Chapter 12 Taxes and Insurance

'Net Assets On-line projects from other chapters discuss cooperatives, partnerships and mergers. Another form of business ownership is franchising. In easy-to-understand terms, a franchise is an arrangement in which an individual or company buys the right to use another company's name and sell its products and services in a particular location.

In 1959, William Larson founded Round Table Pizza. His intent was to serve his customers top-quality pizza. In 1962, Larson began franchising restaurants. By 1979, the chain had grown to more than 150 shops and was purchased by a small group of investors.

With a winning marketing and promotion campaign that focused on "Honest Pizza," the business surpassed Larson's dreams. Today, Round Table Pizza is the nation's fourth largest pizza franchise firm.

One main explanation for the success of the franchisees is their shared belief in product quality. The company treats franchisees as customers and listens to their concerns and suggestions. Professional relationships are carefully developed between the franchiser (Round Table Pizza) and the franchisees (individuals or companies who buy a franchise).

There are advantages and disadvantages associated with any form of business ownership. As part of this 'Net Assets On-Line project, you will research different business models.

All this information on Round Table Pizza and more can be found at www.roundtablepizza.com.

Problem:

Preparation:

In preparation for this problem, complete the following:

• Read information found at the following Web sites: www.inreach.com/sbdc/book/franchising.html, www.corpmakers.com/inc/owner.html
• Review Chapter 3, which covers working with percents
• Optional: if you have access to spreadsheet software (like Microsoft Excel), try setting up Problem 2 using a spreadsheet.

Questions:

1. The two Web sites listed under "Preparation" above contain information about franchising, sole proprietorship, partnerships, and corporations. Summarize the distinctions between each of these forms of business ownership. Another suggested Web site is www.inreach.com/sbdc/book/ownership.html.

2. Below is a table showing sales and assumed variable and fixed costs for various types of ownership with. Use the formulas indicated to complete the table and finally calculate the gross profit for each type of ownership. Change the numbers to see how lowering costs or making changes in other areas affects the bottom line or the gross profit.

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