Is Franchising a Profit Guarantee for the Company - Case Study Example

Introduction Franchising is one of the business strategies that most business enterprises seek to take advantage of. A given business or groups of businesses operate under the brand of another established company through franchising process. One of the main advantages of franchising is the reduced cost of operation. The franchisees may be required to use little funds on marketing and other business operations. This on the other hand is expected to enable the company to make more sales and profits. Secondly, this process also ensures that once a business is established, it begins to operate immediately. This owes to the fact that the business is operating under the umbrella of another established and reputable company. However, it is imperative to note that just because a company operates as a franchisee does not necessarily mean that it will have increased sales. This is despite the reduced cost of operation and better market environment. There are various other factors, which should be considered in ensuring that the company makes more profits. They include issues of prices and quality. With customers being so sensitive on matters of prices, it would be imperative that a given business enterprise considers being a price leader. This is a competitive advantage especially where the business is facing a lot of competition. Market research is vital for the purpose of understanding the tastes and preferences of the customers. This ensures that the company provides the required goods to the market. Qualitative and quantitative researches ensure that the companies conduct an objective marketing research that addressing the needs in the market. Task 1 Every business aims at obtaining accurate and valid evidence about the target customers. This becomes imperative owing to the fact that there is need to ensure that the business meets the actual needs of the customers (Berghoff 2012, p.90). the latter differ in terms of tastes and preferences making it difficult for the businesses organizations, to respond to their need. The current case of Kidz Sportz is therefore not an isolated one, but a reflection of the market challenges that many companies go through. The company is said to have received more than 100,000 new children who require different equipment and services. However, the management grapples with the issue of lack of enough knowledge on the tastes and preferences of these children. Unless something is done urgently, the company will not be able to provide objective services to this large number of clients. To assist in solving the stated challenge, the following recommendations are vital: Conducting a market research This is explained as the process through which a company with the assistant of qualified market research team obtains information about the needs, attitudes and motivations of the customers, for the purpose of serving them in the best way possible (Boudreaux 2000, p.3). It is also a way of establishing what the customers know about the market, to enable a company to plan in terms of prices. It is imperative to note that the world of business has become increasingly competitive, prompting management to implement new strategies for success. This information provides a given company with competitive advantage over its main rivals (Bradley 2007, p.89). Secondly, it is a strategy through which the company is able to attract and also retain the customers to the advantage of a given business institution. A market research is also advantageous in the sense that it provides the company with the market size. In the above scenario, the number stands at 100,000 children. This enables the company in its logistical work. For instance, it is able to know the number of equipment and space needed to accommodate all the children. However, the market research is a process that requires funds and qualified personnel. To receive the information needed, both the qualitative and quantitative techniques become important. The Kidz Sportz for instance should carry out its qualitative and quantitative research on the parents. This owes to the fact that the parents have a better understating of their children’s needs, making it possible for the marketers to obtain this kind of information. It is for this purpose that the researchers should approach the parents. However, the management is experienced the financial challenge for undertaking the research. It is estimated that about 20,000 pounds has been aside for conducting a research in an effort to obtain this crucial information. In addition to that, it is also imperative to note that time is of essence. Interviewing all the parents may take a lot of time, which the business cannot afford. For that purpose, the business needs to do the following: Get a sample This is explained as a subset of the whole population. It is a portion of the entire population, whose characteristics are assumed to reflect the truth on the ground. A sample makes the research more objective and therefore providing accurate and reliable data (Kinnear 1999, p.87). Secondly, it assists in ensuring that less time is taken to obtain the information. Thirdly, it ensures that fewer funds are used to carry out the research, while still maintaining the quality of study. However, whether the sample taken will reflect the needs and attitudes of the clients will depend on the sampling technique employed. The sample size is also imperative owing to the fact that it determines the reliability of the collected information (Kotler 2007, p.56). research indicates that the smaller the sample, the more accurate the information is likely to be. For the purpose of this study, random and convenient sampling should be used. Random sampling technique is one of the simplest methods to use, yet it ensures that accurate information is collected from the subjects. It is also one of the methods that have the capacity to give all the subjects an equal chance to participate in a given research. This owes to the fact that every subject is chosen indiscriminately. On the other hand, the convenient sampling techniques will also be vital in this study. It is the process through which the market researcher may obtain information at any time and place provided that the subjects are available. It is one of the quickest methods used to collect information from the customers. However, it may yield unreliable data due to the fact that some respondents may provide information that is untrue. This is the main reason why the management should consider using the two sampling methods. For the purpose of this study, the sample size will be reduced to 100 parents. To obtain the information from these subjects, both the mixed questionnaire types and interview schedules will be used. Questionnaires are methods of collecting data, which are easiest to use and takes shortest time. However, in order to obtain objective information, it is vital that the company chooses to use mixed type of questionnaire. This owes to the fact that it has both the closed and open-ended questions. The former will contain the questions that require a ‘Yes’ or ‘No’ answers while the open ended one will contain questions which the parents will have the prerogative to provide any information at their discretion. This ensures that as much information as possible is collected. This is imperative for this company for the purpose of understanding the values, belief, tastes and preferences of the target customers. One of the main advantages of questionnaires over other methods of data collection is the fact that it can be used to the whole sample at the same time. On the other hand, though, the use of interviewing technique will also assist in ensuring that more information is obtained from the subjects. It is however, a slow method since only one of the subjects can be interviewed at a time. From the data obtained, it will be possible for the management to have a rough idea on the expectations of the subjects. This is the main reason why it is necessary to ensure that only the qualified and experienced marketing researchers are given the opportunity to take part in the study. On the other hand, though, it is imperative to note that this market research will assist the company in marketing segmentation. This is the process through which the company is able to subdivide and group the clients based on their tastes and preferences. The company will be in a position to understand how many children will be requiring specific equipment, and do the budget accordingly. It will also know the number of children who would be playing a particular game therefore getting its logistics right. With this market research, it is assumed that the company will have the right kind of information that is required to execute the business. It will not only give the business a competitive advantage over its main competitors, but will also assist in attracting more customers. Task 2 From the analysis of the figures provided in the set one data, it is clear that the German Franchisee has not been performing well in terms of its sales revenue. This is despite the fact that the company has gained more sales support and reduced cost of advertisement. From the statistics, it is clear that the franchisee has been able to receive an average of 12, 000 pounds for every quantity of the materials that are sold. In addition to that, since it operates under the umbrella of Kidz Sportz, the company has been able to enjoy reduced cost of operation at an average of 20,000 pounds per month. Operating under this company, should have enabled this franchise to make a lot of income. This is due to the reduced cost of operation. However, it seems that there is no correlation between the reduced cost of operation and performance for this company. This owes to the fact that so far, the company has had unpredictable performance from high to low income. For that reason, I disagree with the franchise that given more support, they will be able to post more profits. One of the main advantages of franchising is the fact that the franchisee has various advantages. Firstly, the franchise does not have to spend a lot of funds in marketing. This owes to the fact that such a franchise works under the brand of the franchisor. In this case, the German franchisee has been operating under the brand of Kidz Sportz. The latter is a company, which is already established and has a good reputation. Franchising is therefore imperative since aggressive marketing is not required. The business picks quickly after it has commenced. This is unlike when a business operates independently. A new business will take some period of time before it can build its brand and attract more customers. On the other hand, franchising has the ability to ensure that companies make more profits and sales. The customers have the impression that the quality of goods and services provided by such franchises is unquestionable. While it is the expectation that a business operating as a franchisee will make more profits, this does not always happen. The good example is provided by the franchisee above, which has been posting reduced sales and profits despite the marketing support provided by the franchisor. This is because there could be other factors that could be affecting the business. For instance, a reduced cost of operation has to go hand in hand with increased quality of materials and reduced prices. It is therefore possible that the company has been selling its goods at a higher price therefore not enjoying the competitive advantage. Secondly, the increased number of competitors may explain the reduced sales for the company. It is therefore not objective to focus on the issues affecting this franchise from a dichotomous point of view, as it has been observed from one of the team leader. There has been the belief that the franchisee should receive more assistance for the purpose of making increased sales. The company management ought to focus on what the challenges might be. Certain variables need to be analysed with a view to ensure that the franchise is back on a performance record. The following diagram provides the summary on what is needed to ensure that the company is back on optimal performance. Fig. 1 factors that contribute to increased sales for the company Customer satisfaction From the memo, it is indicated that one of the marketers said that that the assertion by the franchise that they would make more revenue if given more support was ‘rubbish.’ This is the same sentiment that is held in this paper. It seems that the franchise has both the internal and external factors, which have been posing more challenge. The customer satisfaction is one of such challenges. Is assists in answering the question of whether the customers receive the kind of services that meet their needs (Marder 1997, p, 90). Some of the questions that the management of this franchise will be interested in are whether a market research was done to ensure that only the goods that are needed by the customers are availed to the market. The service delivery is also imperative. This has to do with the time that is taken to serve a particular customer. Many customers will be attracted by a franchise that is more efficient in what they do. It is for this reason that the company should focus on whether it has failed in ensuring a more efficient work force. In addition to that, the communication between the customers and the business enterprise is imperative. This is the information that is passed to the customers by the customer care. The latter must be informed so as to pass accurate information to the customers. The attitude of the employees towards the customers also has an effect. It determines whether the customers will be retained or not. As it appears from the data in set 1, it appears that the business has been obtaining new clients at any given time. However, little efforts have been done to ensure that the company retains the customers. Quantity and price of commodities This is other variables, which are imperative if a company seeks to increase its sales in the market. The franchise should focus on these in an effort to see whether they have been the main causes of drop in sales. Quality and price are also imperative parameters, which assist in increasing or reducing the sales of a given company (Malhotra 2002, p. 93). Customers are very sensitive on the issue of pricing. They will be more attracted to the substitute goods from other franchises that sell at relatively low prices. This franchise should focus on the need to increase the sales rather than making abnormal profits. If the franchise decides to lower the price of its goods, chances of making more sales are high. This is because the business becomes a price leader in the market. It is better for a given company to lower the price, make more sales and finish the stock quickly rather than focus on profit making and take long to finish a given stock. It is imperative to note that the tastes and preferences of the sports materials such as tee shirts may change within a short time. This is because most of the sporting activities are seasonal. If a certain stock fails to be finished within a given period of time, it becomes a loss for the company. It is therefore imperative that the management of this franchise focus on whether the main focus has been majorly on making more profits, and therefore affecting the sales. On the other hand, though, it is one thing to ensure that the price of the commodities is low, and another to ensure that the quality is of the customer’s expectation. In the sporting world for instance, majority of the clients require original attires that are won by the teams that a particular individual supports. For instance, if an individual supports Arsenal, they will require full kit that is original. However, many companies, with an aim of reducing the cost of operation, may avail substandard playing materials. The stated franchise should therefore focus on both the issue of pricing and quality as well. This will be the only way through which the company is able to tell whether the two variables have been addressed. Marketing research This is an imperative strategy, which many companies rely on, to increase its presence in the market (Young 2005, p.91). It also ensures that the business understands the size of the customers that will be served. Secondly, it enables the company to know the tastes and preferences of the customers. Dealing with the sportswear is a challenging business. This owes to the fact that the company needs to understand the kind of goods that the customers are likely to purchase more. As it appears, there could be a problem with the kind of goods that the company has been availing to the market. One of the main problems being that the company has been providing goods without the endorsement of the customers. It is imperative to communicate with the customers with a view to ensuring that the goods that are provided are actually the ones that the customers need. As indicated before, this kind of information cannot be obtained through conducting a market research. Since this process is sometimes expensive, a franchise may decide to use some of the cheapest methods of obtaining data. This may include observation as well as asking the customers, on what they would want availed in the market. Presence of competitors This is another force that would have made it difficult for this German franchisee to increase its sales in the market. This is despite the increased support in terms of marketing. As indicated from the case study, there are many franchisees, which are supported by the Kidz Sportz Company. This increases the competitions amongst these businesses. This is especially due to the fact that majority of these companies have been selling almost similar commodities. When this is the case, there is need for a marketing strategy, in order to gain a competitive edge over other main competitors. It will therefore be imperative that the management of this company focus on issues of competition with a view to find out whether it has played a part in the reduced sales. Task 3 To some extent, the number of students may determine the amount of sales that a business will make. This owes to the fact that as the number of students per class increase, the volume of goods needed also does increase. This therefore allows a given company to sell more goods and make more profits. However, this is not always true, owing to the fact that there are other factors, which may determine whether an individual will make the profits or not. The assertion by the technical director that the low number of students is the main cause of the problem is not objective. It does cannot assist in solving the problem at hand. One of the biggest questions, which the company technician should answer, is whether other companies have also been facing similar challenge. Secondly, why this franchise does have low number of customers?’ is this the same in all other competing franchises?” only when these questions are answered can the sentiments by the management hold water. At the moment, it appears that there could be other factors, which have made it difficult for the company to attract more students. The following could be some of the main challenges, which may make it difficult to perform optimally, even in the presence of more students. Poor managerial skills The management is one of the main determinants of success in many companies. It is the driving force towards success of any given business. The management ensures that the goals of a given company are achieved through a number of strategies that must be used. The management must ensure a good relationship between the company and the employees. This includes ensuring the fact that the company provides the information necessary to the employees. Motivation of the employees is also one of the main determinants of success. It ensures that the company is able to achieve its goals. This owes to the fact that the motivated employees increase their production levels. This is especially on matters to do with the marketing for the company. The fact that there have been few students for this company for instance is a demonstration that there has not been a good marketing team within the company. This however does not mean that the company lacks qualified personnel, but because the employees are not motivated to perform. For the company to begin performing even in the low number of students the following strategies must be used: Customer attraction and retention To attract more students, there is need that the company engages in more aggressive marketing strategy. Though the company is said to have been sponsored by Kidz Sportz, it is imperative to note that there is also internal competitions. With the increased number of franchises, there is need for every company to focus on attracting more customers and retaining them. However, in order to achieve this, a number of marketing strategies must be put into consideration. Firstly, it is imperative to establish a good constructive communication with the customers. Communication is the only way through which the companies are able to understand the plight of the customers in the market. It is the process through which the customers are able to offer their suggestions about the kind of services and goods that they need from the company. Some companies are fond of providing goods, which do not meet the needs of the customers in the market. This is because of lack of enough information. Poor communication with the customer is to blame for most of these challenges. It is therefore imperative that this company focus on the issues of interaction with the customers with aim of providing quality goods and services that are needed by the customers. In conclusion, it is imperative that the company conducts a market research, with an aim of understanding the tastes and preferences of the customers. In addition to that, the company is able to understand how much information the customers have, in terms of issues of pricing and close substitutes. One of the main challenges of many businesses is the increased cost of operation. This is especially the cost of marketing to make the business known to the customers. Franchising therefore becomes imperative in assisting many businesses to begin operating immediately. It is a marketing strategy, which many companies seek to apply. However, this kind of marketing strategy does not always lead to success. This is considering the fact that other factors such as customer relations, price issues and quality have to be addressed as well. It is for this reason that management ought to ensure that all other factors are addressed in order to take advantage of the reduced cost of operation. For instance, customers are very sensitive on the issues of the prices of commodities. With the increased number of competitors, it becomes imperative that companies consider taking the advantage of pricing. This is one of the main ways through which a company can address the issues of competition in the market. Price discrimination is another method that the company should seek to use to increase its sales and profits at the same time. It is imperative to note that one of the main reasons why businesses appear is to meet the needs of the customers by making a profit. However, this may not always happen especially if the company needs to increase the sales in the market. The profit margin may be low considering the fact that there is need to attract as many customers as possible. For this challenge to be resolved, price discrimination becomes imperative. It is explained as the process through which a company may decide to sell similar goods using different prices. The main basis of this strategy is the socioeconomic status of the target customers. Some of the customers for instance are driven by the need for lifestyle in making their purchases. Such people are not sensitive to prices, but the quality of the goods that are provided by the business. The main reason why this strategy is applied is to ensure that all the customers regardless of their socioeconomic status receive services from the company. However, as indicated before, one of the main ways through which the company can tell the kind of customers it is dealing with is by carrying out a marketing segmentation. It the process through which customers is arranged in terms of demographic characteristics and socioeconomic status. It enables the company in making proper decisions, which enables the company to perform as well as achieving its goals. Bibliography Berghoff, Hartmut, Philip Scranton, and Uwe Spiekermann, 2012 the Rise of Marketing and Market Research New York: Palgrave Macmillan Boudreaux, Michael 2000 "Prepare for Your Future in Marketing, Your Interviews, and Something 'Extra'", Student Edition Marketing News (2): 3–4 Bradley, Nigel 2007 Marketing Research. Tools and Techniques. 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