Introduction
The business that I intend to start is a franchise of Wireless Zone. It is one of the most aggressively growing retailers and has more than 400 outlets all over the US (Sinclair, 2011; Nemic, 2012). The business model is accepted in the franchise model of doing business.
The core business of the company is selling technology-related products and provides solutions. The company operates on a franchise model that allows the company to expand at a relatively fast rate and find operates who are actually the owners of the store and have an interest in successfully running the business. Wireless Zone is the name of the company as it literally shows the kind of product sold in the stores i.e. cellular and wireless phones, wireless accessories, GPS navigation, Wireless Data Service, pre-paid cellular service, etc. (Wireless Zone, 2011).
This paper presents a detailed outline of the different aspects of the marketing, managerial, and financial aspects of running a franchise business. The paper will also show why and how the external environment provides support or threat to the operations of the business. the objective of the paper is to understand the feasibility and prospective success of the business.
Management Section
Legal Structure
The franchise model of doing business is based on the concept of a franchisor that licenses a trademark and advances the business expertise and the method of doing business to a franchisee in exchange for a fee from the latter called franchisee fee (Legal Help USA, 2012). Usually, there is a contractual agreement between them, therefore, using a franchise model is an easier and safer method of doing business.
In other words, someone with a business idea sells the right to another person to use the name of the business, sell its products and services to the consumers. A franchise model of business is advantageous for the franchisee to start a business without any hassle of developing a new product, primary research on product demand, and establishing a brand. A franchise model allows a franchisee to develop an already established idea and not build a business right from scratch. The only disadvantage of a franchise model of business is that it reduces the power over certain things like product, branding, marketing, etc. of the franchisee.
Otherwise, the franchise model is a very effective and hassle-free method of starting a business. In term of starting a franchise, the company Wireless Zone will provide “training at Wireless Zone University in Connecticut as well as start-up, operational, customer service, and marketing support.” (Allbusiness.com , 2011) Therefore, from the legal perspective as well as operational perspective, starting up a franchise is much easier and assured of business than to build a new start-up.
Management and Owner
The management of the company will remain with the franchisor i.e. Wireless Zone. The company will have its CEO and other top managerial officials and board of directors. The ownership of the franchise will however remain with the franchisee. Therefore, the person who takes up the franchise is the owner of that specific retail outlet. However, he has to abide by the terms and conditions laid down in the franchise agreement.
As the owner, I will also be managing the store. Therefore, the strategic decision making will be done at the franchisor level by the Wireless Zone CEO and management, but on the store level, the owner will be responsible to handle the day to day managerial activity.
Staff
For the store, the staff that is expected to require are a Manager, Assistant Manager, and a few full and part-time associates. I will take up the responsibilities of the Manager. I will require hiring an assistant Manager and associates who will be responsible for retail sales. Therefore, associates will be the selling point for the store. The staff is to be recruited by the store owner. However, on opening the store Wireless Zone headquarters provide two weeklong training for the franchisee and the new managers and associates at the headquarters of the company (Entrepreneur, 2012). Apart from this, there is an additional 5 days of training at the franchisee’s location.
Marketing Section
The environment in which Wireless Zone operates is very competitive. There is a high degree of supplier power overpricing as there are few suppliers of the popular branded wireless devices. There are a large number of buyers for wireless devices, which therefore reduces buyers’ power. The external environment has been turbulent for Wireless Zone since 2010 with the market hit by the recession.
The US economy was hit by the recession, which affected most businesses. The main reason for this slump in the economy was the failure of the banking system in the economy and dipping in consumer confidence that led to a lowering of demand for consumer durables. However, the company has not been affected by the recession: “Though the economy may be suffering” (Nemic, 2012). Therefore, the external environment through bad for business did not affect the Wireless Zone.
Change in preference of the customers, i.e. a phone is no longer considered just a device through which one communicates but it does much more than that. It is used for various other purposes than just suing for communication. Therefore, even during the recession, there was an increased demand for its products. Given the external environment for wireless technologies, it is now important to understand the opportunities and threats that the company faces.
First, it is a growing company. As Wireless Zone is a fast-growing company, it has the opportunity to grow further. Moreover, the company grew even during the recessionary period when its stores increased from 180 in 2008 to 400 in 2010 (Nemic, 2012). As they provide a niche product of all wireless technology products, its success is greater. The reason being it is a one-stop-shop for buying anything wireless right from cell phones to car phones or GPS systems, to Bluetooth headsets.
There is a great demand for such products as these are relatively new in the market. Another opportunity that Wireless Zone has exploited is its reach in the rural areas. Wireless Zone has 25 to 30 percent of its retail stores in rural areas. However, there are many rural areas where expansion is possible and where there is a great demand for such products (Palenchar, 2009).
The threat that is imminent is that it is a retailer in the ever-changing technology-oriented market. In technology-related products, innovation is paramount, which reduces the product life cycle. Therefore, the products sold by Wireless Zone too may become backdated and there would be less demand for the product, which will reduce their growth. However, if the company achieves to keep pace with the fast-moving wireless product industry there will also be continuous growth for the company.
For instance, the Wireless Zone started as a car phone company in 1988 but expanded its product range to a wide variety of wireless technology products commercially sold today (Palenchar, 2009). Another threat that Wireless Zone faces is from competitors who too may follow the business model and strategy of the company and eat away a part of their revenue share.
Target market
The target market of the Wireless Zone is the rural market in the US. Top management of the company has stated as “Rural America in ‘A’ locations is a definite focus for us” (Palenchar, 2009) however, they plan to expand also in urban and suburban areas. In 2007, their target in the rural market was about 25 to 30 percent. The market segmentation followed by Wireless Zone is based on geographic location. The company has a strong and mature market in the Northeast of the country. The other geographical targets of the company in recent times have been “Midwest and South regions” (Palenchar, 2009). One opportunity that they derived from this expansion is that Wireless Zone is the only agent operating for Verizon.
Positioning Strategy
The company is positioned on two unique lines – first, it is the only supplier of all products that are wireless, and second, they are the sole retailers for Verizon. This provides the company with a double edge that helps the company to operate in greater parts of the country. The company is positioned as the provider of wires technology be it cellular phones or GPS devices or car phones. Therefore, the company has a distinct positioning in the wireless technology market.
Promotional Strategies
The company already has an established brand name. Wireless Zone is a highly popular company, however; consumer ratings or business ratings provided to the company by various media channels are a boon that helps in the promotion of the company. Wireless zone promotes its brand through direct-mail promotions and advertisements through televisions. Promotional activity will be done by the franchisor provided to the franchisee.
The other promotional activity that the franchisee is facilitated with is in-store design. Promotional and sales promotions are done directly in the stores with direct planning done by the franchisor and company management. Other promotional activities that are done are through “ Co-op advertising, Ad slicks, Regional advertising” (Entrepreneur, 2012). Other promotional activates are done through a company newsletter, grand openings, Internet marketing, etc. Public relations activities through philanthropic work also provide a good state for increasing brand awareness (Entrepreneur, 2012).
Financial Section
The financial requirement to start up the store is expected to be around $65,250 – $223,500 and the franchise fee that has to be paid every year is $1,000 – $30,000 (Entrepreneur, 2012). The royalty fee that is to be paid to the company, however, varies. The term of the agreement is of 7 years after which it can be renewed.
Table 1: Investment to start a Franchise.
Table 2: The first year projected Budget.
Table 2 presents the projected budget for the first year of operation of the store. The budget shows that the maximum cost that would be incurred is in the initial set up period. In the initial state when the company is contacted for franchising and initial payment is made after the agreement is signed by both parties. The initial payment has to be around $50,000. The must be noted that in order to take up a franchise for Wireless Zone it is important to have an initial capital of at least $100,000.
Then there are additional costs of inventory, marketing, store opening, display, and signage, etc. It should be noted that costs such as opening costs, heavy marketing costs would be initially incurred due to the initial set up of business. However, these costs will reduce as these are no recurring costs. The recurring costs are some marketing sign related costs, staff salary, and other expenses such as electricity bill. Apart from this, the franchisee has to have excess capital in hand in order to pitch in time of immediate requirement.
Conclusion
The proposal to open a franchise of Wireless Zone is a lucrative option. There is a great growth potential for the brand even though the market of technology gadgets retail is fiercely competitive. The setting up cost is initially high but then the potential to grow and early breakeven provides a grand opportunity for a franchisee. Apart from that, there is a lot of company support in terms of training, marketing, and store designing. Therefore, a lot of strategic work is reduced. Wireless Zone provides a lucrative opportunity for franchisees.
References
Allbusiness.co. (2011). Wireless Zone Ranked #10 Franchises Systems. Web.
Entrepreneur. (2012). Wireless Zone. Web.
Legal Help USA. (2012). FRANCHISING & FRANCHISE LAW. Web.
Nemic, S. (2012). A Time to Give: Wireless Zone Donates $147,000 to Local Charities. Web.
Palenchar, J. (2009). Wireless Zone Building It’s Brand Through Expansion, Store Design. Web.
Sinclair, K. (2011). iPhone, Droid Help Wireless Zone Business. (C. Casone, Interviewer).
Wireless Zone. (2011). Verizon Wireless Zone. Web.