Sassy Shoes Ltd

docx

School

St. John's University *

*We aren’t endorsed by this school

Course

420

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by ColonelSnow13386

Sassy Shoes Ltd. It is July 15, 20X4, and you, CPA, have just met with Richard and Nancy Nickerson who are seeking business advice. Richard is an engineering professor at the local university and Nancy is a substitute teacher. Nancy has always wanted to run her own business and has approached Sassy Shoes Ltd. (Sassy) to investigate the possibility of obtaining a Sassy franchise. The Nickersons advised you that they have no prior business experience and that they need guidance. The only thing they know for sure is that they plan to incorporate the new business. A friend, who is a CPA, has explained the tax implications of a corporate structure. They are confident in her advice and do not need you to advise them on any tax matters. They provided you with extracts of the draft franchise agreement with Sassy (Appendix I) and a five-year earnings projection prepared by Sassy (Appendix II). They also met with two other Sassy franchisees to gain some further insight and provided you with notes on their meetings as well as other information in Appendix III. Richard’s current salary is $125,000 a year; Nancy has been earning $20,000 a year from part- time teaching. They are concerned that they will not be able to replace Nancy’s earnings with income from Sassy. Nancy has also considered starting an independent shoe store as opposed to the franchise. She has included some information on this in Appendix IV. Nancy and Richard would like you to: 1) Calculate a break- even sales number for the first year of operating the franchise store (excluding any start-up costs). 2) Review the franchise agreement and identify three (3) potential business risks, and for each risk identified, propose a risk mitigation strategy. 3) Identify at least three (3) other business risks they might face is they chose the franchise option 4) Identify the total financing required for start-up if they do go the franchise route, and suggestions on possible sources of financing. 5) Provide your thoughts as to whether or not they should pursue the franchise option. This should include an analysis of the financial projections 1

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