1.Would you recommend that Alison keep operating as she is, or should she expand via franchising? Explain your reasons.
3.Is Alison more likely to fail than a bespoke clothing business operating out of a shop? Why?
Research: Students need to support their analysis with reference from the text and a minimum of eight (8) suitable, reliable, current and academically acceptable sources – check with your tutor if unsure of the validity of sources.
Those seeking Credit or above grades should support their analysis with an increased number of reference sources. As a guide 12 for credit and 15 for Distinction. This implies evidence of research is found within your work not merely the cutting and pasting of references to pad out the submission. Sources such as Wiki…, scribed.com, docstore.com, etc. are not considered acceptable sources and should not be used – reliance on such sources will result in a Fail grade.
Presentation: Report format Word count applies to content only, not title page, executive summary, table of contents and reference list). Responses should have a title page attached reflecting the content and the author, executive summary (not compulsory), table of contents, introduction, suitable headings and sub-headings to cover the relevant content and elements of analysis, conclusion, recommendations, reference list/bibliography, appendices (if relevant).
Recommendations regarding franchising for Bespoke Threads
The case study has described about a business of Bespoke Threads. Alison started this clothing business with her partner and consequently earned huge amount of revenue. However, their business faced some trouble when they employed a new business partner from fashion industry. Thus, Alison sold her partnership before experiencing further difficulties and losses. The entire case study has discussed about the business strategy of Alison, as she starts a business from initial phase alone. Initially, Alison does not realise any problem to conduct her business alone. She has kept her original business along with the initial name and has started to work from her home. Her outsourcing of sewing work has earned huge success within a short period and the global financial crisis cannot affect it adversely, as it has become as home-based business. Her new business techniques have helped her to get customers across the cities. Moreover, ordering clothes through online has helped her customers. Her relationship with customer has come strong, as they come to her home for ordering clothes. Moreover, profit percentage of Alison has remained almost same as before (Bentley-Goode, Newton and Thompson 2017). As a result, she does not want to hire a new staff for her business, as to hire a staff she needs to pay wage for the person. Moreover, to accommodate increasing number of staffs, she needs to rent a shop. Thus, she decides to expand her business through franchising. The entire discussion is divided into three segments that provide some recommendation for Alison that whether she keeps operating her business as before or looks for franchising. Moreover, some problems can be focused that Alison can experience in future along with some explanation regarding business strategy of her.
Based on the above case study, it is recommended that Alisa should expand her business via franchising. A franchise business refers to the business where the business owners or franchisors sell their rights to business name, logo and model to the third party outlets that is owned by third party operators known as franchisees. It is mainly based on contractual relationship between franchisor and the franchisees who independently manages the businessfor achieving brand standards that is established by franchisor. According to Gillis and Castrogiovanni(2015), franchising is one of the best method of expanding a business, which is already successful. Alisa should adopt franchising method to expand her ‘Bespoke threads’ business operations as it provides numerous benefits, which are described below-
- Accessibility to better talent-Franchising will help to find talented candidate who can administer Alisa’s location and provide them incentive for working hard.Beckmann and Zeyen (2014) found out that the qualified working people basically prefer to make investment in running the business in return to maximize profits. However, talented people will help Alisa to build the business in effective way.
- Expansion of capital- Franchising will aid Alisa to obtain expansion capital. However, even if Alisa’s capital requirements become less, the franchisees offer capital for opening the franchised outlet (Aguiar, Pauli, Yu and Nascimento 2016). If the franchisees pay the capital to purchase outlets, then it will help Alisa grow the total number of locations or request financing from investors.
- Minimizes risk of business failure- Franchising might also generate higher financial returns for less risk. As the Alisa’s business is mainly based on proven idea, this method will help her check other successful franchises before taking any major step in business(Leeet al.2015).
- Develop the brand- Large number of franchisees will also help to develop the brand of Alisa’s Bespoke threads business. Moreover, Alisa’s business brand will also benefit from franchisee’s capital investment. In addition to this, the brand name will also develop through advertisement or any other kind of promotion adopted by Alisa.
- Cost-effective business-Adoption of franchising method will help Alisa’s business to grow in cost- effective way. In fact, Alisa will not have to cover investing cost in the new premises or employees. Moreover, Alisa must retain this strategy in business for long term so that the overall sales increases and profit becomes maximum. Thus, this will also facilitate Alisa to improve the business operation in future (Wu 2015).
- Easier management-The franchisees will aid to run the business efficiently and thus reduce the demands of management that is placed on Alisa. This in turn will make the management process much easier for Alisa.
- Higher return on investment- Alisa will benefit by expanding her business through franchising by attaining higher return on investment. Since Alisa will employ less capital, the profit will be generated on lower capital investment.
Personal Problems of Growing the Business Further
Overall, franchising method will allow Alisa’s Bespoke Threads business to expand without even spreading the managerial resources across numerous business units. Besides this, this will also aid Alisa to keep her business operation tightly run (Saharum, Songip, Habidin and Baroto 2017). Hence, adoption of this business method will facilitate Alisa to expand and grow her business effectively.
After considering various advantages and disadvantages, Alison can decide to give franchise for her business. However, she can experience some personal problems to grow her business further.
- Firstly, Alison is conducting her business alone and she has full control on it. Hence, the chance for incusing huge amount of loss cannot arise in this context and she can perform with small risks. However, the concept of franchise can be failed and Alison can incur huge amount of loss (Kellner, Peetz, Townsend and Wilkinson 2016). This can adversely affect her financial condition as well. Hence, she needs to know about the ability and skills of a franchisee, which can follow the business procedure properly to achieve a rate of return.
- Secondly, types of customers, business environment and economic condition of all cities across a country are not same. Hence, Alison may experience risks in her business. To avoid such risks, she needs to analyse the market properly to take proper strategic decisions (Erlinda, Afiff and Helmi 2016). Moreover, Alison needs to monitor her business resources carefully. However, initially she can conduct her business activities freely without spending much time on market research. For doing this, she needs to spend more times for her business compare to before. Thus, she cannot give time to her family in future.
- Thirdly, problems can arise between Alison and franchisee regarding qualities, responsiveness and disciples (Alon, Boulanger, Misati and Madanoglu 2015). If her franchisee conducts business with customers in a wrong way then this can reduce the number of loyal customers. Moreover, the value of her company can be decreased further and this can generate huge trouble for her business.
- Fourthly, Alison needs to hire more staffs, which can help her to monitor all those things and to conduct her own business (Calderon-Monge, Pastor-Sanz and Huerta-Zavala 2017). For this, she needs to purchase or rent a shop and this can increase her business costs.
- Fifthly, giving franchisee is a long-term concept and it requires legal supports. Hence, Alison needs to spend more time on these issues and this can hamper her own business activities.
- Sixthly, dealing customers directly can help her to know about the choice, income pattern and style of her customers, based on which she can design clothes. Moreover, she can understand the needs of customers by talking with them. This becomes easier for her to design and make clothes for customers accordingly. However, after giving franchise, it can be difficult for Alison to understand about the choice and budget structure of her customers in other cities.
- Seventhly, franchising can help Alison to increase her sales. However, it is essential understand that there are various process through which a business organisation can sell its products across the city or country. Hence, it can be difficult for her to keep up most of the franchises (Kacker, Dant, Emerson and Coughlan 2016). After bringing a new franchisee, Alison needs to catch up the attention of her new customers in new cities, where people do not know about the name of her company. For doing so, she needs to provide various services like free making charge for clothes or new designs for clothes to keep interest of those customers. Thus, to maintain a good relation with customers and to promote the name of her business at a faster rate, she needs to oversee the entire business activities.
Thus, the above-mentioned points can create some personal problems for Alison to conduct her business solely and freely. There will be huge number of external factors that can adversely affect her business (Bareša, Ivanovi? and Bogdan 2017). Hence, to develop the business with huge success, Alison needs to spend more time for her business with new business strategies and deep patience, as the process of franchisee needs more to implement and succeed. Moreover, the chance of risks will be high.
It is difficult to predict that whether the business of Alison will fail by generating franchisee or can receive huge success rather than operating a clothing business out of a shop. However, it can be discussed based on some factors related to business. The role of a business owner is to make plan for start and conduct a business. Initially the person makes plan regarding business location, finical achievement, registration of the new business and receive license and permits for it (Lindh and Thorgren 2016). However, Alison does not need to follow these steps as her business has already received business registration and license and she is earning sufficient amount of revenue from this business (Zahra 2015). However, Alison needs to become a specialist in Human resource to hire best staffs for her business. As the business of Alison is small, she cannot hire a human resource specialist to hire staffs for her business. Moreover, she needs to perform as an Office Manager to receive phone calls, mails from her suppliers and customers (Sadler-Smith 2016). Alison also performs other activities related to business, like taking order from customers along with measurement. In addition to this, she needs to be the marketing expert for her business and for this; she can follow proper marketing strategy to attract more customers (Hussain, Sreckovic and Windsperger 2018). As marketing needs huge amount of investment, Alison needs to choose the best way, where she can promote her business easily without making huge costs. She needs to perform as a bookkeeper and accountant for her business as well.
Likelihood of Failure Compared to Bespoke Clothing Business Operating Out of a Shop
Hence, from this discussion, it can be said that running a business alone out of a shop is not easy. The business owner needs to take all responsibilities to conduct the business. Moreover, the concerned person cannot spread the business in other cities easily and consequently she cannot increase the customer base and revenue by selling comparatively more cloths than before. Hence, if Alison would decide to operate her business alone with out of a shop, then the chance to fail the business may reduce but the opportunity to make huge amount of profit may reduce as well.
The role of a franchisor is almost same as the business owner. In both situations, the concerned person needs to take care of all business activities. The chief motive of a franchisor is to spread the business across the city for earning higher amount of revenue along with new customers by creating a relationship among various independent business owners or franchisees (Boulay, Caemmerer, Evanschitzky and Duniach 2016). They can help Alison to achieve her business goal and attracting customers under her own established brand. Moreover, franchisees of Alison will to make profit because of their self-interest.
Hence, the chance of business failure in this situation will be low if she can choose efficient franchisee for her business. Other parties can try to conduct the business efficiently for earning higher amount of profit (Hoffman, Munemo and Watson 2016). Thus, the possibility or risks in this situation depend upon other people. If these franchisees perform well and efficiently then the chance of earning revenue and expanding business will be higher for Alison.
To generate franchisee, Alison needs to follow steps to avoid various disadvantages that can occur in this business strategy. Initially she needs to select efficient franchisee, which can conduct the entire business efficiently. Moreover, she needs to do proper market analysis to understand the consumer pattern and income pattern of different countries. However, before this, Alison needs to consult with business experts to understand the impact of generating franchisee in her business. In addition to this, she can analyse other business companies and their activities to understand and adopt proper business methodologies.
After discussing all situations, it can be said that each business organization needs proper strategy to conduct the business efficiently and to earn huge amount of profit. Alison and her partner have adopted proper business strategy and have earned huge amount of profit with limited budget. However, their decision to join a new partner has brought some problems. However, Alison successfully conducts her business alone. In this situation, taking decision of franchisee has generated many difficulties. Though after discussing various advantages and disadvantages, it can be recommended that frachisee can be helpful for her to expand the business in other countries. In this process, Alison can earn more revenue and can increase customer base significantly. However, some personal problem may arise to grow this business further. For instance, it can take time to select better franchisee and to monitor the entire activity. Moreover, proper market research is also required. As a result, Alison will not be able to give time to her family or to conduct the entire business solely. Moreover, it can be difficult to know about the choices of customers in other cities. Hence, the risk of business is comparatively high. As a result, the chances to fail the business are also high in this business procedure. However, Alison can prefer it rather that operating business out of a shop, to earn more revenue and to receive more customers.
Aguiar, H.D.S., Pauli, S., Yu, A.S.O. and Nascimento, P.T.D.S., 2016. Modeling the new franchise creation decision: the relevance of behavioral reasons. RAM. Revista de Administração Mackenzie, 17(5), pp.110-137.
Alon, I., Boulanger, M., Misati, E. and Madanoglu, M., 2015. Are the parents to blame? Predicting franchisee failure. Competitiveness Review, 25(2), pp.205-217.
Bareša, S., Ivanovi?, Z. and Bogdan, S., 2017. Franchise Business as a Generator of Development in Central Europe. UTMS Journal of Economics, 8(3), p.281.
Beckmann, M. and Zeyen, A., 2014. Franchising as a strategy for combining small and large group advantages (logics) in social entrepreneurship: A Hayekian perspective. Nonprofit and Voluntary Sector Quarterly, 43(3), pp.502-522.
Bentley-Goode, K.A., Newton, N.J. and Thompson, A.M., 2017. Business strategy, internal control over financial reporting, and audit reporting quality. Auditing: A Journal of Practice & Theory, 36(4), pp.49-69.
Boulay, J., Caemmerer, B., Evanschitzky, H. and Duniach, K., 2016. Growth, Uniformity, Local Responsiveness, and System?Wide Adaptation in Multiunit Franchising. Journal of Small Business Management, 54(4), pp.1193-1205.
Calderon-Monge, E., Pastor-Sanz, I. and Huerta-Zavala, P., 2017. Economic Sustainability in Franchising: A Model to Predict Franchisor Success or Failure. Sustainability, 9(8), p.1419.
Erlinda, Y., Afiff, F. and Helmi, A., 2016. The Influence Of Franchisor’s Brand Image On Franchisee Trust And Its Impact On Franchisee Intention To Remain In Franchise System. International Journal of Scientific and Technology Research, 5(2), pp.164-169.
Gillis, W. and Castrogiovanni, G.J., 2012. The franchising business model: an entrepreneurial growth alternative. International Entrepreneurship and Management Journal, 8(1), pp.75-98.
Hoffman, R.C., Munemo, J. and Watson, S., 2016. International franchise expansion: the role of institutions and transaction costs. Journal of International Management, 22(2), pp.101-114.
Hussain, D., Sreckovic, M. and Windsperger, J., 2018. An organizational capability perspective on multi-unit franchising. Small Business Economics, 50(4), pp.717-727.
Kacker, M., Dant, R.P., Emerson, J. and Coughlan, A.T., 2016. How firm strategies impact size of partner?based retail networks: Evidence from franchising. Journal of Small Business Management, 54(2), pp.506-531.
Kellner, A., Peetz, D., Townsend, K. and Wilkinson, A., 2016. ‘We are very focused on the muffins’: Regulation of and compliance with industrial relations in franchises. Journal of Industrial Relations, 58(1), pp.25-45.
Lee, Y.K., Kim, S.H., Seo, M.K. and Hight, S.K., 2015. Market orientation and business performance: Evidence from franchising industry. International Journal of Hospitality Management, 44, pp.28-37.
Lindh, I. and Thorgren, S., 2016. Entrepreneurship education: the role of local business. Entrepreneurship & Regional Development, 28(5-6), pp.313-336.
Sadler-Smith, E., 2016. The role of intuition in entrepreneurship and business venturing decisions. European Journal of Work and Organizational Psychology, 25(2), pp.212-225.
Saharum, N., Songip, A.R., Habidin, N.F. and Baroto, M.B., 2017. A Review of Evolutionary Theories in Sustainability related to the Franchise System. International Journal of Academic Research in Business and Social Sciences, 7(4), pp.756-771.
Wu, C.W., 2015. Antecedents of franchise strategy and performance. Journal of Business Research, 68(7), pp.1581-1588.
Zahra, S.A., 2015. Corporate entrepreneurship as knowledge creation and conversion: The role of entrepreneurial hubs. Small Business Economics, 44(4), pp.727-735.