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Work for Your Franchise - Essay Example

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Summary

The paper 'Work for Your Franchise' presents the case a Low Operating Leverage which would be ideal. High operating leverage is very risky compared to low OL. This is because dropping sales ultimately lead to narrowing of margins and therefore, uncontrollable losses…

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Subject: Business
Type: Essay
Level: Ph.D.
Pages: 1 (250 words)
Downloads: 2
Author: estellakirlin

Extract of sample "Work for Your Franchise"

Let’s say you are developing a business plan, but decide that your OL is too high. What could you do (operationally) to lower that ratio? What common technique is available to you to solve this dilemma? Increasing variable costs and decreasing fixed costs. This is because fixed costs do not change with production/sales while variables costs are very flexible and can be controlled. Ways of converting fixed costs to variable costs include: hiring temporary workers instead of permanent workers, paying hourly wages instead of monthly salaries, increasing bonuses related to profits/sales instead of basic salary, using free technology, leasing buildings and other capital assets instead of buying them and hiring outside companies to do essential work.

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