Advertising is done nationally and doesn’t cost the franchisee a penny as the franchisor pays for the advertising and are apart of their business they are advertising us too.
They send out on a regularly basis the branch managers who can keep an eye on the performance of each individual outlet, increasing the rate of success as they will able to help recognise any problems with the day-to-day running of the business and whether all the computer software is up to date and finances are all above board.
The product has already been proved successful with other franchisees and the franchisor. This will mean that the product should be a success if the niche is spotted in the market at the correct time.
Why a franchise?
Advantages: You can achieve significant marketing advantages by being associated with a brand that has regional or national top of mind awareness, and there is usually a common marketing fund used to drive brand recognition and customer growth. In addition, you can probably achieve significant purchasing power savings by being associated with a large system that has much better bargaining power than an independent operator. Finally, you can take advantage of an operating system tested and proven by many other operators to produce the highest possible level of success from the business.
Disadvantages: A franchise system is probably going to require a franchisee to pay both initial and ongoing fees. For Thorntons this is £10,000 for the use of the brand name. These fees represent expenses that you do not have as an independent operator, and you need to be confident that the increased projected revenue, cost savings or profitability associated with being a franchise will more than offset the fee costs. In addition to fees, a franchise system typically has many rules in terms of how the franchise business must be run. Since you can conduct your business in any manner you choose in an independent business, you need to make sure you're comfortable giving up this total freedom to abide by the operating rules of the franchisor.
I choose to be a franchise with Thorntons as there will be less risk than setting up by myself as the way the running of the business will already be tried and tested meaning that a have a greater possibility of success, this will save me time and energy of trying and testing many other systems of setting up a business. There are other benefits to being a franchise like the cost of product promotion will be paid for by the franchisor also there is a lot of support when setting up and continuing on throughout the franchise contract. Being a sole trade was a consideration but I would have a smaller investment so my start up capital would me less therefore I would need to take out a loan which would mean paying all of that back with interest which I may not be able to do as the business would be starting up so making the repayments in the first year would be difficult. Though as a franchise I will have less control over the decisions of the business activities I would rather have the guarantee of setting up a business rather than set up and lose the money that I have invested through the business failing.
Partnerships
A deed of partnership is legally binding document which is made between two people who are setting up a business. This deed will state how the partnership will be run and the right and duties of each partner. Having a deed of partnership drawn up avoids any misunderstandings and disputes between the partners.
The deed will set out:
- The amount of capitol each partner is contributing
- The way in which the partners will share the profits and whether the partners will receive a salary.
- Working arrangements such as how much time each partner contributes to the business.
- What happens if a partner dies and what happens when a new partner is appointed.
For my business to save any arguing over decisions to be made I will have a silent partner. This means my partner will invest money into the business and has a share in its profits. They will liable for any debt too.
Also with two partners they will be benefits if both have prior experience and where the silent parent felt that their advice would be valued and important then they could speak up with some decisions that need making for the business to run successfully. Though my partner is silent I shall take the advice and listen to what they say, I will not ignore it as my main aim is to ensure that the business runs successfully and every little piece of information would help.
A partnership is not hard to set up. In this case there will be a deed of partnership and Thorntons franchise agreement to sign.
Aims and Objectives
Thorntons wish to sell the finest confectionary and to do this they have short term objectives and long term objectives which will aid them to check performance regularly.
As I am just starting up a business one of my main objectives is to ensure survival in the first few years certain measures will have to be taken to ensure that the business survives.
These steps:
To identify when the business is losing money. A cash flow forecast will help me to see and predict where and when I will be losing money. This however is only a prediction and doesn’t account for any problems and some unforeseen circumstances. The start up capital that my partner and I have raised is quite high at £40,000 which hopefully will help cover the costs that I will incur to set up the business. If however the business does lose money I can arrange an overdraft to help cover any debt and I will reduce the running costs of the business or ask less members of staff to come in and work myself on the shop floor until I can improve sales to help make money.
Other steps like monitoring the performance of the staff will also contribute to the survival of the business. Thorntons have very high standards and to sell the finest confectionary you should be able to purchase it with the best possible customer service. By monitoring the staff you will be able to see if the staff has had the adequate training to ensure the best performance, if they have then other motivational strategies will have to be considered, like incentive schemes. Thorntons can have motivated staff by:
- Training workers to their specific jobs. To do this I will be able to coach them and send them on courses to learn about the technology involved in their job and courses that can help improve sales techniques which will benefit us as they will be able to put their training into practice which will mean they are providing a better customer service. With a quality customer service Thorntons will gain an even better reputation and improve our sales figures.
- Paying them a suitable wage i.e. if you pay them the minimal wage £3.30 or £4.40 then you would expect staff to work to the amount they get paid. Therefore paying them a wage above the minimal it will encourage them to work to the requirements of Thorntons which are to have staff working to the highest possible standards.
- Promotion Prospects- At Thorntons the staff can be promoted to supervisor etc. Being promoted not only gives the member of staff a higher wage, but a greater incentive to work as there are new skills and techniques involved in different duties which they will have to undertake.
- Regular appraisal sessions- by having specific, measurable, achievable, realistic, time scaled objectives allows our business to assess the performance of our staff. In a comfortable room I praise the employee for their performance and then perhaps comment on things that I would like to see them improve and set them new objectives. This will motivate them as they will have something new to work towards and won’t become complacent with their work. Also at the appraisal meeting the employee will have a chance to ask any questions or speak of any problems they are experiencing.
Profit maximisation
Other objectives are things like profit maximisation. Again employees are a factor in maximising profits because without their brilliant customer service the customers will feel afraid to ask for help as the employees are intimidating. Also if the employees are not friendly then the customer may not wish to shop at Thorntons again and therefore repeat sales will be low and the reputation of the name will decrease rapidly as my word of mouth the poor customer service that we could provide would spread. Therefore having appraisal sessions and measurable objectives for them to achieve I will be able to see how they are performing and if they are not up to my standards then I will send them on more training courses to ensure that they work to satisfactory standards and if there still is no improvement I will have to let them go.
Also to maximise profit, Thorntons have diverse their products into wedding services, greeting cards, hampers, gifts etc. offering a wider range of products will mean that people may spend more money at Thorntons by buying cards as well as chocolates for a present for a member of their family or friends.
Produce Quality goods and services
To ensure the customers come back and shop at Thorntons they have to ensure that the products and services they are providing are the best. By this I mean the employees are well-mannered and polite to the customers when serving them. This will make the customers feel warm and welcome in the shop. This can benefit Thorntons as the customers will discuss with friends and family the service they received encouraging others to shop at Thorntons. Also the quality of the product should be very high as the founder of Thorntons wished to sell the finest quality chocolate and this is what the directors and shareholders also wish. Thorntons are currently producing new products as many customers want healthier food.
‘Thorntons is well positioned to benefit from the trends towards healthier eating. Our existing strength in boxed chocolates, coupled with increasing recognition of the health benefits of natural anti-oxidants, positions us well to cater for an increasing amount of customers who place quality and health at the forefront of their confectionery choices.’ Therefore as the demand for healthier food increased Thorntons has made it one of their aims to provide healthier chocolate. As the customers needs are very important and though the ingredients have changed slightly the quality of the chocolate is as good as it has ever been.
If coming across a bad service or poor quality of confectionary then I will have to work quickly to help the customer replace their product purchased and ensure an enquiry as to why this product was faulty to prevent this from happening again. I would contact the branch manager who will then look further into the problem and report back to me with the answer and the customer shall then have a written apology and explanation with a possibility of a free weekend for our chocoholics.
Corporate image
The image of Thorntons is a very important aim. As I am buying an image that has already been set up it is important that all my actions that I take do not ruin the reputation the franchisor has worked so hard to get. Therefore to ensure that the decisions I make for the shop are correct I will carry out market research, primary and secondary. This will enable me to see what customers in the area of Huntingdon require from a high quality confectionary shop. Then applying the analysis of these I will be able to sell to the public exactly what they are after. Also the training and employees working standards will be checked by the franchise branch manager to ensure that they are working to the standards to ensure that Thorntons image will not gain any negativity. Again how quickly we deal with customer dissatisfaction will help keep the corporate image therefore having vouchers, money back or replacing the item they purchased could keep the customer happy and still have trust and pride for shopping at Thorntons.
Stakeholders
Thorntons have many stakeholders from, managers, shareholders, employees, customers, communities, suppliers and financiers.
Connected Stakeholders
Shareholders have a lot of influence over Thorntons. Without the shareholders Thorntons wouldn’t be able to fund the marketing strategies for new and existing products. If the shareholders are not happy with Thorntons and the amount of money they are making then they can say who they want on the boards of directors. The shareholders control the directors and if they do not like the performance then they will act on it, by suggesting new ideas for products and increasing sales or electing other people to be on the board of directors. If the shareholders are disappointed with Thornton’s overall direction and growth then they can threaten to sell their shares. Though the shareholders have much influence over Thorntons and who run it can be beneficial as they are seeking to make a bigger dividend.
Internal Stakeholders
Managers
Managers like shareholders have much to gain from the success of the business profit maximisation, growth etc. As the manager I do not want to see Thorntons fail. Therefore every decision I make along side the decisions made by the franchisor are crucial for survival. I benefit from having a branch manager who can assess where the problems are with the day-to-day running of the business. Therefore it is in my best interest to ensure that the employees have had the best training and that the service that they are providing is of high standards as this will encourage increased sales.
Employees
Employees have a significant amount of influence over Thorntons as they can affect the sales and profit made. The employees are also internal customers therefore the business running efficiently is in their best interest. If the employees are de-motivated through poor wage, poor working conditions then they may not perform to the high quality standards that Thorntons require. If the employees are working below the standards then sales will decrease and Thorntons will lose money. Then the employees could be fired and then they wouldn’t be able to afford the rent or food. Therefore Thorntons should provide the adequate training for them employees this will give them incentive to put their theory into practise and maybe even get promoted meaning they would be earning more money which could help with their payments or even have more luxuries for their lifestyle.
Franchisor
The franchisor has a stake in the business because they want to make money from the franchise. If the franchise fails it will look bad on the franchisor as it’s their brand you are using and the reputation within the area of where the franchise was set up may be not be able to fixed. Therefore the franchisor will provide as much guidance as possible for the franchisee to see that they survive.
Customers
Customers want businesses to provide quality products and service. Thornton’s aims and objective try to help ensure that they are providing these to customers as Thorntons wish to keep customers happy and encourage them to shop there more often. This may aid Thorntons into having a larger turnover, which would give the franchisor an increase in royalty payments. Also that the electricity, gas, water and other costs can be paid. If by any chance a customer is unhappy with the service or product they have received from Thorntons then we will apologise and give them free chocolate or vouchers or money back to compensate them for the negligence on our behalf.
Pressure Groups
Pressure groups are groups that put pressure on organisations to make specific changes in their policies or even plans and activities. For example friends of the earth put pressure on businesses to recycle their product packaging. If the pressure group is not happy with certain activities that Thorntons are doing they would certainly humiliate them in local/national newspapers or televise this information to damage the reputation on Thorntons who would then have to act accordingly; like ensuring all their packaging is recyclable and also that the delivery lorries are full and not just transporting a few products whilst polluting the air with the fumes from the exhausts.
Thorntons packaging is cardboard and the bags are recyclable and reusable, to help save the planet. Also they are using cocoa beans from five different countries such as; Cuba, Tanzania, Java, Papua New Guinea and Sao Tome.
Also Thorntons made charitable contributions too. Below is a how much they donated to which charities.
During the period, the Group made charitable contributions to Childline of
£25,000 (2005: £22,000), and to Charitable Christmas Cards of £2,000 (2004: £Nil). It is the policy of the Board not to make political donations and accordingly none were made in the period (2005: £Nil).
Suppliers
Our supplies come from the franchisor as the confectionary being sold is specific to Thorntons. The franchisor is much bigger to me the franchisee they can dictate the payments. I will expect the stock to arrive on time and the quality of the confectionary to be perfect and no damages to the packaging if there is then there could be a decline in sales from the faulty confectionary being sold to a customer. This would be the fault of the franchisee and the franchisor for the delivery process would have to be secure and there could be a problem with the employees making the chocolate contaminating the food.
