CASE to grow or maintain his business as a

CASE STUDY III

LAZYBONES

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1.
        Dan decision on whether to grow or
maintain his business as a lifestyle business should be analysed and observed
from different angles. First, there are advantages and disadvantages
considering each of these two. Since Dan and Reg started business a long time
ago when they literally did not have anything, working non-stop and struggling
for survival, it is on some way logical that both of them will be satisfied
with all what they’ve accomplished so far. But, money is funny and weird thing
that will always push people towards bigger goals and make them to think
differently than in usual situations when they can consider situation supremely
objective.        Other thing is that Dan
is almost 40 years old and it is question is he ready and capable to deal with
all that stress related to company and its improvement.

             After five year of hard work their net profit
margin was 26%, which was 6% bigger than year before and 17% bigger than two
years before. They gained experience, they met people, build some sort of
brand, had a market with very little competitors and all these factors were
enough to decide to grow. Advantages in growing represent: expanding market,
increase revenue, opportunity to improve brand awareness, chance to relocate
business… After Joel and Dan investigated market and the feasibility of
franchising, it was clear that after more than fifteen years company can grow,
and with 7-10 company stores start franchising. However, maintaining this as a
lifestyle business surely is not the worst decision on the earth but there is
simply huge potential in the game that should be used. I would say that grow is
the better decision.

2.
        There is a couple of great ways to
go forward and improve your company. It is hard to implement the franchising on
the best way, but in this case customer demand is constant, the potential
market is constantly coming and expanding, there is no serious competitors (at
least not at their point of interest) and it seems reasonable to start with
franchising. Even all of the partner’s investigations and parameters are in
favour of it. They are confident that franchisees can make larger net margins
with their company than with some else. By investigating I found out that a lot
of big companies are more than a successful franchisers like KFC, Pizza Hut or SUBWAY.

             Different types of growth like licensing
product was not possible, connecting with other business was not necessary
since they have stable business and targeting other markets were less likely to
be achieved since competitors ‘National Drycleaning’  or ‘Dry Clean’ already had a market and were
huge enough to parry new born companies. Some other ways to expand can also be
analysed and represent possible candidates to perform, but statistics, data and
investigations show that franchising as an option have potential to meet
expectations.

 

3.
        Franchising as an option of
expanding and as a mode of the growth has a lot of benefits. Considering this
company’s case, some of them are that a franchisees finance each new location.
In this case, it means that owners do not need to raise outside capital from
banks or potential investors. In the same time, franchisee is new store’s
manager, which will have bigger stimulus to deal with difficulties in business
which will directly effect on the growing of the business. In the same time, it
can help in building brand recognition, brand awareness and spread name
nationally. All these factors can cause rapid growth in making a company famous
and more attractive for potential investors. As a part of additional research I
found out that franchising has a lot of advantages: faster growth, increased
profitability and revenues, exploring other markets (STA, TTA), brand becomes
more popular and most important as a combination of previous ones – risk is
reduced.

            Disadvantages, on the other hand are
more related to question of taking risk. Every plan or option to grow, no
matter how good it is, will eventually face with problems. They can be smaller
or bigger, representing the challenge for owners. Franchising has reduced risk
in comparison with other methods of growing and from them disadvantages and
problems are not terrified as they can be, especially if plan or option for a
specific business is not good enough. Keeping brand consistence, keeping brand
quality, not well known managerial/ franchisee abilities (which are important
for this kind of job), sharing some part of profit, possible giving up of
franchisee are just some of disadvantages. Franchisees can do things that can
be bad for company from time to time. Sometimes, they do it by purpose,
sometimes not. These mistakes are often made because franchisee did not attract
right franchisees. Their lack of experience and low quality are often cause of
their wrong decisions and bad moves. Quality of franchisees is most important
that franchisee need to check. By quality, I mean all characteristics necessary
to perform type of activities required for specific job. You need to make sure
that you choose the best franchisees, based on their work experience and things
like personal abilities, power of adopting to a new situations, education etc.

 4.        Five
year plan with these information can be made roughly without smallest parts of
plan and details. Let’s start with individual location level. Considering first
year, my opinion is that partners should give 100% of their possibilities to
work on brand recognition and investigating possible destinations if they
decide to go global in the following years. They should focus on renting a
facility (because building in this phase is not a good option) that can satisfy
all of their operation needs. They should also take more care about employees
and managers that they need to employ in future. If they need to choose between
quality and quantity in first year, quality is the right answer. Their quality
will be their first “small marketing project”. On that way, they will show
students all benefits of running this business. In second year, expanding
faster should be main goal. By this I do not mean going globally, but expanding
by buying new machines and employing new workers can be a great move. Catching
market as a probably “first mover” is extremely important. Beside quality of
service, quality of managers (right people) at right place is the second year
priority. This combination will attract students, parents and all people who
wants fast and quality service. Marketing and consistency of attracting new
students from areas with large number of them should be a goal. Since the
company expect to have permanent costumers by that time, revenues should be
bigger than in previous years. Speaking about individual location level I would
say that fourth and fifth year should be used to stabilize company and make a
good base for further developing. They should maintain their 24h delivery
service and tend to decrease that time. The market is expanding and more
students are on collages in years to come, especially in developed countries
like US, so the quantity comes into play in this period of time where you need
to satisfy both parent and kids. Company need to expect competition and
improving business plan to the smallest details is extremely important. Every
detail can be decisive, so set of all things necessary to achieve a profit and
build a brand must come fit.

If
we talk about corporate level first and second year should be used to
investigate, analyse and make a right decision when, where and why to choose
specific location around US. They need to be aware that every student in the
country is their possible customer, but which ones of them, at certain time and
at certain places are best target market. Areas with large number of students,
especially ones with high number of international students who even spend a
summer at US should be their primary target area. Second half of second year
should be time when they need to choose location and open a first facility.
More revenue is expected because they entering a new market. Cost should stay
the same with same level of quality, maybe even bigger if it is possible by
hiring new employees. As I previously said, quality is their trump which just
need to be converted into the money. During third year, opening new facility
(it can be smaller) should be objective and if they manage to do it in fourth
and fifth year they just need to continue on the same way until the point when
franchising is real option. Of course, franchising should not be their only
option, but in previous analysis it showed as realistic and very possible
option.

            We can increase revenue per store
using simple activities. That can be special offer during holidays, constant
24h delivery service and offering all types of services. For example, every
third or fifth washing does not have to be for free, but it can be two or three
times cheaper. On that way you will offer special service that is not usual in
price list but you will get some profit. You will make student less resistive
when they think do they need to wash at some other place or at your place
because they know that at some moment almost free washing is waiting for them.

            Before all these actions, you need
to collect data. You need to know how much people will wash laundry at your
place at which part of year, your average visits per day, your average revenue
per day, number of services that are performed during specific time of year (it
includes all your services – washing, drying, ironing, deliver), operating
expenses etc.