C31+Final+Exam+w+Notes+2009 - Management C31, Lec01 and...

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Management C31, Lec01 and Lec30 Final Examination, Summer Term 2009 August 17 th 2009, 2-4 pm. 2 hours, AA112, No Aids Allowed Instructor: Jeff Rybak This exam consists of one case exercise, worth 100% of the exam grade. Ms. Francis Tate has worked as a fitness trainer for over twenty years. She started in the business working after school and on weekends at the local gym and has since turned it into a career. Although she’s done well enough working for other people, Francis has always had the idea that she might like to open up her own fitness center. When she inherited a modest sum of money in 2005 she finally had that opportunity. Things went well for a while, but recently there have been some problems. This is just introduction, obviously. After researching the market on fitness centers, Francis decided that she would benefit from the name recognition and support that comes along with operating a franchise. Get Fit! is a relatively new but expanding chain of fitness centers. Francis liked their brand and found they were in her price range. She signed a contract with them to own and operate a Get Fit! franchise. This is a complex agreement but the most relevant details are that Francis paid them an upfront fee of $50,000 and promised to pay an additional $10,000 per year in exchange for support in establishing and running her business, access to Get Fit!’s suppliers, use of the logos and marketing materials, and the benefit of general advertising. Get Fit! promised that at least 20% of the fees collected from each franchise owner would be spent on advertising in their area. This contract continues indefinitely but it may be ended at any time at Francis’ discretion. There are a lot of details here, but note that there isn’t a real, complete issue yet. Any time you are offered this amount of detail about something you can probably assume it’s important. It’s just that so far you don’t have clear direction in terms of what you need to do with it. But taking notes at this stage, so you’re clear about the contents of the contract, could be useful later. Note – this is one of those times when you could waste a lot of time speculating about how Francis’ contract with Get Fit! might be somehow defective. But there isn’t a single indication in the details that there is a problem here. So if I tell you a contract exists, with no suggestion there’s anything wrong with it, you can trust that much. Francis has been happy with her relationship with Get Fit! for the past several years but recently she became frustrated with their advertising efforts and she is almost certain that they are not spending the required 20% of fees collected on advertising in her area. Therefore, she has not submitted her most recent annual payment and is now almost eight
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This note was uploaded on 05/05/2011 for the course MGT C31 taught by Professor Rybak during the Winter '11 term at University of Toronto- Toronto.

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C31+Final+Exam+w+Notes+2009 - Management C31, Lec01 and...

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