Franchise or not in Michael Bregman Business

Let's contine the discussion with franchise. 5 preconditions are mentioned in the previous post. The case of Michael Bregman who is trying to find strategy to expand his business. He is considering to choose either internal growth or franchise.

The first precondition cannot be satisfied that consumers can easily find substitutes in the market even thought those bakeries are not as fresh as Michael sold. But it demonstrates that the business’s product or service is not unique.

Secondly, the longer business has been running for 7 months, the other business 3 months so far, the business is so young that it is hard to predict it will have consistent profitability as it has at present. And, on the basis of financial analysis on June 30 we can see that profitbility ratio of the units are not good. ROCE and ROI are negative while, gross profit margin is really poor. However, the infant business is not stable in the early stage of development. One week later, the net profit on July 5, 1980 is $ 21455. The growth has further increased by July 5. The business has a substantial changes in the first few months. But the problem is that his liquidity is not good and he has no cash balance left. Franchise is a cheap way of expansion, but still need investment of time and capital.

Thirdly, Micheal's business lasts less than a year. And starts to gain profit from July 5. It is not a convincing business to franchisees.

Fourthly, despite there is an operation manual with everything, Michael is responsible for all controls and procedure monitoring without enough time.

Fifth, Michael has not sufficient arrangement for the tasks of training, supporting, supervising, and nurturing franchisees. It is difficult for Michael to have a franchise system with one or more franchisees if there are no particular operation manual and relative preparations. Again both of his business don’t have any patent or brand image and are very common in the market. Based on such situation, it is hard to get franchisee do investment.

Therefore, he should not be hectic in growth of his business by franchising. Rather he should focus on the stabilizing his existing units and select slow growth strategy so that the existing units get sufficient times to gain financial resistance.