Case ID: W11178
Solution ID: 7745

Fabric Super Store C

Case Solution

The entrepreneurs had offered to purchase one Fabric Super-Store franchise; management had countered with vendor take-back (VTB) financing toward the purchase of two stores if the entrepreneurs would agree to buy and operate both locations. The VTB debt would be in second position to the bank in the event of a bankruptcy. The couple was convinced they could be successful franchisees with both stores, but were concerned with the high proposed interest rate on the VTB offer. While there was no penalty for early repayment (as in their secured bank loan), the bank had offered very competitive rates. After evaluating the financial implications of Fabric Super-Store's counter offer, it was clear that without an immediate and substantial increase in sales at both stores, the entrepreneurs would find themselves unable to operate the business due to the high financing costs. Although both parties were motivated to make a deal happen, some important roadblocks would need to be navigated in order to actually get it done.

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