Busy Bee

Busy Bee v. Simon et al.

Part 1

After graduation as a business student at Humber College and taking a year off to travel, Simon decided that he wanted to go into business for himself. He was attracted to the franchise business and chose one that required very little initial outlay. This involved the opening of a hot dog stand to be set up in front of a major sports retailing outlet recently opened in Toronto. The franchising company, Ace, arranged for the site and supplied the cart itself, with a cooler, stove and storage area. It also supplied jumbo and regular wieners, buns, and condiments as well as soft drinks for a fee only slightly higher than would be available through normal wholesale outlets. Although Simon had no choice but to get his supplies from Ace, he considered this slightly higher cost to be well compensated for by the convenience of getting them all from the same source with a consistent and known quality, and because of the other services supplied by Ace. Ace insisted on supplying the food inventory as a matter of quality control and to ensure product consistency between all of their franchised carts at various locations around the city. The franchise fee to be paid by Simon to start the business was $20 000 and for this in addition to the cart and an initial supply of buns and wieners, Ace would supply a limited amount of advertising and other services such as bookkeeping and tax preparation. Ace also was entitled to a set percentage of Simon’s sales to pay for this service.

Simon’s initial problem was to raise the $20 000. He had no money himself,

having just finished his business program and travels, and in fact owed about $15 000 in

government student loans. He did, however, have a relatively new sports car worth, in his

estimation, about $13 000. He also had an older cabin cruiser given to him by his

grandparents which he estimated to be worth about $10 000. His mother had recently

passed away and his father was a teacher...