Preliminary Round 2

Confidential Information
Incredible Hospitality
You have considered the current situation and believe that there can be a collaboration. At the outset, you
want to state the settlement offer and your justifiable reasons for arriving at such numbers. At the same
time, you’re going with an open mind and look forward to listening to Dave’s thoughts.

You are willing to settle for INR 50 Lacs, without any interest. Frankly, that is the best deal possible. As
the Heads of Incredible Hospitality’s south-India business, you do have complete authority on all issues,
whether business, dispute settlement, investments, new ventures, etc. and do not have any budgetary limits.
However, Incredible Hospitality is being eyed with keen interest by Louis Vuitton Moet Hennessy (“LV”),
a luxury conglomerate comprising several iconic brands, and which is the largest in the world in terms of
revenue. LV has made an important investment in your business in south-India and is expecting that it will
wholly acquire Incredible Hospitality in the coming year or two. LV is concerned that you can’t settle-off
the legitimate franchise fee that you’re contractually entitled to and you are answerable to LV for the same.

The dilemma gets deeper because your lawyers have advised you that you do not have a great case on the
merits. You cannot possibly recover your claim and may get slammed by counter claim of INR 1.54 crores
since there is general obligation of “good faith” in commercial contracts which are relational in nature. A
franchiser may be held liable on many counts of liabilities that you have raised. Since you have a deep
pocket for litigation, you may eventually bleed out Dave – even if he wins the award, you have at least two
appellate stages (although the award can only be reviewed on limited statutory grounds). The main problem
is that once the award is out, you fear that LV may consider Incredible’s business management to be poor
– there were indeed a lot of mishaps that happened at Incredible’s end (especially, relating to the deputed
staff, lack of attention to food costing, and proper/timely support to Lifestyle).

Most of Incredible Hospitality’s outlets are located in Delhi, Mumbai and Bengaluru. But Hyderabad is a
very important market you’re considering expanding in. Café Heights is probably the best property in
Jubilee Hills and it is important to show LV that you have a strong presence in Hyderabad as well. So,
you’ve decided to convince Dave to consider restarting his Café Heights. It will be possible to give Lifestyle
Hospitality a discounted franchise fee of 10% royalty on Net Profit (rather than Net Revenue), which should
help Dave’s business and revenues. This way you can show Dave that if he doesn’t earn a profit, they won’t
earn anything too. You hope to earn his trust and bring him back to field with Café Heights. You are
obviously taking more responsibilities of coordination and support that you’d need to offer as a franchiser,
but you believe it will be all worth it.

Nevertheless, INR 50 lacs cannot simply be written off – you think there may be other ways in which
Lifestyle Hospitality may be able to redeem it by continuing with Café Heights and giving a separate
percentage of his Net Profit. You feel Dave needs to understand something very clearly – it’s all business
at the end of the day.