CASE STUDY IIILAZYBONES 1.
Dan decision on whether to grow ormaintain his business as a lifestyle business should be analysed and observedfrom different angles. First, there are advantages and disadvantagesconsidering each of these two. Since Dan and Reg started business a long timeago when they literally did not have anything, working non-stop and strugglingfor survival, it is on some way logical that both of them will be satisfiedwith all what they’ve accomplished so far. But, money is funny and weird thingthat will always push people towards bigger goals and make them to thinkdifferently than in usual situations when they can consider situation supremelyobjective.
Other thing is that Danis almost 40 years old and it is question is he ready and capable to deal withall that stress related to company and its improvement. After five year of hard work their net profitmargin was 26%, which was 6% bigger than year before and 17% bigger than twoyears before. They gained experience, they met people, build some sort ofbrand, had a market with very little competitors and all these factors wereenough to decide to grow. Advantages in growing represent: expanding market,increase revenue, opportunity to improve brand awareness, chance to relocatebusiness… After Joel and Dan investigated market and the feasibility offranchising, it was clear that after more than fifteen years company can grow,and with 7-10 company stores start franchising. However, maintaining this as alifestyle business surely is not the worst decision on the earth but there issimply huge potential in the game that should be used. I would say that grow isthe better decision.2.
There is a couple of great ways togo forward and improve your company. It is hard to implement the franchising onthe best way, but in this case customer demand is constant, the potentialmarket is constantly coming and expanding, there is no serious competitors (atleast not at their point of interest) and it seems reasonable to start withfranchising. Even all of the partner’s investigations and parameters are infavour of it.
They are confident that franchisees can make larger net marginswith their company than with some else. By investigating I found out that a lotof big companies are more than a successful franchisers like KFC, Pizza Hut or SUBWAY. Different types of growth like licensingproduct was not possible, connecting with other business was not necessarysince they have stable business and targeting other markets were less likely tobe achieved since competitors ‘National Drycleaning’ or ‘Dry Clean’ already had a market and werehuge enough to parry new born companies. Some other ways to expand can also beanalysed and represent possible candidates to perform, but statistics, data andinvestigations show that franchising as an option have potential to meetexpectations. 3. Franchising as an option ofexpanding and as a mode of the growth has a lot of benefits. Considering thiscompany’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 frombanks or potential investors. In the same time, franchisee is new store’smanager, which will have bigger stimulus to deal with difficulties in businesswhich will directly effect on the growing of the business. In the same time, itcan help in building brand recognition, brand awareness and spread namenationally.
All these factors can cause rapid growth in making a company famousand more attractive for potential investors. As a part of additional research Ifound out that franchising has a lot of advantages: faster growth, increasedprofitability and revenues, exploring other markets (STA, TTA), brand becomesmore popular and most important as a combination of previous ones – risk isreduced. Disadvantages, on the other hand aremore related to question of taking risk. Every plan or option to grow, nomatter how good it is, will eventually face with problems.
They can be smalleror bigger, representing the challenge for owners. Franchising has reduced riskin comparison with other methods of growing and from them disadvantages andproblems are not terrified as they can be, especially if plan or option for aspecific business is not good enough. Keeping brand consistence, keeping brandquality, not well known managerial/ franchisee abilities (which are importantfor this kind of job), sharing some part of profit, possible giving up offranchisee are just some of disadvantages.
Franchisees can do things that canbe bad for company from time to time. Sometimes, they do it by purpose,sometimes not. These mistakes are often made because franchisee did not attractright franchisees. Their lack of experience and low quality are often cause oftheir wrong decisions and bad moves. Quality of franchisees is most importantthat franchisee need to check. By quality, I mean all characteristics necessaryto perform type of activities required for specific job. You need to make surethat you choose the best franchisees, based on their work experience and thingslike personal abilities, power of adopting to a new situations, education etc. 4.
Fiveyear plan with these information can be made roughly without smallest parts ofplan and details. Let’s start with individual location level. Considering firstyear, my opinion is that partners should give 100% of their possibilities towork on brand recognition and investigating possible destinations if theydecide to go global in the following years. They should focus on renting afacility (because building in this phase is not a good option) that can satisfyall of their operation needs. They should also take more care about employeesand managers that they need to employ in future. If they need to choose betweenquality and quantity in first year, quality is the right answer. Their qualitywill be their first “small marketing project”.
On that way, they will showstudents all benefits of running this business. In second year, expandingfaster should be main goal. By this I do not mean going globally, but expandingby buying new machines and employing new workers can be a great move. Catchingmarket as a probably “first mover” is extremely important. Beside quality ofservice, quality of managers (right people) at right place is the second yearpriority. This combination will attract students, parents and all people whowants fast and quality service. Marketing and consistency of attracting newstudents from areas with large number of them should be a goal. Since thecompany expect to have permanent costumers by that time, revenues should bebigger than in previous years.
Speaking about individual location level I wouldsay that fourth and fifth year should be used to stabilize company and make agood base for further developing. They should maintain their 24h deliveryservice and tend to decrease that time. The market is expanding and morestudents are on collages in years to come, especially in developed countrieslike US, so the quantity comes into play in this period of time where you needto satisfy both parent and kids. Company need to expect competition andimproving business plan to the smallest details is extremely important. Everydetail can be decisive, so set of all things necessary to achieve a profit andbuild a brand must come fit.Ifwe talk about corporate level first and second year should be used toinvestigate, analyse and make a right decision when, where and why to choosespecific location around US. They need to be aware that every student in thecountry is their possible customer, but which ones of them, at certain time andat certain places are best target market. Areas with large number of students,especially ones with high number of international students who even spend asummer at US should be their primary target area.
Second half of second yearshould 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 staythe same with same level of quality, maybe even bigger if it is possible byhiring new employees.
As I previously said, quality is their trump which justneed 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 fourthand fifth year they just need to continue on the same way until the point whenfranchising is real option. Of course, franchising should not be their onlyoption, but in previous analysis it showed as realistic and very possibleoption. We can increase revenue per storeusing simple activities.
That can be special offer during holidays, constant24h delivery service and offering all types of services. For example, everythird or fifth washing does not have to be for free, but it can be two or threetimes cheaper. On that way you will offer special service that is not usual inprice list but you will get some profit. You will make student less resistivewhen they think do they need to wash at some other place or at your placebecause they know that at some moment almost free washing is waiting for them. Before all these actions, you needto collect data. You need to know how much people will wash laundry at yourplace at which part of year, your average visits per day, your average revenueper day, number of services that are performed during specific time of year (itincludes all your services – washing, drying, ironing, deliver), operatingexpenses etc.