Category: Franchising

Franchising industry is very popular, as its rates of development are rather high. Though there numerous advantages of using franchising concept in the business, the potential franchisors should be aware of the existing risk of buying a franchise fraud and put much effort in investigating the ways to avoid dealing with franchise frauds.

Franchise systems developed between the 1860s and 1950s and today occupy a significant place in the mainstream of business in the USA and worldwide. In common sense, franchising is a “lease” of company’s brand and business strategy. Usage of a franchise is regulated by agreement between franchiser (the one who offers a franchise) and franchisee (the one who buys a franchise).

The United States occupy leading position in employing franchising concept in practice. This model appears to be a secure model of running a business. It has shown good results even in the tough economic market.

One of the most common claims made by a franchisee in the situation when a franchise has failed to achieve success and bring profit is a franchise fraud (Bundy & Satterlee, 2007, p. 191). The franchisee states that he is a victim of the fraud and that the franchisor was aimed at gaining personal profit. In the same time, the franchiser can claim that franchisee signed the agreement of free will. Such cases can lead to the need of appealing to the Court.

The problems can be avoided if the people involved in business are aware of difficulties related to signing an agreement with an unreliable franchiser. Such mistakes can easily be avoided if the franchisee is well informed about the appropriate procedure needed to exclude the risk of buying a franchise fraud before signing a contract.

Franchise frauds appear when unfair companies sell intellectual property that does not belong to them and make a fortune by using other brand’s popularity. It happens when the company creates its merchandise mark by copying the popular brand (branded colors, package, names of products, etc.). Another type of franchise fraud appears when the unfair companies even do not register its merchandise mark.

They simply create a franchise project that is based on the brand of the successful company and sell it to inexperienced franchisees. Franchise fraud has no commercial value, as it offers only copying of superficial specifics of the brand. Only valuable franchises offer the successful business models based on great experience and presenting commercial classified information.

Franchise frauds mostly appear in the industries using chain stores concept. They include fast food, fashion clothes, and automotive industries. Fast-food restaurant industry presents a special area of risk, as food restaurants represent the largest segment of the total franchised businesses (Gandhi, 2014, p. 3).

They are the most popular objects of creating and selling franchise frauds (e.g. Mash Donalds). Another risky area consists of fashion clothes brands (e.g. ZaraZara). Sometimes, franchise fraud can even gain more popularity and profit than the original company.

Merchandise mark, logotype, production technologies, and unique models of business conducting are regarded as an intellectual property of the company. Copying of intellectual property is punished by law. Therefore, the owner of the original is free to appeal to the Court and ask for material compensation in the case of fraud exposure. Both sellers and buyers of the fraud are punished in such case. The potential franchisees should be aware of the responsibility they accept when buying a franchise fraud.

The timeliness of the exposure of franchise fraud is of vital importance. The franchisee should ensure the reliability of franchisor before signing the documents. In the 1970s, the frequent cases of selling franchise frauds led to mass protests of businesspersons against sales of fraudulent franchises. The word “franchising” even was regarded as an abusive one. The situation became normal only after passing appropriate laws.

This experience shows that law regulation of franchising is one of the most important keys to avoiding the prevalence of fraud franchise frauds and ensure their early exposure. There are three federal laws, which are aimed at ensuring keeping of rights of franchisees (Abel & Burke, 2003, p. 361).

The Federal Trade Commissions Franchise Rule requires disclosure of information that is necessary to be known to make relevant decisions before signing a contract. However, there is a loophole in the law, which lets franchisors make undocumented oral claims, which are “typically inadmissible to establish fraud, even if inaccurate” (Abel & Burke, 2003, p. 362).

Several reforms of the rule have been proposed to make it more precise. As the law is not likely to expose the frauds and protect the franchisees, they should consider investigating the proposed franchisor and market, interviewing current franchisees, and consulting legal counselor prior to signing an agreement. Such precautions will help the franchisee to expose possible franchise frauds and prevent unpleasant consequences.

There are certain strategies that can help to prevent the risk of dealing with franchise frauds. The person eager to buy a franchise should directly contact the owner of the brand and avoid interacting with intermediaries. It is better to communicate with participants in the business market, whose contacts can be found on their official websites. It is also of vital importance to check the official registration documents of the selected merchandise mark.

The potential franchisee should require full information about the selected company, e.g. history, data about products and offers, the experience of other franchisees. The age of the company and the size of its current network are also essential aspects to be considered while investigating the chosen company. The consultation with a legal counselor can also reduce the risks of buying a franchise fraud.

There are some red flags for detecting franchise fraud. They include the franchisor’s reluctance to expose the relevant information about the company and other franchisees. Such behavior can be a sign of previous negative experience of other franchisees. Another alert is the company’s young age.

If the company has less than three years experience and already launches the franchising program, it can be a proof of the fact that the brand was created only for selling. Even if such network has certain success, it is appropriate to consider the insufficient experience of the franchiser. It can result in future mistakes made by the inexperienced franchiser.

There are many unfair companies, which are aimed at selling franchise frauds and receiving profit. Businesspersons willing to become a part of franchising industry should pay special attention to the exclusion of the possibility of buying a franchise fraud before signing the agreement with a franchisor. Exploring red flags for detecting the franchise fraud and the controls for preventing it can contribute to the franchisee’s successful decision on choosing an appropriate franchisor.

References

Abel, E. M. II, & Burke, D. (2003). Franchising fraud: The continuing need to reform. American Business Law Journal, 40(2), 355-384.

Bundy, K., & Satterlee, K. (2007). “You made me do it”: Reliance in franchise fraud cases. Franchise Law Journal, 26(4), 191-198.

Gandhi, H. V. (2014). Franchising in the United States. Law and Business Review of the Americas, 20(1), 3-24.

Indivisibility is a margin position, which allows any production manufacture to function (Besanko & Braeutigam 2010). When a company requires an appliance that produces 500 items installs an apparatus that produces 2000 pieces, it leads to an overproduction, because such an appliance cannot be divided into small ones. The device can become productive only by raising the level of production to 2000 items. Indivisible input is an increase in production that cannot be divided in order to manufacture fewer items (Mukherjee, Mukherjee, & Ghose 2004). The UPS franchise organization, as the most companies, has several indivisible inputs. Here are examples of indivisible input of the UPS firm: an industrial machine has to be fully equipped in order to supply an organization with copies of output; the vehicles used in the firm are designed for massive transportations.

There are four essential typical features of a perfectly compatible company: “a large number of small firms, identical products sold by all firms, perfect resource mobility or the freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology” (Perfect competition, 2005, para. 1). These four components combined indicate that a certain company that is considered to be perfectly competitive is not able to seize domination over the whole retail. A market that is perfectly competitive implies that the competition exists at the maximum achievable position. The economists of the neo-classic dispute over the possibility of a perfect competition to be able to create the most excellent effect on customers and society in general.

The excessive quantities of smaller companies that manufacture interchangeable output signify that an abundant quantity of flawless replacements can take a place of the production that is manufactured by any corporation. “This makes the demand curve for a perfectly competitive firm’s output perfectly elastic. Freedom of entry into and exit out of the industry means that capital and other resources are perfectly mobile and that it is not possible to erect barriers to entry” (Perfect Competition, 2005, para. 3). Impeccable awareness indicates that every company function on the same foundation; that consumers are aware of every attainable perfect alternative for a product and that companies indeed manufacture interchangeable items (Perfect Competition, 2015). The UPS franchise shares the trait of exact services provided by other companies, as there are different firms that render transport and logistics services. This confirms one of the basic traits of perfectly compatible company – “identical products sold by all firms” (Perfect Competition, 2005, para. 1).

An economic profit is a “difference between the revenue received from the sale of output and the opportunity cost of the inputs used” (Economic Profit, 2014, para. 1). Unlike in a monopoly or an oligopoly, a perfectly competitive company is not able to derive a monetary benefit eventually; in other words, a company is not able to obtain pecuniary profit that covers more than the company’s expenses.

Assuming that the UPS franchise firm is competitive, the profits would not inevitably disappear over time; more likely, the profit of the firm would gravitate towards normal profit (Profit, 2015). Due to frequent distorting of this hypothesis of a zero eventual profits, it has to be noted that in this context the concept of ‘profits’ is manipulated differently. The approach of neo-classics delineates profits as a monetary balance, which remained after taking away all expenses (Economic Profit, 2014). On the other hand, proponents of classical economics interpret profits as a remaining amount of funds after reimbursing expenses that do not include interest and risk coverage; thusly not taking into consideration a number of opportunity costs. So, to conclude, if the UPS franchise firm becomes compatible, the remaining economic profits after subtracting every expense would be minimal, as, according to the classic economy, the economic profits only cover the expenses of the firm and would lean towards normal profit on the long run.

References

Besanko, D., & Braeutigam R. (2010). Microeconomics. New York, New York: John Wiley & Sons.

Economic Profit (Or Loss). (2014). Web.

Mukherjee S., Mukherjee M., & Ghose, A. (2004). Microeconomics. Dehli, India: PHI Learning.

Perfect Competition. (2015). Web.

Perfect Competition, Characteristics. (2005). Web.

Profit (Economics). (2015). Web.

Based on the specifics of the case, La Grande Enchilada is a business format franchise since the company provides the franchisee an already established brand that comes with all the necessary equipment, products, and trained personnel to run the business efficiently (Terry & Chetwin, 2015). All the franchisee has to do is operate the business based on the prescribed guidelines that were set by the company.

The problem with sole propriertorship is that during instances of damage to the equipment or facilities of the restaurant, it is the franchisee who is responsible for replacement or repair (Schnell & Gardner Jr., 2015). There are exceptions to this where it has been proven that the equipment provided by the franchisor was faulty, to begin with. However, barring such circumstances, it is the responsibility of the franchisee to cover the cost of repairs.

The primary factor that the court would investigate would be if Del Rey’s La Grande Enchilada was really in violation of the prescribed safety procedures (Anwar, 2011). Yes, a fire did occur in the restaurant, but the specifics of the case did indicate that it was a result of complying with the safety manual (i.e., making sure a towel was located two feet away from the grill). From this perspective, the court would side with Del Rey when it comes to his argument that the franchise was unjustly terminated; however, before rendering judgment, there are other issues that the court would examine (Hutton & White, 2016).

For instance, the court would investigate why the grill sparked in the first place since this indicative of some fault in the equipment or lack of sufficient maintenance. Not only that, there is also the issue of the oil towel; why was the towel oily in the first place? Is it common for other La Grande Enchilada restaurants to have an oily cloth located so close to the grill, or is this a case that is unique to Del Rey’s franchise? Lastly, the court would also ask what the purpose of the towel was in the first place.

If it was proven that the cloth was used for cleaning up oily messes, as indicated in the manual, then the fault is not with Del Rey; however, if it is shown that the towel is supposed to be used for an entirely different purpose and was not intended to be oily, then it can be stated that Del Rey did not follow proper safety procedures.

The likelihood of the court ruling that La Grande Enchilada had good cause to terminate Del Rey’s franchise will all depend on whether it can be proven that the franchisee was in actual violation of the company’s prescribed safety procedures. If it is established that it was the procedures that were the cause of the fire in the first place or that it was an unforeseen accident due to circumstances outside the manual, then it is likely that the court will not rule in favor of La Grande Enchilada (Kyuho, Khan & Jae-Youn, 2010). On the other hand, if it is proven that Del Rey did not follow proper safety procedures and was lax in maintaining proper operations, then the court will rule in favor of La Grande Enchilada.

Reference List

Anwar, S. T. (2011). Franchising: category issues, changing dynamics and competitiveness. International Journal Of Commerce & Management, 21(3), 241-255.

Hutton, R. W., & White, F. J. (2016). DOL Issues Administrator’s Interpretation Impacting Joint Employer Liability in the Franchise Restaurant Industry. Venulex Legal Summaries, 1-3.

Kyuho, L., Khan, M. A., & Jae-Youn, K. (2010). Critical Issues and Challenges in the Management of International Restaurant Franchises: Franchisee Perspective. Journal Of Foodservice Business Research, 13(2), 85-97.

Schnell, B. B., & Gardner Jr., R. K. (2015). Battle over the Franchisor Business Judgment Rule and the Path to Peace. Franchise Law Journal, 35(2), 167.

Terry, A., & Chetwin, M. (2015). Issues at the end of a franchising relationship. Australian Business Law Review, 43(2), 152-166.

Advantages and disadvantages of 1-800-Got-Junk franchisees’ experience

The daily operations at the company headquarters followed a routine of a short meeting between the CEO, Brian Scudamore, and staff which are centered on discussions about important daily data and keynote addresses from the CEO on how to attain set goals. -1-800-Got-Junk Company runs the most successful franchise businesses as a result of its focus on franchise partnership development and support. A franchise partnership with 1-800-Got-Junk Company brings forth the following benefits:

1. Success is more certain because of the 94% satisfaction rating policy that the parent company continuously pursues.
2. Franchise partners enter into a successful business system that offers comprehensive support in prime areas such as training, coaching, field visits, and other benefits from the national commercial alliance developed by the mother company.
3. The agreement entered into remains secure and any major changes while the contract is operating do not affect the contract; this is left to the franchisee to decide whether to adopt the new changes or not.
4. 1-800-Got-Junk Company nurtures a business environment in which the participation of all partners is encouraged. As such the partners are always motivated and more bonded to the mother company. In Scudomore’s words; it is putting all these brilliant minds and saying “let’s innovate together” (International Accounting Standards; IAS-16). Further, to make this much easier the mother company runs an extensive call center from where all calls are handled.
5. The company network developed an umbrella body (franchise advisory council) which is a group of 6 partners elected by the others and mandated to collect feedback from their respective regions, summarizing and then meet the management at least two times a year to discuss improvement plans.

Why 1-800-Got-Junk changed its franchisees’ territory sizes

On the other hand, the 1-800-Got-Junk company system presents a few challenges to the franchise partners. These include; 1) overregulation of the franchise partnership. The structure of 1-800-Got-Junk is run in a very standardized routine thereby leaving little room for the individual partners to increase or improve regional performance. This denies the franchisees the opportunity to be their boss an attribute of most small businesses. 2) it’s costly as it charges ongoing royalty of 8% per dollar earned cutting on profits to the franchisees.

The change of franchisees’ territories emanated from the increased number of franchise partners and consequently increased tasks in the existing systems. This was captured in Scudermore’s statement that “there were too many materials, and partners wanted an updated website.” Further, he hinted that this would form the basis for changes during the year. Following this, the managers submitted their action plan to the franchise alliance council who then communicated to the franchisees the intention to restructure territories.

I believe that 1-800-Got-Junk Company had at its disposal a better communication technique than the one it rolled out. Given the gravity of the matter (changing of franchisees’ territories) and the increased number of franchise partners it was necessary to negotiate with the entire group which could then unlock health deliberations and eventually a resolution. This would give better results since all partners feel part and parcel of the decision making process. It will also accord them the opportunity to learn the pros and cons of implementing the new procedures and therefore showing more cooperation and reduce discontentment.

Communication of changes of territory sizes

I commend 1-800-got_Junk Company on the exhaustive procedures of goal setting and data collection. The gap between the franchiser and the franchisees is filled with a 6 member council (FAC) which is mandated to collect and analyze data from all regions after which they meet with 1-800-Got-Junk Company top management for final decision making. This process draws its strong points from the democratic election of the FAC members. Furthermore, the top leadership greatly involves the partners In terms of input in the decision process. This is emphasized by the CEO who simplifies the role of the franchise partners in his as “let’s innovate together.” Also, since the company runs a central call center collecting data, customer relations, advertising efforts, and implementing decisions generally is done with much ease.

How 1-800-Got Junk is capitalized

Capitalization in accounting is used to refer to Assets tangible or intangible in value and don’t fall into components of other capitalized assets. According to IAS assets that form part of an entity’s capitalization are those that are used in the operation of its activities. Further, the IAS stipulates that assets should have a useful life of a year or more. 1-800-Got-Junk Company by the nature of its operations has the following capitalization base. Its tangible assets include; 1) trucks which are used to ferry Junks from homes to the company. 2) Buildings where the corporate offices and recycling plants are based. 3) Equipment that is used to process the junk collected, and also equipments at the call center (electronic wares such as computers). 4) The royalties that the franchisees pay (8% per dollar earned). On the other hand, intangible assets would include: 1) trade secrets; that is customer lists and recycling methods. 2) Goodwill 3) copyrights and trademarks (intellectual property.

Reference

International Accounting Standards; IAS-16. (1998). Fixed Assets: Property plant and Equipment. Web.

Executive Summary

Ken and Mary did not have the appropriate work experience needed to handle a business operation. They cannot make appropriate decisions when it comes to the ownership of a Second Cup franchise. As a result, they made faulty assumptions, and it made them believe that they had the resources to operate a coffee shop. They relied on information that was given to them by Second Cup.

The document that they received provided information on the annual operating expense for the enterprise. It also contained the projected earnings in the next twelve months of operation. However, careful scrutiny of the data revealed that Ken and Mary did not have the correct information to ensure that cash flow problems will not crop up in the first few months of operation. They needed to talk to the representatives of the Second Cup to obtain a more detailed breakdown of the expenses and projected earnings. After collating the pertinent information regarding the franchise, they must decide if they will need a bigger loan. They must make the necessary adjustments to prevent cash shortages in the near future.

Introduction

Due to the lack of management experience, Ken and Mary made assumptions that were not consistent with the facts of the case. The $20,000.00 in savings was only enough to pay the franchise fee. However, they needed more funds to pay other types of expenses. Second Cup gave them the assurance that it is relatively easy to secure a $200,000.00 bank loan on account of their being a franchisee of the company.

However, a careful examination of the annual operating expenses and projected revenue revealed the absence of key information that they needed to make the appropriate decisions for their new venture. They need this information to avoid cash shortages in the first few months of the business operation. They need to reconsider the business proposal of the Second Cup. They need to dig out more franchise-related information.

Problem Statement

Ken and Mary needed to acquire and collate pertinent information in order to make effective decisions on acquiring a franchise from Second Cup.

Analysis

The financial information from Second Cup requires further analysis, especially when it comes to the cash flow problems of the business. It is important to point out that Ken and Mary Hatch cannot afford to run out of cash while operating the said coffee shop business. However, Ken and Mary are struggling when it comes to their cash reserves. They made the disclosure that they could only afford to pay the $20,000.00 franchise fee. It is important to find out if they have access to other funds. It is not practical for them to invest everything in a single business deal. Therefore, it is also imperative to figure out the family situation of the couple. If they have children, then, they need to have cash reserves for emergency expenses.

The couple has to figure out the exact amount needed to pay for the following:

1. Kitchen equipment
2. Advance payment for renting the building
3. Cost of Hiring Employees
4. Permits and Fees

Based on the financial statement provided by Second Cup, the couple has to spend money to cover the miscellaneous expenses, advertising royalty, insurance, and other advertising requirements. They have to pay for these expenses even before the store can sell a single cup of coffee. They have to shell out at least $65,000.00 if Second Cup demands payment upfront for all types of advertising expenses. They also need an extra $20,000.00 for the revolving cash fund.

They need to find out if the cost to purchase equipment will not exceed the $100,000.00 mark. The couple’s ability to lower the cost of equipment will enable them to save a few thousand dollars. They can divert this amount for operating expenses. However, they will have problems if they need more than $120,000.00 to purchase the necessary equipment for the coffee shop.

In a typical franchise agreement, the franchisee is compelled to purchase a certain amount of goods to jumpstart the symbiotic relationship with the franchisor. According to the figures released by Second Cup, Ken and Mary must purchase products worth $320,000.00 for the first year of operation. Based on these figures they will probably need to purchase products worth at least $25,000.00 to start the delivery cycle. They do not have the money to pay for this expense. They will encounter cash flow problems because the $200,000 loan from the bank will not be enough to cover the cost of the equipment and other start-up costs.

Alternatives

Ken and Mary will request a detailed breakdown of the projected annual operating expenses for the franchise. They also need to look at the price list for the required kitchen equipment based on the system that was created by Second Cup. They also need to request the schedule of payment in order to find out the amount of money that they are obligated to pay the Second Cup in accordance with the terms of the franchise agreement. These actions will enable them to determine the exact cost of the equipment. They will also determine the exact amount of money that they will need to pay the Second Cup on a weekly or monthly basis.

The information generated through the use of appropriate cash flow techniques will allow them to see the exact amount of money they will need to operate the business in the first month of the fiscal year. They will figure out if they have enough funds to purchase the coffee products and other commodities from Second Cup. Furthermore, they will find out if they have enough money to cover the initial cash balance of $20,000.00. In addition, they will know if they have enough money to pay the salaries of the workers.

Ken and Mary should alter the loan application, in the event that the cost of equipment and other start-up costs exceeded the $200,000.00 threshold. In this scenario, they will need a bigger bank loan. They will also find out the number of workers they will hire to help them run the business.

If they think that there is not enough money to operate the said coffee shop, Ken and Mary can decide to look for other business opportunities. Ken and Mary’s decision to pursue their dream of becoming entrepreneurs hinges on their ability to ask critical questions directed at the representatives of Second Cup.

Recommendation

Ken and Mary should ask the representative of Second Cup all the pertinent questions related to the annual operating expenses of the business. They will use the information to determine the viability of the business.

Implementation

Ken and Mary will schedule a final round of meetings with the representatives of Second Cup in order to dig out more information regarding the operating expenses of a typical business outlet. They also need to ask questions with regard to human resources issues. They need to figure out other details, such as the cost of securing permits and other miscellaneous expenses. They also need to find out the type of expenses that a typical business owner incurs. After collating all pertinent information, Ken and Mary will realize that they will eventually run out of cash a few months after the start of the business. They will be compelled to request a bigger loan from the bank.

In the event that the bank refuses to provide a loan in excess of $200,000.00, Ken and Mary had to change their approach in acquiring a Second Cup franchise. In this scenario, they are compelled to negotiate certain aspects of the business agreement. Second Cup managers must accept staggered payments for twelve months so that Ken and Mary can pay for royalty advertising and other forms of advertising fees. Second Cup will shoulder these expenses on behalf of the franchisees in the said area. A favorable response from the company will enable Ken and Mary to save some money so that there are enough cash reserves needed for the revolving cash fund.

After the final round of meetings with the representatives from the Second Cup, Ken and Mary will have a clearer picture of the managerial requirements for their new business. They will also make the tough decision to hire only one employee to reduce operating expenses.

Ken and Mary must take advantage of the training program provided by the company. They will focus on studying cash flow techniques, and they will attempt to acquire basic accounting skills. They have to acquire the skills needed to secure a favorable response from the bank. They will use these skills to develop their own version of a feasibility study that will help them determine the viability of owning a Second Cup franchise. The outcome of the feasibility study will help them realize if they have the resources needed to operate their own business.

Executive Summary

In the recent past, business organizations have grown as a result of having expanded their economic bases by attraction or nurture of new businesses as well as expansion of existing ones (Love & Crompton, 1999). The question facing most firms is where to open, expand or relocate. Another issue of great concern to the business owners is which competitors to acquire (Clarke, Bennison & Pal, 1997). Location decisions carry a high risk due to the amount of investments involved. Several factors have to be put into consideration to safeguard the firm’s investment and promote its growth (Hernandez, & Biasiotto, 2001). The impacts of these decisions on the firm’s activities are long-term; therefore, a strategy is necessary to ensure a viable location is selected.

A firm’s attraction to a certain location can be attributed to accessibility to the local market size, availability of skilled labor, well-developed infrastructure, low rents, appropriate laws and regulations (Trofimenko, 2010). Availability of government services is also a crucial factor since new business ventures require approval from the authorities. It is important that the firm contributes to meeting the economic, political and social goals of the government in the proposed new location. To fullfill these requirements is of great importance as the firm understands their significance. The process involved in location decision making is rather complex, and therefore, firms ought to employ all the available resources in ensuring a successful process.

The four proposed locations for expansion of Boba Rolls’ eateries, West Des Moines, Des Moines, Ames, and Ankeny, are located in the State of Iowa which economic recovery had been stable as 2011 drew to a close. State revenues increased by 4.7% for fiscal year 2011 (Wahlert, Wallace, Koonce & Igbokwe, 2012). Personal income also increased in the stated period. This growth in economy makes the State attractive for Boba Rolls to expand into. The City of Des Moines would make an ideal location for Boba Rolls to locate a new franchise. The primary deciding factors in Boba Rolls’ new location are the cities’ population, demographics, assistance from local authorities, local competition, cost of living, lease prices, and security. The main objective is to select a location which has more advantages than disadvantages. The firm’s approach to location selection is matching the firm’s needs with community characteristics (Murray, Dowell, & Mayes, 1999).

Des Moines has a higher population than the other proposed cities. According to the United States Bureau of Census, in 2011, its population was estimated to be 206,599. The population growth of 1.6% recorded in 2010-2011 provides an opportunity for attracting new customers. Therefore, the demand for the food and beverages is likely to be higher than in case with the less populated cities. According to Des Moines’ data, the median age is 33.5 years which is mainly the working class. This class of people is a good target market since most of them prefer light lunch during working days; therefore, a fast food restaurant is attractive to such a group. The customers would also enjoy free Wi-Fi so one can do his/her work while relaxing at the restaurant. Late hours would allow people to spend the most ample time for them to meet with their friends or colleagues, after office hours. Hiring in Des Moines would be relatively easy as there is a high quality workforce whom Boba Rolls can recruit, and wages are lower there than the national average is.

The Cost of Living Index in Des Moines is relatively low as compared to the other cities under consideration. This means the people of Des Moines have a higher purchasing power than the residents of West Des Moines, Ames and Ankeny do. Local competition is also low in the city. Out of 48 fast-food restaurants and chain businesses in Des Moines, only 2 are located on Army Post Rd. which is the proposed site for a new franchise. It would be easy to tap into the local market.

The lease prices for the premises are fairly reasonable. $9 per square foot per year is cheaper as compared to $22 in West Des Moines or $14 in Ames. The cheaper lease prices contribute to lower operating expenses of the company. Security is also good in Des Moines as the crime rate is low there.

Options for relocation

West Des Moines is a rapid growing city with a population estimate of 57,909 as for 2011, according to the United States Census Bureau. About 85% of the population is whites alone, 5.2% Hispanic, 4.8% Asian, 3.2% Black, the remaining percent accounts for other races. The city offers a wide variety of employment opportunities ranging from retail to industrial ones. The primary purpose of the Department of Community and Economic Development is to stimulate the economy, expand employment opportunities and encourage establishment and growth of commerce and industry in the city. The Department has been and still is very instrumental in attracting new businesses. It works closely with them to find suitable locations compatible to the zoning requirements. One of the highest priorities of this region is retention and growth of business. The local authorities try to achieve this by offering problem-solving assistance which may include business incentives and competitive grant programs.

Some of the commercial activities that make up the economy of Des Moines City are manufacturing, financial services, agriculture and insurance. The city’s employment that can be attributed to manufacturing is small. However, the significance of the manufacturing industry to the economy cannot be underestimated. Insurance business is huge in Des Moines with a number of insurance firms having their headquarters in the city. The health sector employs approximately 25% of the workforce. There are incentive programs for new and existing businesses. The Greater Des Moines partnership offers financial assistance programs to firms interested in economic development. There is also assistance to companies that wish to expand or relocate to Des Moines. The business assistance offered includes identification of land, financing, project management, referrals for licenses, job recruitment and training. Through the assistance of the City’s local authorities, businesses can take advantage of the various tax policies in place.

Des Moines Airport and four major railroads serve the city of Des Moines. Most businesses in Des Moines expand due to the high quality of workforce and low crime rates. Commute time is short in metro Des Moines. Housing is affordable and the cost of living is low. The city’s population comprises about 70.5% whites, 12% Hispanic, 10% Black, 4.4% Asian, and the rest is for the other races.

The city of Ames is located in the middle of the State of Iowa, and its population estimate was 59,909 in 2011. Approximately, 82.5% of this population is white alone; Asian 8.8%, Hispanic 3.4%, Black 3.3% and the rest is other races. The median household income was 37,124 and the per capita income was $21,857 in 2009. There is one airport within 30 miles from Ames. There is no train station within the same radius. The average one way commute time is 17 minutes which is lower than Iowa’s average of 20 minutes.

The city of Ankeny’s main industries are wind energy, biosciences, Information Technology, business services and logistics. In 2011, the population stood at 46,302. More than 90% of the population was white while the rest were Hispanic, Asian, Black, American Indian, Native Hawaiian and other races. The city of Ankeny offers financial incentives to encourage job creation and capital investment. The estimated median household income was $69,712 and the per capita was $31,446 in 2009.

Points of Comparison

Population

Population is a key determinant of demand for a commodity. Markets are presumed to be functionally related to population. Although West Des Moines had the highest population growth rate of 2.3% in 2010-2011, Des Moines still had the highest population of the four Cities. According to the United States Census Bureau, 2010-2011 population estimates were as follows:

The market for the “Asian finger foods” will be higher in Des Moines than in Ames, Ankeny or West Des Moines.

Availability of cheap labor is determined by the population characteristics. The employees in Des Moines’ businesses are drawn from a five-area county of more than half a million residents. This gives the firm a large pool from which to recruit. The workforce in Des Moines is trained and has a necessary skills due to the levels of education and availability of vocational and skills training programs.

Local Competition

When selecting a location for a business, it is important to consider the business climate which is defined by the presence of similar businesses or businesses in the same industry. In the four cities, there are fast-food restaurants and chain businesses. However, in some of the cities, the number of competitors is too much on the proposed street which means the customers have several restaurants to choose from which may be a challenge for a new Boba Rolls Eatery. In Ames, the proposed site is Campus town neighborhood 2510 Lincoln way. The city has 19 fast-food restaurants, 10 of which are on Lincoln way. The proposed site in Ankeny is Ankeny Center on Ankeny Boulevard. Ankeny has 10 restaurants, 2 of which are located on Ankeny Boulevard. West Des Moines has 17 restaurants, 3 of which are on the proposed street, Jordan Creek. Des Moines has 48 restaurants, 2 of which are on the proposed street, Army Post Rd. Taking into account the population rates, out of the four, Des Moines faces less local competition than other three cities.

Cost of Living Index

The cost of living index (COLI) is an indicator that measures changes in the cost of products and services including food, housing, utilities, transportation and health. The United States COLI is 100.

Des Moines has the lowest COLI. The cost of living is lower in that city. A low COLI implies a higher purchasing power for the consumer.

Demographics

Demographics are important in understanding trends and markets in relation to natural increase in population, migration of people and distribution in the population characteristics (Loreto, 2010). The level of income is a key determinant of demand for a commodity. An increase in income causes demand for normal goods to rise, and a decrease in income leads to a decline in demand. The four cities experienced an increase in estimated median household incomes between the years 2000 and 2009. Ankeny had the highest growth of 14,550 in median household income while Ames had the least, 1,082. Despite the increase in income in West Des Moines, Ankeny and Ames, the purchasing power of the consumers has still remained lower than that in Des Moines, due to the high cost of living in the three cities.

According to City-Data, the median resident age of the population is 23.8 years in Ames, 31.9 years in Ankeny while it is 33.5 years in West Des Moines and Des Moines. The age group in Ankeny, West Des Moines and Des Moines is mainly working class to whom fast-food restaurants appeal since most of these people prefer light lunch, and Boba Rolls Asian “finger foods” would come in handy. The late hours would also be ideal for most of them as they could meet with their friends or colleagues after working hours.

Lease prices

Lower rents and lease prices are an important consideration in determining the location of a business. Availability of affordable premises is significant in lowering Boba Rolls’ yearly expenses. Lease prices are highest in West Des Moines with its $22 per square foot per year followed by Ames with its $14. Des Moines comes next with $9, and the cheapest is Ankeny with $6. If this were the only factor under consideration Ankeny would be the ideal place. When we take into account the population and local competition, we have to rule out Ankeny and remain with Des Moines.

Assistance from local authorities

Businesses in Des Moines seem to enjoy more assistance from the local authorities than in the other proposed cities. Des Moines’ local authorities have put in place elaborate programs to retain existing and attract new businesses in the city. The assistance offered by the Office of Economic Development enables businesses to make good decisions, regarding location, resources and management opportunities. The tax policies are friendly, and businesses can enjoy tax credits and exemptions. Various job training programs are available from Des Moines Area Community College. Businesses located in the Iowa Enterprise Zones with a capital investment of $500,000, while meeting certain requirements, can qualify for tax credits and exemptions. Infrastructure is better developed in Des Moines as compared to that in Ames, Ankeny, Des Moines and West Des Moines.

Security

Security is a major concern for any business in any given location. Criminals pose a threat to the day-to-day activities of the business and the safety of the customers. A location with the lowest crime rate is desirable. Des Moines enjoys a lower crime rate than Ames, West Des Moines and Ankeny.

Conclusions and recommendation

Having closely examined all the four cities, Des Moines is recommended. The city’s high population would provide a large market for Boba Rolls Asian “finger foods” and beverages. The growth in population will provide for a new market for the products. The industries in the area are diversified bringing a large number of workers into the city. These employees create a market for the foods. The workforce in Des Moines is highly qualified, meaning that Boba Rolls may employ the best workers. The wage in the city is lower than the national average which implies the firm will spend less on wages there as compared to the other cities. The reduction in wages will contribute to the firm’s profitability.

The proposed site is Stefon Plaza on Army Post Rd. On this street, there are two fast food restaurants, out of the forty-eight found in the city. 2 out of 48 located in the city of 206,599 people is not a great competition. Boba Rolls will be able easily to tap into the local market. The lower cost of living is the higher purchasing power of the consumers is. Most of the inputs used by most firms in the city are produced locally; this means cheaper source of inputs and reduction in transport costs, thereby minimizing operating costs. Low operating cost translates to more profits.

The median age comprises mainly of people who are working. As a rule, most people in this category do not have lunch at home, as they prefer to choose fast foods due to the light foods offered. The restaurant opening late hours will provide a place for these people to meet with their friends, while free Wi-Fi allows them to continue working on their projects even after office hours. The city is well served by an airport and four major railroads. A well-developed infrastructure allows for accessibility and lower transportation costs. Although transportation costs account for a small portion of the total costs, improvements in infrastructure are likely to yield small gains (McQuaid, Greig, Smyth, & Cooper, 2004) Thus, the impact of transport in business cannot be overlooked.

The assistance to businesses by the local authorities and the state is an incentive to businesses wishing to expand to Des Moines. Boba Rolls can take advantage of them to reduce the relocation cost and benefit from the helpful tax policies. The low crime rate allows businesses to expand without fear of losses or threat to life which results from criminal activities.

Though Des Moines is recommended, the other three cities have their advantages as well. Some of the advantages are as follows. Lease prices are lowest in Ankeny which also has the highest household income for the period of 2000-2009. Ames has the highest Asian population of about 8.8 % which would provide a ready market for the Asian foods. Moreover, West Des Moines’ Department of Community and Economic Development has put in place programs to stimulate economic growth and attract new businesses into the area. Having put into account all the advantages and disadvantages of each city, Des Moines emerged as the ideal location for a new Boba Rolls franchise.

References

Clarke, I., Bennison, D. & Pal, J. (1997). Towards a Contemporary Perspective of Retail Location. International Journal of Retail and Distribution Management , 25(2), 59-69.

Hernandez, T. & Biasiotto, M. (2001). Retail Location Decision-Making and Store Portfolio Management. Canadian Journal of Regional Science/Revue canadienne des sciences régionales, XXIV(3), 399-418. Web.

Loreto, R. (2010). Applying Demographics to Business Strategy: The Impacts of Demographic Trends on Your Business. Web.

Love, L. L., & Crompton, J. L. (1999). The Role of Quality of life in Business (Re) Location Decisions , Journal of Business Research 44, 211–222. Web.

McQuaid, R. W., Greig, M., Smyth, A., & Cooper, J. (2004). The Importance of Transport in Business Location Decisions. Web.

Murray, M. N., Dowell, P., & Mayes, D. T. (1999). The Location decision of Automotive Suppliers in Tennessee and the Southeast. Web.

Trofimenko, N. (2010). Factors Affecting Location Decisions of the Economic Headliners – Exporters and Foreign-Owned Firms – in China. Kiel Working Paper No. 1645. Web.

Wahlert, T., Wallace, E., Koonce, K. & Igbokwe, J. (2012). Iowa’s Workforce and the Economy 2012. Web.

Introduction

The role of franchising in a contemporary world of business is of great significance due to an urge of people to move their business more intensively. In this respect the example of Cold Stone Creamery is grave enough. It is concerned with the idea of using outsourcing methods rather than in-home production. Outsourcing is popular today in the world. It is based on the points on making goods by means of a franchisee powers. Suchlike initiative is appropriate for its convenience. The parent company does not make great efforts, so that to promote its product line. On the other hand, the need for effective and productive cooperation becomes leading within a company’s subsidiaries.

Cold Stone Creamery begins its history in the year 1988 when Susan and Donald Sutherland founded a small company for ice-cream production (Cold Stone Creamery, 2008). Since that time the company expanded the field of its influence throughout the USA and in some little number of countries. It became known as the union with Kahala Group (Cold Stone Creamery, 2008).

Discussion

For an applicant for Cold Stone franchising there should be several fundamental approaches. Most of them are concerned with the financial stability of a franchisee and his/her financial potential, on the whole. Outsourcing is a versatile framework of what and how should be done. In this respect an applicant should be aware of the corporate secrecy about the technological approach when producing Cold Stone ice-cream and other products relating to the brand. Thus, the preparation of an applicant starts with his/her personal concern as of the company’s activity and its strategic outlook on the further development of powers and impacts throughout current and potential areas of business relations.

Ehrlenspiel et al (2007) admits the idea of how outsourcing became so usable and popular within companies: “An essential basis for outsourcing was always to use the advantages of having a specialized supplier, with regard to costs, technology, and schedules” (187). Suchlike tendency is significant due to costs’ decrease in a perspective of further sharing of the company’s product line with franchisees. Here the vertical trend of relationships development is considered to be the main. The parent company influences on its subsidiaries, so that to have an idea about the process of production. Rabin (2005) outlines the following statement making more glimpses at the above mentioned model of production process, namely:

Organizing production through vertical integration means that firms are organized into a business unit. The implication from this is that measuring the performance of individual firms requires that a “transfer price” be established for goods and services exchanged (9).

The procedure of documents and all appropriate phases preparation and acceptance is not so long when an applicant is concerned about his/her business plan taking into account the internal policy of the corporation and its approach toward payrolls, taxation, banking procedures and ethical policies according to the practice of financing promoted in Cold Stone Corporation. One more touch should be presupposed, as Bulcke et al (2003) admit, with a two-factor dimension of interests as for ‘local versus offshore sourcing’, namely: location-specific factors LCFs and firm-specific factors FCFs. Thereupon, the Cold Stone Company seeks for better peculiarities of a franchisee’s location and its current positions for competition with the closest rivals of the company (Bulcke et al, 2003).

It is useful to know that Cold Stone Creamery was ranked in 2006 Number 11 in Entrepreneur Magazine’s Fastest Growing Franchises with the initial Franchise Fee being $42,000 with a total investment between $294,250 and $438, 850 (Cold Stone, 2008). For owning one’s own Cold Stone Creamery® franchise several requirements should be fulfilled. The bellow table (Cold Stone, 2008) provides a franchisee with the information according to the costs varied between the low and the high readings:

Apart from primordial data of fees described above there is also another ongoing board of fees regarding to the possible additional expenses and regulations with the various controlling organizations. Thus, a definite franchisee should take into account the seriousness of features concerned with the Cold Stone collaboration. Before becoming a franchisee one should point out a list of mandatory requirements to better understand the purpose of being Cold Stone’s franchisee. The above mentioned table should be helpful in outlining the advantages and limitations of a would-be project of a store and everything which can be supported with it. Moreover, the role of initial payments presupposes that after paying for every point in the agreement a franchisee should have an additional extra limit of financial sources. In this respect dealing with Cold Stone Creamery is an optimal decision while providing strategic evaluation about a future franchise.

Franchise Direct (2009) proves the idea of better conditions provided by Cold Stone Creamery in contrast with rivals in this sphere of business. Moreover, such initiative gives a varied field of rewards given by a franchisor. Thus, the company fairly suggests the policy of rewarding and restrictions for its franchisees. In other words, the violation of such principal points as, for example, Hours Violation, Non-participation, Relocation, Late Charge and others, is considered to have a negative development of relationships between the franchisor and a franchisee. The fair attitude of both sides is outlined with rewards which can be due to positive gains of a franchisee and for the performance above target. In this case an applicant should be aimed from the very beginning at a right direction in the business affairs evaluating, at the same time, probable and desired outcomes. In practice most of the franchisees are concerned about having suchlike relationships and try to make every possible attempt to improve the aspects related to product delivery from the head office, preparation by virtues of a special technology and catering of the customers, as a result. The more previously mentioned initiatives are supported, the more efficiency can be predicted in the long and in the short runs.

Conclusion

To conclude, the Cold Stone Creamery Corporation is one of the well-known franchisors in the United States providing people with tasty ice-cream in a great assortment along with smoothies, pies and other related products. Being a franchisor since the year 1994 Cold Stone Creamery gained a wide popularity both among customers and partners, franchisees. In this respect an applicant for franchise field of relationships with the Corporation should be aware of the list of fees and preferences which the company gives. Moreover, a franchisee should take into account ongoing fees and the principles of taxation with regard to the peculiar location. All in all, Cold Stone Creamery is a great opportunity to start one’s own franchise business and to become successful in it.

Reference

Bulcke, D. van den, Zhang, H., and Esteves, M. do C. (2003). European Union direct investment in China: characteristics, challenges and perspectives. London: Routledge.

Cold Stone Creamery. (2008).

Ehrlenspiel, K., Kiewert, A., Lindemann, U., and Hundal, M. S. (2007). Cost-efficient design. Berlin: Springer.

Franchise Direct. (2009).

Rabin, J. (2005). Encyclopedia of public administration and public policy. Boca Raton, FL: CRC Press.

Cold Stone Creamery provides three ice cream sizes. To start with, there is the 5 oz “Like It” size. This is then followed by the 8 oz “Love It” size. Finally, we have the 12 oz “Gotta Have It”. There is also a smaller size of 3 oz, intended for the children (Duff, 2006, par. 4). Besides ice cream, Cold Stone also offers iced coffee drinks, malts, shakes, and smoothies. It is important to note that natural ingredients are used to produce the ice cream, which is manufactured in-house (ColdStone Creamery, 2009, par. 2). Accordingly, it is also the intention of the potential franchisee to follow in the footsteps of the parent company.

The franchisee shall also endeavor to introduce a line of products made of pies, ice cream cupcakes, and ice cream cakes, with the intention of appealing to the youth as a target market. It is also the intention of the franchisee to manufacture frozen desserts that are customized to the specifications of the customers, in effect ensuring that the company has a competitive advantage relative to the other ice cream manufacturers. Furthermore, it is also important to note that the different flavors of ice cream on offer by the franchisee shall be the same ones that the parent company manufactures. These flavors include banana, chocolate, vanilla, and Butterscotch (Duff, 2006, par. 2).

Plans of how to manufacture the product(s)

The proposed ingredients for the manufacture of ice cream by the potential franchisee to Cold Stone Creamery include cream, corn syrup, condensed skim milk, stabilizers (for example, Carageenan and Guar Gum), emulsifiers (for example, Di-glycerides Polysorbate 80), and a colorant (for example, annatto yellow). In this case, the condensed skim milk shall contribute the “serum solids” (also known as ‘non-fat milk solids’) to the final ice cream product. The function of this particular ingredient is that it helps the final product to retain a desirable texture, especially after the process of whipping air into the ice-cream mix, in order to increase its volume. This process is usually referred to as “overrun”. This is the increase in the volume of the final product relative to the ice-cream mix, following the process of incorporating air into the mix. Accordingly, it will be the intention of this franchisee to Cold Stone Creamery to adopt the overrun that the company has stipulated.

The use shall also be made of corn syrup to replace sugar. The use of corn syrup is necessary since it is able to depress the freezing point of the ice cream, with the result that

the ice cream is able to be frozen to lower temperatures than would have been the case had sugar been used. On the other hand, the stabilizers ensure that even after the final product is in transit, it is able to withstand variations in temperature. It is important to put in mind the fact that ice cream is an emulsion made up of a solid phase and a liquid phase. In order to hold together such an emulsion, emulsifiers are usually utilized. The emulsifier is made up of a phase that has an affinity for the liquid phase of the ice cream, and another phase that has an affinity for the solids phase of the ice cream. This way, the emulsion remains held together. The colorant is also used to give the final ice cream product an appealing look (Burton, 2009, p. 2). Accordingly, the utilization of these ingredients shall be in line with the stipulations that have been issued by Cold Stone Creamery, as applicable in the various franchises that the ice cream maker holds.

The actual manufacturing process shall entail a number of steps. To start with, all the liquid ingredients shall be placed together and adequately mixed. Then, these shall be added to the cream and skimmed milk and subjected to a blending process, using a blender. The purpose of this processing step is to ensure that the solid ingredients for the ice cream are adequately and uniformly dispersed in the liquid ingredients.

Following a successful blending of the ingredients, the process of pasteurization shall then be adopted. In this case, it is the intention of the new franchisee to adopt a steam pasteurization process whereby steam shall be utilized to heat up the ice cream mix to the desired temperature regimes. A heat exchanger shall be employed so that the flow of the ice cream mix is counterclockwise to that of the steam. This way, the franchise hopes to benefit from the steam economy, with the incoming steam encountering cold ice cream mix, and the exiting steam that is already stripped of its heat encounters an ice-cream mix that is warm, thereby cooling it.

After pasteurization, the ice cream shall then be homogenized. This is whereby a homogenizer is used to reduce the fat globules in the ice cream mix, in effect dispersing them uniformly throughout the ice cream mix. This is for purposes of ensuring that the final product is uniform in texture, and does not cause a feeling of sandiness in the mouth at the time of consumption. After homogenization, the resulting mix is usually smooth in terms of texture. Besides, it is also palatable and is able to retain more air during the crucial stage of overrun. Furthermore, a homogenized ice cream mix has been shown to be more resistant when it comes to melting. Once the mix has been homogenized, it shall then be allowed to age for a period of between 6 and 24 hours.

The idea is to give fat globules in the mix enough time to crystallize and cool down. Also, the polysaccharides and the proteins that are to be found in the mix have time to take in more liquid and become hydrated. This is useful in enhancing the texture and body of the final product. The aging process shall be accomplished at refrigerated conditions, at temperatures that do not exceed 5 C. Once the mix has aged to the desired level, it will then be subjected to the next process of freezing.

However, before the freezing process of the ice cream mix, additional ingredients such as fruit purees, flavors and colorants shall be incorporated into the mix, at special flavor tanks. It is important to note that both the freezing as well as the hardening process shall take place in a special freezer. To accomplish the two steps, a pump shall be used to dispense the mix into this freezer. Usually, the freezing and hardening step will not take longer than 30 seconds to realize the final product. It is within this machine that the incorporation of air will also take place, to accomplish an overrun for the final product. Upon exiting the freezer, the product shall then be packaged into the desirable containers, then labeled and stored into refrigerated conditions, awaiting dispatch.

References

Burton, S. (2009). Chemistry in a cone.

ColdStone Creamery (2007). The Cold Stone Creamery Story. Web.

Duff, M. (2006). Target, Cold Creamery sign in-store deal. Web.

Introduction

Cold Stone Creamery is the company which performs its business activity on the basis of the Franchise relations. Originally, franchising is the business activity, which requires a multi-angle approach towards the development of the business activity in general and the issues of management in particular. The aim of this paper is to define and research the software packages, networks, hardware, email and instant messaging programs, web site, and disaster recovery plan. Originally, there are the factors that are required by the parent organization, and therefore would be used for the successful running of the business. All the aspects of this business activity will be represented from the point of view of the successful business strategy and all the required details for the marketing activity.

Software Packages

Software packages, which are required for the Cold Stone Creamery Franchise business activity do not differ from the packages of any business organization. One of the most important software for any organization is financial accounting software. Originally, there were a number of variants of such software nevertheless, there was no necessity to purchase expensive licensed software for the first time. Free software is reliable enough and will help not only in accounting but also is saving money for the improvements of business activity. Thus, GnuCash is personal and small-business financial-accounting software, freely licensed under the GNU GPL.

Another software tool which will be required is the office pack. MS office is widely known for its universality, nevertheless, there are also free equivalents exist. Thus, OpenOffice may be used by management, as all the necessary functions for text editing and creation of presentations are provided with this pack.

Taking into consideration the fact that the purchase of the licensed software may cost up to $2000 in total, there is strong necessity to mention that free software should not be treated with skepticism. Originally, purchase of the license does not mean that the software will be working properly, nevertheless, one can always rely on the technical support service. Free software, in its turn, often works quicker and are more reliable and technically advanced by various plug-ins. (Dicke, 2004).

Networks

Networking system of the franchise company is not less essential than for any other business company. The internet is the tool of the working communication among the workers and management team. Network is the necessary instrument for the automation of the business performance as well as the constant update of the software all over the organization. The best variant of business network is the mixed variant of wireless and wired network, as some of the devices, like electronic bar-code reader or the system of recognizing electronic passes may be portable, and wired connection is not suitable for such devices. As for the internet connection, I should be provided for the chief management only, for the communication with the central office of the Cold Stone Creamery Corporation.

Hardware

In light of the fact that hardware breakdown may cause not only the expenses for the new equipment, but also the loss of the necessary business information and serious financial losses associated with it. Thus, preference should be given to the reliable manufacturers of durable hardware. As for the trademarks Welsh and Ilan (2006) emphasize that Dell is optimal variant of price and quality. The era of PCs is approaching its end; consequently, the staff should be equipped with laptops. They are cheaper than PCs; nevertheless, their functionality is enough for the business performance, while portability and mobility is beyond any competence.

Email and Instant Messaging Programs

The fact is that most corporations, which have numerous subsidiaries, or act on the franchise basis have their own email servers. As for the matters of instant messaging, it is emphasized in Sherman (2008) that the real necessity of this type of communication is defined in the course of business activity. Surely, business corporations rarely resort to such services as ICQ, Jabber, MSN or AIM. Surely, some team members may use them for the corporate or personal communication, nevertheless, the inter departmental communication may be arranged with the help of video conferences (if urgent discussion of any issue is required). If the urgency of the problem does not require instant messaging, the problem may be discussed via email.

Web Site

Web site is the least necessary component of the business activity of the franchised subsidiary. The fact is that, web site is generally created for potential customers and hitting the target audience. Cold Stone Creamery is the well known corporation which acts within the national scales, consequently, it is within the concerns of the central office of the corporation to take care of the advertisement and creation of the web site. In the light of this fact, it should be emphasized that the franchised subsidiary does not have to spend its resources on the web advertisement, as its main aim is to care of the awareness within the region.

Disaster Recovery Plan

First of all, before creating the disaster recovery plan there is strong necessity to obtain at least the average data of the disasters and possible hazards, as well as their Annual Occurrence Rate. Moreover, business risks should be taken into consideration. In the light of the fact that the business issues often cause the largest expenses, the following data should be considered:

These are the investment requirements for purchasing the Cold Stone Creamery franchise. Low and High columns represent the minimal and maximal investment sums correspondingly. Sherman (2008) in his research dedicated to the issues of franchise investment emphasizes the direct association with the possible minimum of the investment and increasingly high rates of the financial risks. Consequently, the higher the investments are – the lower risks the company will experience.

As for the matters of natural disasters, it should be stated that all the working rooms and spaces should be equipped with fire detecting and fire fighting systems, as well as anti theft systems. If the region is subjected to hurricanes or floods, the corresponding measures should be taken.

One of the largest risks is represented by IT danger and improper adjustment of network security systems. Only qualified IT personnel should be hired in order to avoid these risks. From this point of view, it should be stated that the particular attention should be paid to the security software package. This may be either free or licensed – the only factor, which is important, is the qualification of the IT department members.

Disaster recovery itself will depend on the hazard itself; nevertheless, the initial actions will be associated with the removal of the consequences of the disaster, and then restructuring of the business structure or security systems in order to avoid similar hazards in future.

Conclusion

The information system of the Cold Stone Creamery franchise is an important part of the business activity in general. The fact is that the constantly globalizing world requires quicker response and reaction for the appearance problem or risk, consequently, the properly adjusted communication system is the main factor of successful business performance and marketing activity.

The research of the software packages, networks, hardware, email and instant messaging programs, revealed that there is no need to save money on cheaper hardware, while free software may be even more preferred then the licensed.

As for the matters of disaster recovery planning, it should be emphasized that the information sphere is subjected not only to informational risks and hazards, but also to natural disasters, financial risks (equipment may be sold for the debts), low endurance etc. Consequently, risk assessment is the action of high priority for the informational system of the business organization. Moreover, the communication factor is also very important in the risk assessment, and it should be taken into consideration.

References

Dicke, Thomas S. Franchising in America: The Development of a Business Method. Chapel Hill, NC: University of North Carolina Press, 2004.

Sherman, Andrew J. Franchising and Licensing: Two Powerful Ways to Grow Your Business in Any Economy. 3rd ed. New York: AMACOM, 2008.

Welsh, Dianne H.B., Ilan Alon, and Cecilia M. Falbe. “An Examination of International Retail Franchising in Emerging Markets.” Journal of Small Business Management 44.1 (2006): 130.

Abstract

Franchising has become a very popular expansion approach for many entrepreneurs. This can be seen from the large number of franchises sprouting up all over the world. Franchising can be categorized as either trade name franchising or business format franchising. This research proposal examines franchising and SMEs in Kuwait. It seeks to determine the advantages and disadvantages of franchising, and to ascertain why local entrepreneurs in Kuwait are not franchising their businesses.

Introduction

Franchising refers to the license or right that a government or company grants to an individual (or group) to operate their markets in a given territory. A franchise can therefore be defined as a special form of licensing whereby the franchisee purchases intangible property from the franchiser. The franchiser insists on setting the rules for the franchisee on how to run this business.

Franchising is therefore a system of doing business and at the same time a marketing tool for commercial entities to rapidly expand their market share using less resources. There are two main forms of franchising namely trade name franchising and business format franchising. Bill (2000) stated that there are two basic ingredients forming the basis of franchising, which include the license to the franchisee to operate under a trade name using trade or service marks, associated with the franchisor and the franchisor’s continuing control over the franchisee’s operations. Hence, it’s necessary to know why franchising became the dominant economic process.

Some companies have pursued international franchising to expand beyond a saturated domestic market or to establish a presence in the international market before the competition can establish itself. Moreover, international franchising can also assist enterprises in distributing their costs and associated risks across the entire network of outlets.

According to Burton et al (1955), international franchising is a mode of entering a foreign market which involves a relationship between the entity in the host country and the entrant. In this arrangement, the entrant transfers a business package developed by the host entity under contract. International franchising is therefore a unique mode of entry, and is different from foreign direct investment, licensing and exporting. It was adopted very fast in the developed countries and helped other countries economic to grow and expand their enterprises.

The recent growth experienced in international franchising can be attributed to the emergence of newly industrialized countries in the global market, the establishment of regional trading blocs, diminishing profits in the domestic market, liberalization of eastern bloc countries, competition, and need (Alon, 2006).

Background

The Kuwaiti population is considered as a consumer-oriented population due to the fact that in the mid 1970s and 1980s its work force was working entirely in the government sector. The government sector gave Kuwaitis financial security and economic stability. A government job meant a secure job for life; this security played an important role in the inception of the financial institutions, competing banks, and financial companies.

The Kuwaiti economy, on the other hand, has grown profoundly with its Gross Domestic Product (GDP) and the population growing in parallel. This created huge revenues in the local banks, but has created gaps in the market. For instance, the Kuwaiti local market has a great need for methods of creating new business opportunities and SME’s expansion. This is due to the fact that franchising contributed to about 10 percent of the world’s GDP and about 14 percent of the world’s total retail sales (Mondelsohn, 1995).

Available data from the Kuwaiti’s economic sectors revealed that the Kuwaiti market is also confronting certain limitations in its GDP. The government has found these limitations to have a negative impact on SME’s expansion and growth, hence adopting franchising. The need for establishing a new trend for future franchising necessitated the understanding of the reasons and obstacles that prevent business owners in Kuwait’s local market from pursuing SME growth and expansion.

A research in franchising has examined a wide range of issues that need to be classified as SME growth determinants. These issues include societal, legal implications of franchising, franchised and company –owned units, and the efficient operation of franchise systems (Scott, 2004).

Research Methodology

This research will be conducted using a database outlined in a questionnaire, which is based on relevant theories and hypothesis. These theories and hypotheses will be used to write a thesis that will analyze the factors and obstacles that could either help Kuwait’s SMEs to expand by themselves or help in the development of franchising in Kuwait.

Information for this research will obtained from various sources, including business owners and professionals. The topics researched will mainly be from foreign market franchising case studies as well as international franchising method of entry. These methods will however be modified in order to fit into the local market in Kuwait.

The literature used in this research will be from sources on the subject of interest, such as research from recognized franchising owners, articles, periodicals, and relevant text books. The thesis will start with an overview and general information about franchising and business expansion obstacles. It will then take an overview of local franchising markets. The research will also analyze the country’s readiness to implement the franchising approach, either in the local or international market. Other issues to be considered in the discussions will be the role of entrepreneurs, social and culture conflicts, size of enterprises, and resources in Kuwait.

The exploratory methodology that will be used centers around conducting survey questionnaires to end users so as to understand obstacles that answer why franchising was not adopted in Kuwait. Hence, the franchising factors and the socio-economical issues will be documented in order to address issues related to the potential of implementing the franchising approach in Kuwait.

Conclusion

Since the proposed methodology is informative and exploratory in nature, statistical information will be collected from the planned sampling procedures in order to determine the possibilities of expanding the franchisee’s market into a local franchise. Based upon the results of the quantitative methodology, it is anticipated that the findings will help in achieving the desired goals.

References

Alon, I. (2006) ‘Service franchising: A Goal perspective’. ISBN: 978-0-387-28182-7.

Bill, H. (2000) ‘ How to franchise your business’. The Irish Franchise Association. Bill Holohan and Associates.

Burton, F.N. Cross, A.R. (1955) ‘ Franchising and foreign market entry’. In International Marketing Reader, Paliwoda, S.J. Ryans, J.K., London:Routledge, 35-48.

Mondelsohon, M.(1995) ‘New nank franchise finance scheme introduction in UK’. Franchising World, Vol.27(1). 69-70.

Scott, W. (2004) ‘Factors influencing the decision to adopt multiple unit franchising arrangements’. Department of Marketing, Griffith Business School, Griffith University.