Blair case study
There is a particular quote room the case that I believe is telling in terms of how he should proceed. “In the food service business, you are serving food and trying to please your customer. In the franchise business, your customer is the person who has paid you thousands of dollars for a franchise…
Let’s a deferent business. ” The crux of the case study details Flair’s Inspiration and planning for his concepts as a result of a career In the restaurant business. HIS Idea of an artisans pleural In the Charlotte area Is a novel one, and by all accounts has thus far been successful.
However, he mentions that he as never worked for a franchise operation before, and by fundamentally altering his business by expanding via franchising so soon after his restaurants opened for business, I believe he would weaken his long-term prospects for success. I think it is critical that he take the time at hand to master the operations of his fledgling concepts, and when the time does come for expansion, he should do so organically until he has established a culture and reputation within his restaurant businesses that will be more easily replicated if he does franchise in the future.
I would suggest o Martin Blair that he should focus his efforts on stabilizing his Viva Italian restaurant, which he admits still occupies much of his time, and then his first expansionary move should be to open another Placenta without going the franchise route.
At the time of the writing of this case study, Pizzeria and Viva Italian have only been in operation for 7 and 3 months, respectively.
While Blair mentions that both businesses are doing “well”, and the sales figures do show a marked increase for both establishments – with Pizzeria going from $27,030 in January to $61,806 in July, ND Viva Italian going from $1 33,410 in May to $196,461 – a deeper look at the Corporate Balance sheet in Exhibit 18 reveals that his concepts are still operating at a deficit. Specifically, Flair’s net loss before income taxes for the 9-month period ending 6/30/2013 is $84,537. That figure is greater than the amount of money his Pizzeria restaurant generates In monthly sales.
Surely, If his restaurants continue to Increase sales at their current rate he will begin to see profits, but In the ever-competitive food service Industry the continuation of success Is hardly guaranteed.
Acquiring significant capital investments to open new franchises for his businesses Wendell currently operating at a tattletale, to me, seems Like a rolls move . Inner Is no guarantee that the Pizzeria and/or Viva Italian franchises that do hypothetically open would see the same success as the original establishments.
While the sales figures are encouraging, it is hard to imagine that the restaurants have built up the sufficient brand equity among potential customers in the Charlotte area that would be needed to persuade people to choose them over other eateries. By franchising out his essentially brand new restaurants he would be moving his day-to-day operations from one in which he has demonstrated great strength, which is delivering quality food options in markets that didn’t previously exist in the Charlotte area – artisans pizza from Pizzeria and a diversity of potential eating experiences at Viva Italian (breakfast, lunch, dinner and coffee).
The case mentions the unique advantage that Blair acquired for Viva Italian through hiring a chef from a local bakery, and how the chefs input was critical in bringing Flair’s vision of a full-service restaurant to ruction, and keeping fixed costs down as a result of serving 3+ meals.
By expanding via franchising, his focus would essentially shift to managing whomever he brought on as a franchisee, and he has no experience doing that. It is not guaranteed that the franchisee will have the same ability to identify the right chef for a restaurant concept that he or she did not create.
Thus, I do not believe the time is right for him to franchise either or both concepts, and the prudent move would be to demonstrate more experience and success with the concepts before he is willing to take on additional investors. In my estimation, if Blair follows this recommendation to stay the course for the next few months (the text mentions that he must make a decision soon on space in office buildings in the downtown Charlotte area) and forestall any expansion until his restaurants are operating in the black, he should be able to command a larger franchise rights fee if he were to choose the franchise route.
On the same note, he would also have more cash on hand to invest in another Pizzeria that he could open, and he also would not need quite as much outside investment, thus maintaining more control over his operations.
Earlier in the passage Blair notes how uncomfortable he initially felt in borrowing money from his parents to establish these restaurant concepts, and expanding this soon by adding investors would only serve to diminish the sovereignty he has exercised in tailoring these restaurants to his exact specifications.
Adding franchises to the mix when there are only one of each establishment currently in existence would further complicate the situation. It is possible that Blair views the franchising route as a safer, less risky alternative to slowly building out his business throughout the Charlotte area. However, ranches do require constant control and monitoring.
Blair is still in the process of establishing best practices for his new restaurants, specifically Viva Italian, and if he is surprised by the unexpected issues that arose during the process of opening each of his restaurants, it is impossible for him to accurately predict what issues might arise in a franchise situation. In summation, the current financial of his operations, while promising, combined with the lack of expertise in the area of franchising lead to the conclusion that expansion via franchising is not the wisest next move for Martin Blair