The write-up case: Mike Bellobuono
In my opinion Mike Bellobuono should not choose to franchise. If Mike accepts Fred Deluca’s offer and franchises there are some risks that Mike must consider. One of the risks is that Bagelz could end up being an extension of Fred Deluca’s empire and in the worst case scenario Mike could lose control of the whole operation.
All employees in Bagelz should have the same guidance and they should be aware of the company’s goals and values. It requires a huge control of the business! If Mike loses control of the business and something goes wrong, it will still be Mike’s responsibility. One bad story could damage the Bagelz reputation like ...view middle of the document...
In 1992 became Mike Bellobuono a full partner in the Connecticut-based bagel chain named Bagelz. The business team consists of four members in which Mike Bellobuono serves as the director of Bagelz’s operations. Two of the members, Wes Becher and Joe Amodio, are former owners of Bagelz and the last member is Mike’s college friend, Jamie Whalen. They received a partnership offer from Fred Deluca – one of the most successful franchisors in the world. Fred Deluca’s most significant start-up is Subway – a large sandwich franchise.
During the negotiating time Subway received a lot of negative publicity regarding the franchisees dissatisfaction and that makes it even harder for Mike to pursue the right decision.
The case implies benefits and risks of using franchising.
Mike and his team must decide whether to continue operating as a company-owned chain or to grow through franchising. If Bagelz continues to operate as a chain store it will constrain the company’s growth rate but franchising will still not be a solution free of difficulties.
Analysis of the problem and alternative courses of action::
Building up a quality brand is very difficult, and by franchising, Bagelz could loose their identity and core values. Franchising could lead to a less quality-oriented product and could end up harming the brand.
A Franchise requires strict rules and procedures of the employees, which would lead to less flexibility, less action on market trends and difficulties in maintaining a high standard of operations.
There are a lot of rules and legislations Bagelz need to take into consideration before they franchise, and must fill out the Uniform Franchise Offering Circular (UFOC) format to comply with the US Federal Trade Commission (FTC) regulations. It will take a lot of time and resources to make sure that the company complies with those rules. If the franchisee doesn’t comply to the company rules and procedures, that could really harm the company as well as the brand of the company.
On the other hand – if franchising was the last option...