Case On RELE Essay

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Case Study on RELE-Rouen: Language Immersion in Normandy Executive Summary Maxime is the co-founder of RELE-Rouen, a franchise language school under RELE at Rouen, France. The business took a downturn during the economic crisis from 2009 to 2011 and it has been losing money for three consecutive years. The franchise contract with RELE is due for renewal in two month. At this time, Maxime is presented with three options: 1. Renew franchise contract with RELE 2. Switch to OILT programs 3. Sell the building to EFEL This report first explored the constrains that Maxime faces in this decision making process. And then the three options are analyzed and compared in details by using a set of criteria, including financial return, franchise…show more content…
One of the possible reasons can be that RELE wanted to avoid new investment in selling to a new segment during crisis while their main focus was to maintain profitability of their own center. It is reasonable to assume that Maxime and Beatrice have a stronger bargaining power now given the fact that they have been approached by OILT and the economy will recover more in 2012. It is estimated that RELE-Rouen will take a profit of close to €91,000. From the calculation, it is clear to see that the profitability of RELE-Rouen is directly affected by the types of programs they can offer. If RELE put a stop to their weekend program, they will have another year of loss. Option 2 – Switch to OILT programs It is assumed that they will be offering both French and English classes during weekday and weekend with OILT. But without a clear understanding of the new targeted market, it is difficult to estimate a sales number. In this calculation, instead of looking at the profit based on an assumed number of sales, the profitability of the OILT programs is evaluated using the same level of sales as proposed in Scenario 3 with RELE. The comparison of the profitability can reveal the different franchise fee structure and its impact on profitability. It is also expected that certain amount of initial investments is required when switching to OILT. But at this stage, there is not sufficient information yet. The calculation simply assumed a similar cost structure as RELE, and did
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