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The Framemakers

Autor:   •  February 7, 2019  •  1,670 Words (7 Pages)  •  5 Views

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Robert and Teresa had initially considered franchising a U-Frame-It store in Brandon, but were quickly scared off by an initial $20,000 franchise fee and royalties of %10 of sales. As well, they would be required to follow a certain format and purchase supplies from the company directly. The positive aspect of opening the franchise would be that it is already and established brand. They would have little to do to make themselves known as the company would take care of that. Yes, they may be required to purchase all supplies from the company, however if the supplies are of quality and reasonably priced, they may be a better option anyhow. A known name would also be of importance in this case as there is already an established store in Brandon as competition. The franchise fee is not overly ridiculous considering that would include set-up assistance. Where if on their own, they would be paying around five times that amount. Also, where they are new to the framing industry, it may be of assistance to have somewhere they can start from and not just a blank sheet.

Cons of franchising would include creativity. With control of how the store is formatted, it often leaves little room to expand individually and to put one’s own creativity in the store. Purchasing of supplies could also prove to be negative as supplies may be higher priced than those of other suppliers, and as well they might not be the quality that you were looking for. Franchising would also reserve the right to be shut down at any time. This could result in loss of investment and with no store or income.

Robert and Teresa were initially annoyed and surprised that their banker had requested and continued to request additional information to be supplied. This can be evidently related to the financial mishap in the business plan. Without more of an in-depth breakdown of how many will be spent and projected income for roughly 5 years, they leave their business vague and potential for financing very low. And even when the Normans completed additional work, their numbers were underestimated and there wasn’t sufficient foresight to projected income. They were evidently mostly only approved for the loan due to their good credit standing, and their long-time past dealings with the bank.

As a banker, before the loan would be approved, I would need all relevant in-depth information. The Norman’s fell short $10,000 when budgeting for their business. As a banker, when reviewing their proposal, you should be able to recognize this and work with them so they can have a more realistic statement. They would also need projections of income for the first five years. You then have a clearer picture of how the business plans to operate and where their financing is being put to use and how they will get it back. Yes, credit standing and past dealings with the bank are important, but giving a loan of that risk without proper financial foresight would not be approved.

Robert and Teresa Norman have done substantial work on becoming owners and operators of their own business The Frameworkers. Despite the immense work on research and their background in the business field, they fell short of financial obligations and their business plan was bare. With the given situation and information, it appears in my opinion that the Normans should have franchised. To be competitive with the other store and to have assistance with start-up procedures, the pros would substantially out way the cons for their framing business.

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