Introduction
My Friend’s Bookstore was established from a very humble beginning and has continued to thrive since its inception. Its success is owed to the efforts of the three pals who combined their efforts. Perhaps, it would have been difficult for this business to survive if it was operated by a single individual. The three friends were, certainly, able to manage their time very well because other than doing business they were students in the institution where this enterprise was based (My Friend’s Bookstore, 2011).
Describe what would happen to the cash position and cash flow of My Friends’ Bookstore if the owners decided to open another store
The business entity mentioned above was able even in the presence of its major competitor, and as time moved on, it was able to have a bigger market share than the college bookstore. They did this by subsidizing their rates, and since this bookstore is operated by students who probably reside on the college premises, they can remain operational even after official working hours. It means that the three fellows had to sacrifice their free time, and indeed their sacrifices have been paid back.
Now that the business is making big returns, if the three guys decided to open another bookstore in a different location, they would have to look for money to fund the establishment of the new branch. Moreover, for the new branch to be operational, they would have to hire a few employees to help them in running it. The major concern here is where the money will come from.
They have several options to choose from first one is to use the profit they get from the current enterprise to open another branch. If the profits are not sufficient, they can consider applying for a loan from their bank. One expects these guys to have one common bank account separate from their accounts. Depending on the amount they have in the bank, they can get a loan and repay it using the profits that they get from the current business.
It means that the money they will be getting from the current business will be used to repay the loan and maintain the new business until it becomes stable to cater to its expenses. Pakroo (2010) argues that opening another branch has its own risk, but as it said, no achiever has never lost something hence the three guys should not be afraid of losing because in business is the worst enemy in the business world.
Is My Friend’s Bookstore a good candidate for Franchising? Explain and defend your answer
The business is a good candidate for franchising because it has a stable and feasible business model. This kind of business is compatible with its environment, and these three people are keen observers because they could identify an opportunity right under their noses. It is said that opportunities are around us, but the major challenge is to identify them. This kind of business is like a gold mine in the education sector because the demand for reading materials is so high.
The pioneer business is strategically located, and the availability of customers is assured because it’s conveniently situated in the college hence the new business entities, seeking to benefit from its brand should be located somewhere close to a learning institution because that is where reading materials are most needed. It is where most business people fail because they don’t consider the location of their business.
Moreover, the business can be easily duplicated to different colleges thus franchising is seen as a good strategy since third-party businesses can increase the bookstore’s market share. Since My Friend’s Bookstore is a small business, franchising will help the business in cutting down the cost of opening new firm-owned bookstores because other marketing activities such as managing cash flows are handled by third-parties (Tyson & Schell, 2008).
Describe what the owners would have to do to prepare to franchise their business
Before a new branch operated by a third-party is set up, the business partners would have to get authorization papers such as licenses from the authorities to avoid engaging in running battles with local authorities and the franchisees. The owners should consider reputable businesses to enter into an agreement and come up with a plan that would help other bookstores sharing the same brand name to enter into the core business activities. The parent business should be ready to offer the franchisee support activities such as advertising and training. The partners should, therefore, assess their financial status with regards to income and expenditure and, therefore, decide on the number of franchisees to enter into a contract with (Madura, 2008).
The three partners own the bookstore equally. What are some of the difficulties they may encounter in sharing management duties equally?
In partnership businesses, various issues affect the partners. First and foremost, when decisions are being made, all the partners have to be consulted for their views concerning the matter at hand. Furthermore, in case a new branch is opened, the partners have to hire the premises where the new branch will be situated. The staff who will be working in the new branch ought to be trained for some time before they are deployed to the new branch. This means that they will have to work in the current branch because their progress has to be monitored.
Another difficulty is the priority of duties to be shared. Since this is a business that mostly serves students, it may be difficult to set up procedures for managing discounts offered to students, and by what criteria can a student air his/her complaints to the managers. Buying and borrowing books are two different processes that need the consent of all partners in duty delegation.
What processes might the owners put in place to clarify their duties as equal partners?
According to Tyson and Schell (2008), making decisions without involving the other partners can be interpreted as disrespect to the partnership; there must be respect among the partners. Besides, the problem of sharing profits can be solved by distributing the profits according to the inputs of an individual to the business. It means that the earnings will not be equal because they will be based on the percentage of inputs.
In partnership with businesses, it’s advisable to have a constitution that dictates how the business will be managed. It should contain the business ethics that should be followed by all and the expected action that can be imposed on the partner who does not abide by the rules. The constitution should clearly explain the roles of each member and the disciplinary action that can be taken against the defying member. In essence, it would be difficult to manage the business without written rules and obligations and this means some members will be oppressed by others because they will be doing their roles plus those of their partners. It is not healthy for the business.
References
Madura, J. (2008). International financial management. Mason: Cengage Learning.
My Friend’s Bookstore. (2011). Store Info. The Presbyterian College Bookstore. Web.
Pakroo, P.. (2010).The women’s small business start-up kit: A step-by-step legal guide. California: Nolo.
Tyson, E. & Schell, J. (2008). Small business for Dummies. Indiana: Wiley Inc.