Marketing Strategy
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1. Franchisees gain numerous advantage when they purchase a franchise. First, while a franchisee may be opening a new store, it is part of an already established business and system. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. Franchisees also get support for management and training activities, as well as financial assistance. Going hand in hand with this, a franchise already has an established brand name, quality of goods and service which have been standardized across the franchisors larger company, and national advertising programs from franchisors. Franchises also have large-volume, centralized buying power. A franchise has proven products, and successful business format. Finally, site selection and territorial protection is offered for franchises. All of these advantages increase the chance for a new business in a franchise to be successful. While there are many advantages to a franchise, there are disadvantages as well. First and foremost, in order to own a franchise and take advantage of all the benefits of owning a franchise, there are fees and royalties which are ongoing for advertising, use of the franchise name, products and services, and for use of the business system. A franchisee must also adhere strictly to regulations and standards imposed by franchisors. Franchisors also require the purchase of supplies and equipment from approved suppliers. Franchisors can also restrict what products can be offered in a store, which limits the product line as a whole. This results in an overall limit of freedom which entrepreneurs who start their own business do not have to deal with. Finally, and possibly most relevant from a business standpoint is market saturation. Franchisees have grown tremendously fast in recent years, resulting in an overwhelming number of franchises in the market place.
2. Option 1: Continue their current marketing efforts
Advantages:
* Will not increase current advertising costs
* It is a familiar strategy with limited unknown factors
* Will not require changes to pricing and costs of goods sold
* Will not require changes in fees or business plans of current franchisees
* Requires no extra actions or time to implement
* Gives franchisees more freedom than they usually have
Disadvantage:
* The current marketing campaign is not working
* Sales are declining at a faster rate than before the current marketing plan
* Could result in continued losses as well as costs of new plan if revenues do not increase
Option 2: Begin Discounting Sandwiches
Advantages:
* Could increase sales
* Could increase competitive edge over competing companies
* Could draw in new markets and demographics
Disadvantages:
* Decreases profit margins, possibly driving costs of goods higher than sale prices
* Could result in drastically greater losses, especially if sales do not increase
* Damages reputation of quality ingredients
Option 3: Launch new marketing campaign
Advantages:
* Franchisor will be collecting advertising fees from franchisees again
* Chance to draw in new customers and penetrate new markets and demographics
* Chance to increase sales without costs to the franchisor
* Does not damage profit margin to increase sales
Disadvantages:
* Franchisees could be hesitant to pay higher advertising fees causing difficulties in implementation
* Limits freedom to advertise in local markets
* “Blanket” marketing plan across the entire franchisor may not appeal to possible consumers in all areas
3. The best option is the one which has the highest chance of success. To me, the choice is simple. Option 1, sticking it out with the current marketing campaign, is a bad idea. It has been six months since franchisees were given the freedom to advertise in their local markets. The results of this six month period have been catastrophic, as sales have declined even more since this action was taken. This is ample time to see this is a losing strategy, and a different move is necessary. Option 2, lowering sandwich prices through discounts is also, a bad idea. While this could boost sales, it will cut into an already small profit margin. The result would be a need for sales to increase drastically in order to generate a profit. This could also have a negative effect on the brand name of the franchise. By taking a reputation hit and lowering quality of ingredients in order to make sandwiches at lower prices to maintain the current profit margin could put many consumers off the franchise. This could have an even more catastrophic result, and damage done to a companys reputation can take years to recover from. This leave option 3, launching a new marketing campaign. While this may encounter some resistance from franchisees who want the freedom to control their own advertising and to not have to pay advertising fees, it also has the best chance of success without damaging the companys