Small Business Management - Assignment Example

Small Business Management Student’s Name: Course: Tutor’s Name: Date: Question 1: The steps that the Beauchamp’s would have followed in converting their business into a franchise In deciding to franchise their Cafe Yumm! business, Mary Ann and Mark Beauchamp made the decision to allow franchisees to use their trademark to sell products and services to the growing consumer base. For the franchise business to grow effectively, the two co-owners needed to follow several steps when converting their business into a franchise. Specifically, they needed to ensure that they abide by the legal and regulatory requirements of establishing a franchise. Additionally, they needed to design a framework for “selecting and recruiting franchisees”, in addition to identifying the method of transferring the franchise concept to the franchisees (Chow & Frazer, 2003, p. 600). Finally, the Beauchamp’s would need to enter into franchise agreements with the franchisees. The franchising code of conduct forms the main legal and regulatory framework that franchisors in Australia need to abide by. One of the key requirements that the Beauchamp’s had to meet therefore is the “disclosure documents of franchising agreements, outsourcing external advice, and retaining employees and franchisees” (Terry, 2003, p. 17). However, franchises are also closely scrutinised by the Australia Competition and Consumer Commission (Frazer, Weaven & Wright, 2006). The Beauchamp’s would also have conducted an “independent objective evaluation” of their prevailing business situations, including their products/ services, trademarks, intellectual property, their target and existing market, and the profitability (Small Business Development Corporation, 2012). Additionally, they would also have needed to estimate the cost of the franchising process in order to establish the finances needed. Based on the initial evaluation of their business, the Beauchamp’s would also need to identify the improvements needed in order to enhance the chances of success in the business. Another important process in franchising, and which the Beauchamp’s would have found necessary is the development of a model for their franchise system. The Small Business Development Corporation (2012) identifies the business format franchise as the most ideal model for food outlets since the franchisor gives the franchisees the rights to use their intellectual property (in this case the cafe Yumm!, and the taste of Yumm). In addition to the model, the business owners would need to develop an operations manual. Franchise operation manuals contain detailed explanations of how the franchise business should be run, and is therefore a major point of reference for the franchise agreement (Terry, 2003). Finally, and has been suggested by the Small Business Development Corporation (2012), the Cafe Yumm! owners would need to design a plan of action for the franchise starting with its launch, to its expansion both in the short and long term. Seeing that neither Mary Ann nor Mark were experts in franchising, it is worth noting that they would have benefited from assistance offered by franchising professionals such as franchise consultants, bankers, solicitors and/or accountants. Overall, careful planning, the estimation of costs and time-requirements needed to make the franchising process a success, and the evaluation of the business in order to determine its current position and propose a franchise model based on the same are necessary steps that the Mary Ann and Mark needed to consider taking. Question 2: The statement “at small, fast-growing companies, more than half of new businesses come from referrals not advertising” by Reichheld is a testimony of how important referrals are to small businesses. Drawing from the ‘ultimate question’, it is obvious that iPower’s inability to satisfy customer needs not only made it lose any repeat customers, but it also lost potential customers because the word about its unsatisfactory service provision probably spread among its targeted customers. Evidence that referrals are important is seen in the fact that iPower started making good business progress once the customer service improvements were made, and this corresponds with the improved Net Promoter Score (NPS) that the company has. Naturally, small businesses do not have the advertising budget that their larger counterparts have. Hence, the success of such small businesses usually relies on alternative marketing and promotion tactics. Referrals have been identified as one of the most potent ways of getting a small business to record exponential growth (Frey, 2001). The power behind referrals is associated with the fact that they are issued by credible third-parties, who have firsthand experience regarding the benefits of the product or service. Secondly, referrals do not have any financial implication on the small business. In other words, referrals are essentially free because as Molinski (2007) observes, “your loyal customers are doing most of the work” (p. 166). Third, customers who refer others to the business have an established sense of loyalty to the products or services offered therein and are therefore likely to form a significant percentage of repeat customers (Frey, 2001). To get the referrals however, the business owner (just like Gorny in the featured iPower case) has to streamline the customer service to meet the needs, requirements and expectations of the customers. As Frey (2001) notes, the satisfied customers are the most likely source of referrals for any business. Dissatisfied customers would on the other hand voice their dissatisfaction to potential customers hence discouraging potential new buyers from trying out the products or services. As Molinski (2007) notes however, superior customer services are not akin to referrals; instead, the business owner must make a deliberate action to ask the satisfied customers to refer their friends, family or colleagues to them. Even when existing customers have referred potential customers, the business still shoulders the greatest responsibility of proving that the service is worthwhile. This then translates first time customers into repeat customers, and probably loyal customers too (Longenecker, 2008). Once the business proves to new and doubtful customers that their services can be relied on, and are a good value for the money spent on them, a trusting and positive relationship starts between the customer and the business (Frey, 2001). Consequently, customers refer other people to the business with the conviction that the services provided by the business will be useful to them. As more referrals stream into a business however, the owner must be cognisant of the need to increase the service provision capacity in order to avoid a situation where too much demand compromises the quality of services offered References Chow, L. & Frazer, L. (2003). Servicing customers directly- mobile franchising arrangements in Australia. European Journal of Marketing, 37(3/4): 594-613. DOI: 10.1108/03090560310459104. Frazer, L., Weaven, S., Wright, O. (2006). Franchising Australia 2006 survey. Griffith University. Retrieved March 19, 2012 from: http://images.thewebconsole.com/S3WEB687/files/4c32623f55003.pdf Frey, D. (2001). How to make it rain referrals. Marketing Best Practices Inc. Retrieved March 19, 2012 from: http://www-rohan.sdsu.edu/~renglish/377/notes/chapt07/raining_referra.htm Longenecker, J.G. (2008). Small business management: launching and managing new ventures. 4th Ed. London: Cengage Learning. Molinski, M. (2007). Small business in paradise: working for yourself in a place you love. Berkley, CA: Nolo. Small Business Development Corporation (2012). Franchising your Business- what is franchising. Retrieved 19 March 2012 from: http://www.smallbusiness.wa.gov.au/franchising-your-business/ Terry, A. (2003). Franchise Sector regulation: an Australian experience. Paper presented at the EMNet-Conference on “Economics and Management of Franchising Networks” Vienna, Austria, June 26-28. 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