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A report to evaluate the success or failure of Initial City Links decision to Franchise.

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Introduction

A report to evaluate the success or failure of Initial City Links decision to Franchise. Introduction: Many large and national and international retail and service businesses have expanded rapidly and in most cases this is down to the business deciding to franchise out its outlets. What is franchising? Franchising is a means of a business (franchisor) with a product or a service to expand but does not want to sell to consumers directly. Hence, it franchises out it outlets to business entrepreneurs (franchisee), in the form of a franchise agreement - this is a legal agreement between both parties for a set time. This allows the franchisee to sell the franchisors products or services and the right to trade under their name and use the franchisors logo and designs. But in return the franchisee must pay royalties; a percentage of the final profits to the franchisor and must contribute to a central pool of capital, for marketing, which benefits all franchisees. A franchise agreement is unique in the sense of the closer inter-dependence between both parties. The income of the franchisor is dependant on the income of their franchisees. The franchisees depend on the franchisor for its market power and their brand name. Advantages of a franchise agreement for the franchisor: * Expansion of the business is paid for by the franchisee; these include initial set up costs, which will include the cost of acquiring premises, machinery, equipment, materials. * The franchisee also has to purchase a franchise agreement from the franchisor this provides the franchisor with a lump sum payment which it can choose to invest of pay of its debts. * Expansion can be a much faster as the franchisor can expand without a need to fund the expansion from its own capital. This makes international expansion much easier and faster. * The sale of its brand image and name produces a large amount of financial capital. ...read more.

Middle

So by franchising operations this meant that the agents were then tied to a franchisee agreement which stipulated what rules and regulations the franchisee must comply with. This also allowed the company to 'streamline' its operations which would have resulted in reducing the running cost of the company and this in turn would have increased the business' long term profits, which in turn would have made the business stronger and less of a take-over target. The decision to franchise by Initial City Link was a good one as they could also implement 'quality control' measures to enable them to provide a quality service throughout their network. Also the decision to franchise is a good one as it allowed the company to 'promote' in a sense their better agents to franchisees, and those who did not have the same level of business acumen, to be guided by those more experienced agents. I believe that an express delivery system is best expanded by franchising, as this allows the company to expand rapidly without the need to use its own capital, franchising also allows the business to expand much more rapidly and this has to be good for any business, even more so for a delivery company. As it is no good for the company not being able to deliver to a certain area of the country as it is yet to set up operations in that area, and it cannot afford to do so, simply because the capital for investment simply isn't there. So this allows the business to expand rapidly to also allow the business to provide coverage for the whole country. Also the franchising system that Initial City Link adopted is good because, as this is still a relatively new business sector; express parcel deliveries, there are not many proven 'express delivery experts' so by franchising out they can admit new entrepreneurs, into the business which allows new ideas to be raised, and that can only be good for a business. ...read more.

Conclusion

In summary, I believe that Initial City Link's decision to franchise was a good one as this decision has allowed the company to increase its profitability and size significantly as they have been able to expand without the need for them to invest their own money, which has allowed them to cover more of the country and to use other funds to start to diversify into other countries, and start franchising operations there as well, such as Luxembourg and Germany. Even though their social and environmental policy has been extremely poor for a company of the calibre such as Initial City Link, their financial figures have reaped the benefits. In a world where competition is so fierce, especially in the delivery sector, social and environmental policies are not key points that the directors would be worried about. Conclusion: I believe that the franchising of Initial City Link territories looks bright for the future. As only recently they announced a new franchised outlet in Maidstone, Kent. This shows that Initial City Link continue to grow through franchising, which must certainly mean a bright future for the company. In a corporate and personal world, where time is of the essence urgent deliveries will continue to have a flourishing trade. This must clearly mean that as market leaders Initial City Link will continue to expand and continue to fill the market niche that it has filled so well to this day. With the ability to continue franchising outlets, and expansion, other competitors will find it hard to break into a domestic market where Initial City Link has done so well to control. But with the likes of Parcel Force, DHL all becoming major players in the market, and with smaller firms such as 'findit' and Kelly Search all trying to get a foot hold Initial City Link Must continue to deliver a quality product it has done for so long. ?? ?? ?? ?? 1 ...read more.

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