Chapter 3 - Hospitality Business Structu

Chapter 3 : 

Chapter 3 Hospitality Business Structures

The Importance of Proper Organizational Structure : 

The Importance of Proper Organizational Structure Ease of formation and maintenance Liability Taxation Terminating or selling the business

Common Hospitality Organizational Structures : 

Common Hospitality Organizational Structures Sole proprietorship General partnership Limited partnership (LP) C corporation S corporation Limited liability company (LLC)

Sole Proprietorship : 

Sole Proprietorship A business organization in which one person owns and, often, operates the business.

General Partnership : 

General Partnership A business organization in which two or more owners agree to share the profits of the business, but are also jointly and severally liable for its debts.

Limited Partnership : 

Limited Partnership A business organization with two classes of owners. The limited partner invests in the business, but may not exercise control over its operation, in return for protection from liability. The general or managing partner assumes full control of the business operation, but can also be held liable for any debts the operation incurs.

Limited Liability Partnerships (LLP’s) : 

Limited Liability Partnerships (LLP’s) Special type of general partnership Partners personally liable for the commercial and other obligations of the entity, own acts and omissions, and for acts and omissions of persons under their supervision.

C Corporation : 

C Corporation A group of individuals granted a charter, legally recognizing them as a separate entity with rights and liabilities distinct from those of its members.

Subchapter S Corporations : 

Subchapter S Corporations A corporation still but helps you avoid double taxation (once to the shareholders and again to the corporation)

Limited Liability Company (LLC) : 

Limited Liability Company (LLC) Type of business organization that protects the owners from liability for debts incurred by the business, without the need for some of the formal incorporation requirements.

Slide 11: 

Comparative Tax Structures

Concepts in Organizational Structure : 

Concepts in Organizational Structure Master-Servant – Also called Employer-Employee. Employer in complete control of employee’s conduct Agent-Principal – Empowered to act on behalf of the principal. Typically, principal responsible for conduct and obligations of agent.

Concepts in Organizational Structure : 

Concepts in Organizational Structure Independent Contractor - A person or entity that contracts with another to perform a particular task, but whose work is not directed or controlled by the hiring party.

The Hospitality Franchise : 

The Hospitality Franchise Franchise - A contract between a parent company (franchisor) and an operating company (franchisee) to allow the franchisee to run a business with the brand name of the parent company, as long as the terms of the contract concerning methods of operation are followed.

Advantages of a Franchise Purchase : 

Advantages of a Franchise Purchase Buying “established” brands. Training Economies of Scale Tried and Tested business model

The Franchise Rule : 

The Franchise Rule Basic disclosures Earnings claims Advertised claims Franchise agreements Refunds Contradictory claims

UFOC : 

UFOC Uniform Franchise Offering Circular (UFOC) A federally mandated document that gives new franchisees transparency before to buying a franchise, so as to create a far better relationship between the franchisor and the franchisee. Many states treat sales of franchises like securities. Must franchisors have to file a circular of record before selling franchises in the state.

Franchise Agreement : 

Franchise Agreement Details the rights and responsibilities of the franchisor and the franchisee. Cornerstone document of the franchisee--franchiser relationship

Operating a Franchise : 

Operating a Franchise Encroachment / impact Purchasing requirements Operations manual changes

Operating a Franchise : 

Operating a Franchise Renewal clauses. Non-compete clauses.