Richard Paul is about to graduate from his M. B. A plan and planning to get down running his ain shop. While scanning through occupation advertizement. he comes across of The Body Shop Canada. The notice stated that the company has figure of operating shops available for franchise. Knowing the tremendous success of the company. Mr. Paul decides to buy the franchise.
Cost to get down a new franchise is estimated to make about $ 257. 900 upper limit. Mr. Paul estimates that he can merely afford with approximately $ 125. 000 which evidently still non plenty to cover the start-up cost. After examine the list of franchisees. Mr. Paul realizes that 13 of them ain multiple shops. Knowing this fact. Mr. Paul comes with an thought of buying two shops alternatively of one because some of the start-up costs and runing disbursal would non be higher than runing a individual shop.
Mr. Paul has two friends who are willing to affect with The Body Shop Canada franchise. Their equity retentions would supply Mr. Paul with extra capital and would decrease the work of runing two shops in separate two separate metropoliss. In respects of the organisational construction. Mr. Paul be aftering to make a keeping company with him as a exclusive proprietor and his two friends would be the limited spouses.
The organic structure Shop Canada has two available franchise in City A and City B. Each metropolis has its ain advantages and disadvantages. Before leaping into any determinations. Mr. Paul has been informed with a new sing the Goodwill cost for each metropolis. After hearing the intelligence. Mr. Paul rushes back to his house to make a really simple pro forma statement along the lines with his projection.
This study contains the suggested option. design to help Mr. Paul with his determination. One of the options is for Mr. Paul to carry on an industry analysis since he has no working experience in adult females merchandise industry. Fiscal analysis has besides been provided in this study stated that Mr. Paul should see of purchasing two shops alternatively of one based on the net income border from the first twelvemonth and the 2nd twelvemonth. The net income border growing between the first and the 2nd twelvemonth is much higher if Mr. Paul was runing two shops.
The last portion of the study is placing the class of action that Mr. Paul should follow and how to implement them. There are four stages on how to implement the actions before and after Mr. Paul operates the shop. This study will besides place the primary issue. sketching the aim. and analysing the current state of affairs in order to decide Mr. Paul’s determination on whether to buy the shop or call off his offer.
Events and Incidents Leading up to the Primary Issue|
Partnership or Not
The Body Shop has grown its company concatenation throughout the universe. There are over 70 stores in Canada. Mr. Paul has given a idea of purchasing one of the franchise because he feels he has “nothing to lose” for buying The Body Shop franchise. Mr. Paul asks for farther information sing the standard for buying one of the franchises. The franchise understanding states several understandings that need to be followed such as the company would rent the premiss and sublease it to the franchisee and the franchisee must run the concern and be in the shop at least 40 hours per hebdomad. Within the missive besides saying the cost to get down the franchise.
After gauging the cost. Mr. Paul has come up with appraisal that he could afford $ 125. 000 by himself and the remainder of the payment will be covered by the bank. Based on his experience and making. Mr. Paul believes he would non hold any problem converting the bank to loan him the money.
After analyzing the overall study. Mr. Paul comes with a idea of buying two franchises alternatively of one because he realizes there are 13 of the franchisees have multiple shops. The ground behind holding multiple shops is because Mr. Paul thinks the start-up costs and operating disbursals would be no higher than for a individual shop operation. Mr. Paul has two friends in head that he would believe would be a great spouse to run the franchise. Two of his friends will buy a minority equity place of the franchise and it would be a great aid for Mr. Paul because he would hold extra capital. City A. Bacillus or Both
There are two bing locations that are available for Mr. Paul. One of the shops is located in City A and the other one is located in City B. Both metropoliss have different advantages and disadvantages. Shop that is located in City A is presently in franchise operation but the proprietor is be aftering to sell the franchise on the market due to household jobs. Size of the shop is artlessly smaller than he has imagined. However. many people describe the location as the merely good retail location in the metropolis. On the other manus. the shop in City B is located in one of the newest promenades in an country surrounded by upscale lodging and extended development. In term of size. shop in City B is much bigger comparison to the shop in City A.
Mr. Paul is certain that both of these shops would be good above his outlook for start-up operations. He besides owns a house in City B and he is willing to remain in City B in order to run the shop. One of his possible spouses is presently lived in City A and will be able to run the shop in City A. The lone concern he has is finding the monetary value of the premium for the on-going operations.
Mr. Robertson has described the typical Body Shop Canada franchise and he believes that Mr. Paul is non the right individual that would able to run the shop. Without any experience of running a franchise particularly a company that is specialized in women’s demands. Mr. Paul does non hold any back uping grounds that may assist him to be the eligible appliers.
The following issue in this instance is Mr. Paul does non hold a sufficient support to run or buy the franchise. The Body Shop Canada would non allow multiple franchises to a new franchisee. The bear downing cost for the two shops in City A and B are out of the blue high with an sum of $ 125. 000 for City A and $ 250. 000 for City B. Knowing these bear downing costs have made Mt. Paul to reconsider his offer because he can merely afford to pay a little sum of the bear downing cost. Objective|
The aim of this study is to find whether Mr. Paul should see buying the shop in City A. B. both of them. or non call off his offer to purchase the shop. There are several factors that should be considered before proposing Mr. Paul with his determination on buying The Body Shop franchise. To guarantee profitableness. the fiscal study will be analyzed to make stronger statement for make up one’s minding the picks.
Analyze of the state of affairs
Mr. Paul is about to graduate from his M. B. A plan and planning to buy The Body Shop franchise. His employment experiences do non fix him to run one of the biggest and good known companies in the universe. Body Shop’s attorney does non see Mr. Paul as the right campaigner to run the franchise based on Mr. Paul’s educational and working background. One of the chief concern is Mr. Paul does non hold any cognition on women’s merchandise which is Body Shop’s merely selling merchandise is women’s merchandise.
Financially. Mr. Paul needs more fund to able to afford the franchise. There are several demands that Mr. Paul needs to pay. However. he believes
the bank would loan him the money to buy the franchise. Alternatively of purchasing one shop. Mr. Paul has a program to purchase two shops because after detecting the overall study of Body Shop. he realizes that 13 of the franchisees ain multiple shop. Mr. Paul has person in head to assist him run the shop and may be able to assist him with the get downing cost. His two friends are the ideal shop proprietor for the Body Shop because first of all they are adult females which mean it would non be excessively hard for them to near the client. Second. one of them is presently stayed in one of the metropolis the shop located. Mr. Paul thinks that the best organisational construction would be to make a keeping company with him as a exclusive proprietor. and enter into separate partnership understandings with each of the adult females.
The pick of taking which shops in which metropoliss are non an easy determination for Mr. Paul. Each metropoliss have its ain advantage and disadvantage either location wise or financially. Mr. Paul besides sing of purchasing both of the shops because he estimates the start-up cost and operating disbursals would non be excessively much higher than for a individual operation. The determination will be concluded based on Mr. Paul’s fiscal stableness and other stakeholders. Situational Analysis|
Making a proper situational analysis of the fortunes at Mr. Paul’s determination of either purchase the franchise or call off his offer would let an insightful mentality through all angles. Performing stakeholders analysis would assist measure and place the significance of all the cardinal groups and persons on the success of Mr. Paul’s determination. This analysis would expect the sort of influence. either positive or negative. These identified groups or persons will hold on the proposed program every bit good as supplying with schemes to achieve the most effectual support possible through all.
Negative Consequences: There are several effects for being a exclusive proprietor of the company. In instance the exclusive owner fails to pay the disbursals originating out of concern activities. Mr. Paul’s personal belongingss may hold to be used to pay for those. Mr. Paul besides non an expert in every facet of direction particularly in marketing adult females attention merchandise.
Positive Result: Having two concern spouses who are interested of buying the franchise will supply Mr. Paul with extra capital and it would be lesser work for Mr. Paul to run the shop. They can portion in the net incomes with a lower limit of attempts. Since Mr. Paul will be the general spouse. he will retain the bulk of control over daily operations of the shop. every bit good as doing determinations for the future way of the shop.
Designation and Evaluation of the Options
Mr. Paul’s determination of buying The Body Shop Canada franchise has ne’er been an easy determination for anyone to do. Body Shop Canada’s attorney Mr. Robertson has suggested that Mr. Paul could non suit with Body Shop’s doctrine. concern acumen. and entree to the needed capital of around $ 250. 000. After all. without the set accomplishment and cognition to run a franchise that is specialized in adult females care merchandise. Mr. Paul may non stand out to accomplish Body’ Shop’s outlook. Therefore. below are some of the alternate methods that Mr. Paul could utilize to make up one’s mind whether he should end his offer or maintain on prosecuting his end to buy the franchise.
Industry/External Analysis| Before come ining an industry that Mr. Paul has ne’er experienced before. it would be a smart move to analyse the industry and external factors that are impacting the company. Menaces and chances are specific countries of analysis that Mr. Paul should be cognizant of because cognizing the menaces and chances of the industry. Mr. Paul would be cognizant what determination he has to do to better the company’s sale and client service. | Without any cognition on what is go oning around the industry. Mr. Paul would non be able to run good harmonizing to the customer’s demand and in the terminal will non run into The Body Shop’s outlook. | PEST Analysis| Difficulties and job that might be happening in future will be anticipated right.
This is really of import for Mr. Paul because suited action can be taken before the jobs occur in the hereafter. As a consequence. Mr. Paul able to avoid the cost that used to retrieve the troubles. | The whole analysis of PEST is constructed based on premise without any prove. This may do Mr. Paul to develop an unsuitable scheme based on a incorrect premise. | Partnership| With a partnership concern construction. Mr. Paul does non hold to do all of the determination because two of his spouses have an equal duty to run the shop.
Since two of his spouses are both adult females. they may hold better cognition on how to market the merchandise and attack the clients. Kind of issues can originate with purchases for the company or even with determinations on which providers or clients to take on. Having all spouses equal in power and duty can do jobs unless proper guidelines are set out. This difference may happen in the long tally.
Having merely one concern spouse may cut down any possible difference in the hereafter. In footings of determination devising. holding merely one individual operates the shop. it is traveling to be a batch faster without holding to compromise and discourse with each other sentiment since they will be working in one shop. Having merely one spouse to portion the net income. Mr. Paul is evidently will increase his income instead than sharing the stores’ net income with two people| Merely holding one spouse to lend with the purchase of the franchise. Mr. Paul will hold less extra capital.
Before giving any decision on Mr. Paul’s determination on buying the franchise. Mr. Paul should see looking at the Pro Forma Statements for a Single Franchise and the Pro Forma Statements for Two Shops. The ground for analysing these fiscal statements is to find whether Mr. Paul should buy merely one shop. multiple shop. or even call off his offer. The fiscal ratio that will be used is the Net income Margin to bespeak what per centum of each gross revenues dollar is left after run intoing all disbursals and which of the two programs is more profitable.
Net income Margin: ( Net Earnings/Net Gross saless ) x 100 %
Year1: Net Gross saless: $ 475. 000
Net Net incomes: $ 20. 751
Net income Margin: ( $ 20. 751/ $ 475. 000 ) x 100 % = 4. 37 %
Year 2: Net Gross saless: $ 617. 500
Net Net incomes: $ 54. 780
Net income Margin: ( $ 54. 780/ $ 617. 500 ) x 100 % = 8. 87 %
The net income border growing from twelvemonth 1 to twelvemonth 2 addition by 4. 5 % Two Shops
Year 1: Net Gross saless: $ 950. 000
Net Net incomes: $ 36. 335
Net income Margin: ( $ 36. 335/ $ 950. 000 ) x 100 % = 3. 82 %
Year 2: Net Gross saless: $ 1. 235. 000
Net Net incomes: $ 123. 895
Net income Margin: ( $ 123. 895/ $ 1. 235. 000 ) x 100 % = 10. 03 %
The net income border growing from twelvemonth 1 to twelvemonth 2 addition by 6. 21 %
Based on the Profit Margin analysis. it is clearly shows that holding two shops will be more profitable in footings of gross revenues because the growing in individual franchise is merely 4. 5 % and the growing for holding two shops is 6. 21 % . This has suggested that Mr. Paul should see buying two shops alternatively of one. Decisions|
After detecting the options and analysing the Pro Forma Statements. Mr. Paul should decidedly follow the suggested options in helping his determination with make up one’s minding whether to buy the franchise or call off his offer. Merely by cognizing his current fiscal position. it has clearly stated that Mr. Paul has an deficient fund to buy the shop. Despite his working background of seven old ages of retail direction and has managed one of Canada’s national section shop ironss. Mr. Paul seems to non recognize that he has no cognition on how run a franchise that its chief merchandise is adult females care merchandise. He may be confused on how to near the client and retain the strong relationship with his client.
His program on holding two concern spouses may non besides work good because he still has to run his ain shop in City B by himself. Another extra point why he should call off his offer is because he has no working experience in an industry that sells adult females care merchandise and harmonizing to Body Shop’s attorney Mr. Robertson. Mr. Paul is non the ideal individual who can suit in the Body Shop Canada’s doctrine. concern acumen. and entree to the needed capital of $ 250. 000. This statement has to be taken into consideration because Mr. Robertson has scanned through many campaigners who are offering to buy the franchise. Therefore. he would cognize who would be the right individual to be eligible running the franchise.
Course of Action and Implementation
If Mr. Paul still decides to prosecute his end of having the franchise of The Body Shop Canada. there are some class of action and execution procedure that should be performed before go on his application. This would non merely assist Mr. Paul with his determination but it will besides cut down the negative impact on moral. productiveness. and motive of his spouses and his employees. It will besides assist him to run into Body Shop’s outlook. Phase 1: Conduct Industry/External Analysis * Lack of experience in this industry. Mr. Paul should aware of any menaces and chances of this industry * Mr. Paul should interview a Capable Matter Expert who has been working or analysing the industry * Research from scholarly diaries and on-line diaries that have conducted a survey of this industry
Phase 2: Advise the bank * Harmonizing to his current fiscal position Mr. Paul would non be able to afford purchasing the shop * Ask the bank to loan him the money to cover the start-up cost|
Phase 3: Notify one of his spouses * Based on the suggested options. Mr. Paul should hold one concern spouse alternatively of one * It may be hard to get down up the shop with one spouse bust finally it will convey more advantages compare to holding two concern spouses * Outline the duties * Supplying Mr. Paul’s spouse with the fiscal statements. * Notify the spouse on his hereafter program in footings of net income sharing
Phase 4: Observe and Evaluate concern activities * Equally shortly as he operate the shop * It is important for a concern proprietor to maintain observe and measure the concern activities to avoid any loss and able to reconstitute a new program if necessary * Document all information sing public presentation of the staff for both shops