Introduction to the Legal Environment

"Perfect Nails" operate a franchise chain of nail bars in high street locations. They have a new store opening in Luton and advertise the franchise. Dawn is interested in taking the franchise and running the business as manager. She meets with the accountants that act for "Perfect Nails" to discuss the profitability of the venture.

At the meeting, the accountants produce the accounts of a similar franchise elsewhere and base their projections for Luton on these figures. The figures show a healthy business making good profits. Dawn is at first unconvinced, but after some discussion, the senior accountant says, "Take it from me - I have been in business for twenty years. In my opinion you will make at least £60,000 a year from this franchise"

Dawn then decides to take the franchise and signs an agreement that includes the following term: "This document contains all the terms of this franchise agreement. Perfect Nails accepts no responsibility for any statements made by any servants or agents of the company unless confirmed in writing by Perfect Nails..." She pays £75,000 for the franchise and invests a further £25,000 in fitting out the shop ready for business.

Over the next six months, Dawn incurs significant losses. It transpires that the figures used in the earlier discussions had not been properly audited by the accountants and the figures exaggerated the profits of the other business. It also transpires that the accountants had earlier suggested to Perfect Nails that it needed to radically overhaul the costs of the business if franchisees were to be able to make a reasonable living from running these shops.

Task

Write an informal report for Dawn explaining all the legal issues involved, you should further advise Dawn on which Court her case would be heard in should the case proceed to litigation and the process by which the case would be brought to court. Finally you should advise her what remedies will be available to her should she be successful in her case.