QUESTION 1 (LEGAL FORMS OF BUSINESS) 15%
Your friends Monica and Rachel have approached you with a business idea. They want to
open three beauty salons in Adelaide. They have identified the shopping centres where the
three salons will be opened. They invite you to a meeting where they present you with a
business plan.
They will manage a salon each and their friend Phoebe will manage the third salon. Phoebe
does not want to be involved in the business in any way apart from managing a salon.
They ask if you would be interested in investing in the business and they are seeking $150,000
from you. Monica and Rachel each have $50,000 invest. The total invest from all of you will
be $250,000.
Monica and Rachel have not done anything further about setting up the business and were
waiting until they discuss it with you. They want to call the salons “Friends Essential Beauty”.
1. What business set up would best suit “Friends Essential Beauty” and how would you
protect your investment in the business?
2. What are the advantages and disadvantages of your choice of business set up.
3. How would you ensure the name “Friends Essential Beauty” is available and what does
it cost to register the name?
QUESTION 2 (EMPLOYMENT AND BUSINESS OBLIGATIONS) 35%
You have now opened the 3 salons and they have been operating for 3 months. Monica,
Rachel and Phoebe are managing the salons and there is a total of 10 permanent staff
members.
You have had a few issues with Phoebe’s salon
Two full time beauticians – Mary and Kate
Casual beautician – Ursula – She is Phoebe’s identical twin sister
2.1 Mary – Full time beautician
Mary has upset a customer by using the wrong product and the customer had a rash all over
her. You had advised Mary that she should not use this product but she is a rep for it and
thinks it is great. You agree with Monica and Rachel that you want to terminate Mary’s
employment.
Can you terminate her employment without any consequences?
2.2 Kate – Full time beautician
Kate keeps turning up to work dressed in black (Goth clothing), with an increasing number of
tattoos and piercings. You do not feel this is appropriate and want her to stop wearing Goth
clothing and remove some of the earrings on her face.
Can you tell Kate what to wear to work?
QUESTION 3 – DEALING WITH CUSTOMERS & COMPETITORS 50%
3.1 Ursula & Phoebe
Monica and Rachel attend the “Beauty and Hair Convention” at the Adelaide Convention Centre.
They have a stand to promote their “Friends Moisturiser”. They have a banner with “Friends
Essential Beauty” behind the table. The Convention is to last three days Saturday/Sunday and
Monday. On the stand next to you are Ross and Joey who are manning a marketing stand promoting
neon signs for salons. During the convention Phoebe and Ursula have visited the stand a number of
times and covered the lunch breaks on Saturday and Sunday. Ursula is going to manage the stand
on the Monday.
On the Monday Ursula is managing the stand and gets into conversation with Joey. Joey says to
Ursula “I have a great business deal for you. I know you have all set up “Friends Essential Beauty”
and I think we can do a deal on three neon signs”. “You can buy three signs for $30,000, a saving of
$15,000.” Ursula thinks it is a great idea and rings Phoebe who also agrees with her. Ursula tells
Joey we would love to buy them. Ursula and Joey sign an agreement for $30,000 to be paid when
Joey delivers the signs the next weekend. Under Ursula’s signature are the words “Phoebe Boufatt,
Manager of Friends Essential Beauty. Ursula does not point out the error.
The next day Phoebe meets with you, Monica and Rachel and tells you of the agreement to purchase
the neon signs. Monica and Rachel are very upset and state that Phoebe nor Ursula had no
authority to purchase something that expensive. “We cannot afford it,” they tell her. You all agree
you will not pay for the signs.
Using relevant legal principles, explain who is liable for the payment of the signs – is it Friends
Essential Beauty, Phoebe or Ursula?
ACCC
The ACCC has written to you about a few complaints they have received. Please prepare for
Monica and Rachel an explanation for each point based on legal principles about the issues
raised.
3.2 (1) You advertise that “a contribution from every beauty treatment goes to charity” but, in fact,
there is no record of any such collection being made nor sent.
3.2 (2) You advertise that your “Friends Moisturiser” is made from all natural products but in fact
about 20% of the product is artificial food colouring that has been used to give it the unique
Friends colour.
3.2 (3) Essential Beauty is an already established beauty salon with a large number of salons
in Adelaide. They believe you are misleading consumers by havinge a name similar to
theirs.
