The Chris and Pat Case

J.P Martin and LL. Miller made an informal agreement with two entrepreneur's Chris and Pat Smith to begin a restaurant and catering business. The Chris and Pat invested $25,000 and the chefs invested $10,000 into the business. After losing money two years in a row Chris and Pat decide to close the business.

Chris and Pat have to make a decision on how to distribute the remaining funds and come to an agreement with the chefs on leasing agreements. Chris and Pat plan on opening a floral business in the near future and plan using existing equipment to jump start the initiative. The van can be used for floral deliveries and the store for the floral shop. Leftover funds can also be used to invest in the floral business. The Chris and Pat will be meeting with the chefs to discuss how to dissolve the partnership. The following will need to be considered:

* How will the remaining $15,000 of the investment be split?

* How will the lease be handled with the kitchen space with 18 months remaining on the lease?

* How will the lease be handled on the van with 18 months remaining on the lease?

* How will the lease be handled on the kitchen equipment with six months remaining on the lease?

The kitchen equipment would not be a smart investment and the lease should be terminated. Chris and Pat will need to propose to take over the storefront lease. The cost of $500 will be paid by Chris and Pat. The lease will must be amended to only have Chris and Pat on the lease and the chefs will be removed from it altogether.

Chris and Pat will take the same approach and propose to take over the lease of the van. The cost of amending the van agreement will be $500 which will also be paid by Chris and Pat. The amendment will remove the chefs from the van agreement and only Chris and Pat will remain on the lease. Taking over the van lease will continue to be used for floral deliveries.

The remaining investment money will be $15,000. The chefs contributed about 28% into the business and Chris and Pat contributed 72%. 28% of the $15,000 is approximately $4,200. To make a fair offer, Chris and Pat will offer the chefs $5,000, and recoup $10,000 for themselves.

Proper negotiations will allow Chris and Pat to start their new business and also allow the chefs to be recouped for worked earned. I learned this week that proper planning and fair and consistent contract negotiations are essential to fair and equitable business transaction.