Background of the Business
The case study ‘Bespoke Threads’ provides an insight into the business venture of Alison and how she developed the business with her partner. The key aspects of the case study highlight the factors which allowed the business to develop in a step by step manner. It also highlights the facts about it converted into a home business from a retail outlet. In this discussion the focus will be on the future aspect of the business and how it can develop. It will try to find the answers to several questions which are to be answered on the basis of the case study. The following will help in the development of a conclusion which will summarise the key contents of the discussion.
Should Alison expand via franchising?
The case study on which the discussion is based upon highlights the business of Alison which had developed due to its uniqueness. However, the loss of infrastructure and partner, made the business convert from a retail counter to a home grown business. The business survived and has again flourished. At this stage of time Alison is considering about expending the business by franchising out because she does not want to take the responsibilities of running a business alone as she also has a family to look after. At this stage franchising is a positive approach that she can take in order to expand her business.
Franchising is a concept of marketing which can help in the rapid expansion of small business. The rapid expansion can in turn provide the small business to gain popularity in the market and can easily spread the chosen products to a wide area through distribution networks (Dant et al. 2013). The key benefits of franchising a business are the following.
- Capital Acquisition: Any business expansion requires a large amount of capital investment in order open branches or outlets over a wide distribution area. However, the limitations of a small business comprise of the small capital. This is the most popular limitation that a small business organization faces while developing an expansion plan. Franchising provides a solution to this problem. Franchising allows the entrepreneur to reach out to different smaller businessmen who are ready to invest into the business. This helps the entrepreneur to gain the required capital to expand into different territories without even investing the capital. The investors are considered as agency partners who get to do the business of the products under the brand’s support (Nijmeijer, Fabbricotti and Huijsman 2014). This on the other hand helps them to gain their profits. The main benefit of franchising is that it lowers the risk of expansion and also reduces the cost and debt factors that are the prime factors required for expansion. The entire cost and responsibility of expansion is shared among a group of franchisee who use their resources to develop the business and in return deliver profits to the parent company.
- Less Staff Required: As the case study highlights that Alison doesn’t want to hire new staffs for the business expansion or form a new management team, franchising comes as a solution where she can expand the business without directly hiring a number of employees. Hiring and training of employees require a lot of costing and also a developed infrastructure. For a small business like Alison’s it have a direct effect on the Return of Investment. Moreover, maintaining a workforce requires lots of responsibilities as being the owner Alison has to be aware of their requirements. This would come upon as an extra responsibility upon Alison. Franchising reduces this responsibility, as this responsibility goes upon the franchisee (Baena 2012). As they invest they become the stake holders of the company and it becomes their responsibility to maintain their personal workforces in their areas for the development of the business. The parent company does not have to interfere in the operations of the small franchisee and the focus on the other aspects of the business which can help the business to develop further. This aspect lets the entrepreneur to indirectly acquire a team of professionals who are adept in business management and carry forward the business. However, the entrepreneur does not need to be responsible for their operations and the financial burden also is not a responsibility of the entrepreneur anymore.
- Rapid Growth: the modern market and globalization does not let a monopoly business to happen very often in the market. The competitiveness forces the different entrepreneurs to spend more resources to develop and increase the business. This can lead to the rapid growth of the company. However, resources can be limiting factor for a small company and the big companies can easily outrun in the long run. Franchising becomes a solution for the small entrepreneurs as the resources are shared by the franchisee as has been discussed earlier. Moreover, franchising can rapidly create the presence of the brand at a larger portion of the marketing network (Weaven et al. 2014). Moreover, robust promotions from the franchisee in little areas can be of a large impact if seen from a unified point of view. The brand easily reaches to a lot of people. This is quite essential in gaining an upper hand over the competitors in terms of expansion and development of the business. Franchising thus can help in the rapid increase of the market share, without even the entrepreneur to actually invest in the promotional activities or the marketing campaigns.
- Increased profit: Franchising allows the entrepreneur to be free from lots of responsibilities and costs. These include not hiring of many staffs for the management of the company or not having to utilize greater resources for the development of business and expansion. Every responsibility is taken by the franchisee who looks after the development of the business by fulfilling the responsibilities such as hiring, training and marketing (Altinay et al. 2014). The only part of the job of the entrepreneur is to produce the product and send it to the franchisee. The rest of the responsibility falls upon the franchisee’s shoulder. This type of huge cost-cutting in the business helps the entrepreneur earn more profits from the sales then it would have been from direct sales from the company retail outlet.
- Increasing Brand Value: The rapid expansion by the franchisee system can help the entrepreneur in achieving a higher brand value for the products. While the limited resources of the entrepreneur lets the brand confined in a small part of the marketing area, franchising helps the products to rapidly spread out to large wide marketing area. This is possible as the franchises are distributed in small areas, which if united forms a very large area. When the brand reaches out to large number of people in a short period of time, it easily increases the brand value of the company and eventually increases its market valuation. The increased sales and the success of the franchisee system are evident from the larger profits of the company.
- Other Market Expansion: A business requires to constantly developing and it is the sole responsibility of the entrepreneur to invest in new business ideas to venture into different markets to explore the potentiality of the business house and also for the motive of greater profitability. However, if the entrepreneur looks after the business all alone, it is impossible to look for possibilities in the other secondary or tertiary markets (Gillis and Castrogiovanni 2012). Hence, if the entrepreneur franchises out and expands the primary business with the help of the franchisee, the responsibilities of the business are shared by the franchisee. This sharing of responsibility helps the entrepreneur to look for possibilities of other products and think of venturing into different markets for secondary expansion. This ultimately helps the business to grow and develop and increases the profitability of the organization.
- Low Risk: Franchising of a business lowers the risk factor for the entrepreneur. As has been pointed out in the above discussion, franchising helps the entrepreneur to share the responsibilities of the organization. The franchisee looks after the financial and managerial operations at their own point of operations which cover a larger part of the marketing and communications (Lee et al. 2015). The entrepreneur need not shoulder any responsibility regarding these aspects and can focus only on the production and the business expansion part. Moreover, the capital investment in the newer expansions is none but the money that have been invested by the franchisee businessman. These types of rapid investments lower the risk of debt for the entrepreneur in lower as the main money comes from investors. This can help the entrepreneur to expand into newer products and will also be able to explore new ideas for the better development of business in the future.
The benefits of the franchisee system highlight the key factors that can help Alison in expanding the business. However, there are also certain challenges that she can have to face in the process of expanding the business by franchising.
- Working in a system: Alison has always been seen to be an independent entrepreneur who likes to work independently. This was the prime reason for leaving her earlier workplace and moving into the business. However, starting a franchisee network can once again bring her into the system which might get frustrating for her as she has to deal with the similar process of work again and again. These rules and regulations are essential for maintaining the franchisee structure. If she doesn’t operate according to it, then it is expected that her franchises would also abide by the rules of the organization.
- Risk in business: In a franchisee system, Alison has to be dependent on the franchisee for the growth and development of the business. It is the success of the franchisee that will determine the success of the company. Though it has been said that the franchisee bears all the responsibility for the sale of the product, it is also essential for the parent organization to monitor their activities because it is their brand they are working with at the end of the day. Any wrong marketing or promoting action can damage the brand value of the product. This increases the risk of the product as it has remain dependent on the action of the franchisee activities.
- Co-operation with the franchisee: Another key issue that the Alison can face is the challenge of working with franchisee. As the franchisee and Alison are two different people, it essential to understand that the two people might have different approaches towards the marketing and development of ideas. Different ideas can lead to clash of ideas which can be harmful for the company’s development (Hoy and Stanworth 2014). There must more interaction between the entrepreneur and the franchisee in order to make the understanding better and in the process determine the success of the organization.
- Expectations: Sometimes, people invest in franchisees in order to achieve instant success. However, the market circumstances always do not remain the same and the franchisee might have to put in extra effort to succeed (Mumdziev and Windsperger 2013). This triggers the false expectation in the franchisee and they might be demotivated from continuing the business. These situations are quite challenging for the entrepreneur as the money from the franchisee are generally invested in the business operations. Reimbursing of the money might come as an extra burden for the company which becomes a challenge for the entrepreneur.
- Higher franchisee demands: One of the key aspects of the franchisee system is that the profit is shared by the franchisee and the entrepreneur. Hence, a higher franchisee demand will let to profitability of the entrepreneur to fall low. Moreover, the entrepreneur has limited control over the franchisee. The franchisees are independent businessmen who do business by investing their own money (Altinay et al. 2014). The only advantage that the entrepreneur has is that it lets the franchisee use its brand name and loyalty. Other than this, carrying out the operations is the franchisee’s sole responsibility. The entrepreneur cannot interfere in the franchise’s internal operations methods. This leads to difference in ideas which might turn out be harmful for the business.
Alison had the bespoke clothing store in a retail store where she and her business partner had seen considerable amount of success. However, a certain turn of events made her to shift the business to her home where she survived and flourished in the business. But in the modern age business is more about competitiveness and development. Alison might have succeeded in creating a sustainable market for her products but it is not certain that whether that market will survive in the future outside the local community. This will drastically lower the profitability of the company and huge losses can eventually shut down the company. In short, it can be said that there remains a possibility that Alison can fail in the bespoke clothing business out of a retail shop.
Should Alison Expand via Franchising?
This failure is evident at a certain point of time, because people today are more concerned about the brand value than local brand. A retail shop still adds value to the product, but when it moves to the house it becomes more of a handiwork than a business product. Franchising out can help in the rapid development of the brand as it can capture a huge market. However, one aspect that promises a future for Alison’s product is its availability online. The case study says that Alison’s garments were popular because once they had the measurements of the customers, the customers could anytime according to the same measurements and get the customized garments ready at their doorstep. However, this process requires Alison to maintain a strong operations structure consisting of tailors and other staffs who could organize and do the required work. Maintaining this kind of infrastructure is difficult for Alison as besides being a businesswoman, she is also has a family to look after. Moreover, she herself wants to spend more time with her family than give her everything to business. Hence, it can be seen that it is not possible for Alison to maintain such a huge structure for the business and franchising off the responsibilities seems to be more favourable for Alison.
Conclusion:
The entire discussion is based upon the case study of a bespoke garment business y a lady named Alison. From the discussion it can be seen that franchising seems to be a very favourable option for Alison as she can benefit from different aspects like, she can grab a large market for her products at a very short period of time, invest a small amount as the capital money and at same time run a large business with the help of the franchisees. Moreover, all the key responsibilities are shared by the franchisees and Alison can enjoy the profits without much labour to give. However, besides these advantages there are certain limitations to the franchisee system which Alison can face as she cannot have a complete control over the franchisees. They are independent businessmen who like to do their business without interference. Hence, it can be concluded that though there are certain limitations it is better for Alison to franchise out the business and enjoy the profits of the development without taking the overall responsibility.
References:
Altinay, L., Brookes, M., Madanoglu, M. and Aktas, G., 2014. Franchisees’ trust in and satisfaction with franchise partnerships. Journal of Business Research, 67(5), pp.722-728.
Altinay, L., Brookes, M., Yeung, R. and Aktas, G., 2014. Franchisees’ perceptions of relationship development in franchise partnerships. Journal of Services Marketing, 28(6), pp.509-519.
Baena, V., 2012. Market conditions driving international franchising in emerging markets. International Journal of Emerging Markets, 7(1), pp.49-71.
Dant, R.P., Weaven, S.K. and Baker, B.L., 2013. Influence of personality traits on perceived relationship quality within a franchisee-franchisor context. European Journal of Marketing, 47(1/2), pp.279-302.
Gillis, W. and Castrogiovanni, G.J., 2012. The franchising business model: an entrepreneurial growth alternative. International Entrepreneurship and Management Journal, 8(1), pp.75-98.
Hoy, F. and Stanworth, J., 2014. Franchising: an international perspective. Routledge.
Lee, Y.K., Kim, S.H., Seo, M.K. and Hight, S.K., 2015. Market orientation and business performance: Evidence from franchising industry. International Journal of Hospitality Management, 44, pp.28-37.
Mumdziev, N. and Windsperger, J., 2013. An extended transaction cost model of decision rights allocation in franchising: The moderating role of trust. Managerial and Decision Economics, 34(3-5), pp.170-182.
Nijmeijer, K.J., Fabbricotti, I.N. and Huijsman, R., 2014. Making franchising work: A framework based on a systematic review. International Journal of Management Reviews, 16(1), pp.62-83.
Perryman, A.A. and Combs, J.G., 2012. Who should own it? An agency?based explanation for multi?outlet ownership and co?location in plural form franchising. Strategic Management Journal, 33(4), pp.368-386.
Weaven, S., Grace, D., Dant, R. and R. Brown, J., 2014. Value creation through knowledge management in franchising: a multi-level conceptual framework. Journal of Services Marketing, 28(2), pp.97-104.
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