MSc Entrepreneurship and Innovation Management

BEMM386 Business Law and Mitigating Risk

Assessment: Summative assessment, Risk Audit and Commercial Scenario

% of Credit: 100%

Word Count:  3,500 words ± 10% (The word count is excluding the cover page, table of contents, appendices*, reference section, and signed plagiarism declaration)

*(Appendices must be appropriate and utilised within the main body of text or will not be considered for marking purposes).

The word count should be split between the 2 Parts, approximately equally.

Individual Risk audit and commercial scenario

During the module you will hear about a range of legal and commercial risk factors you will need to navigate when setting up, growing and maturing a business.

Your task in this assessment is to respond to a scenario based on what you have learned.

We expect you to explore literature to identify important factors that may determine risk and outcomes.

This should be supported predominantly by your review of literature (see the suggested reading on ELE).

Assignment Brief and Structure

Part 1 Risk Audit. Setting up your own business. You have a product or service past development stage and are ready to go to market.

  • What legal and commercial risk factors have you already considered and taken up to this point and what will you need to consider now to set up the business formally?
  • Consider the legal vehicle you will use and why.
  • What legal agreements will you need in place?
  • What Intellectual Property sits within the business and how have you protected it?

Part 2 Commercial Scenario. Based upon the Commercial Scenario on the next page prepare the following:

  • An informal set of Heads of Agreement/ Memorandum of Understanding. In bullet point format write:
    1. the key commercial and legal terms (the concepts) you want to include;
    2. any changes you want to negotiate to their proposed terms.

You do not need to observe any legal formalities for the agreement, this is to test your commercial awareness of how legal issues affect business transactions and your ability to identify risks and mitigate them.

  • Include a covering email to the other party identifying the areas where you do not accept their proposed terms and your counter-proposal. Remember, this is a negotiation, you want the contract but you also want to protect your business from major risks and financial failure.
  • Finally, briefly explain your reasoning for including the terms chosen in Part 2 (a) i. above and other major risks that this contract could pose to your business and how you might mitigate them.

Commercial Scenario:

You own the Good Bake with your co-founder Jo, it has become a well known artisan baked goods retailer which you have built up a strong and loyal following for over 3 years.

Having trained as a pastry chef in Paris you have developed your own secret recipes and processes in the production of some of the more innovative business products.

All ingredients are sourced at a premium locally, are organic and with high ethical standards so goods are sold at premium prices which your retail customers are happy to pay.

The business has expanded in to 3 city centre retail premises in the region, one of which contains the kitchen space for production. The business has 12 employees which are a mixture of part-time, full-time and casual.

Approximately 80% of revenue comes from retail sales in-store, 20% is derived from wholesale deliveries to restaurants, cafes and hotels in the local area but you and Jo have identified this as a huge growth market.

The business spends most of its gross income on supplies (ingredients, packaging, food labelling etc.), rent, payroll, and utilities. Gross income is around £900 per day. Costs are around £600 per day leaving a pre-tax profit of £300 per day.

You are approached by a luxury boutique hotel chain White Noise, who want The Good Bake to supply baked products fresh each morning to their hotels within a radius of 100km of your kitchen.

If things go well there is potential to expand nationally and subsequently internationally to the chain by exporting frozen part-baked goods for finishing locally within White Noise hotels using The Good Bake branding and logo.

In order to fulfil the contract, The Good Bake will need to expand production capacity by taking on new commercial kitchens and an additional 4 employees as well as a regulatory expert on food labelling, packaging and health & safety for the 4 sites. You will also need to lease a new delivery vehicle or find a distribution company to deliver for you.

White Noise have e-mailed you their proposed commercial terms below and have asked you to produce a heads of agreement which if approved will form the basis for a formal Supply of Goods contract.

  • The Good Bake shall produce and make available a minimum of 30 units per day to White Noise exclusively.
  • No minimum order quantity from White Noise.
  • Delivery to 5 x White Noise premises each day by 6.30am. Timing to be of the essence.
  • The Good Bake will be subject to a minimum contract term of 12 months.
  • White Noise reserve the right to terminate the contract at any time upon 3 months notice or immediately if The Good Bake breaches any of the terms.
  • Unit prices to be fixed at 50% of The Good Bakes current retail shop prices for the initial term of the agreement with no ability to increase.
  • Upon termination The Good Bake must deliver to White Noise their secret recipe and processes.