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 it did with the company Jack-in-the-box.
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He has large amounts of capital, resources and experience. Through franchising the business will grow more quickly and Bagelz will become competitive in geographical areas it is not currently present.
According to exhibit B, there is a lot of growing potential within the Food-service industry, and according to Exhibit C the average Bagelz store makes a profit of $83,616.00. These important statistics support my theory that Bagelz can survive through an owned chain.
If they don’t franchise Mike Bellobuono and his team risk being locked out by the competition but as mentioned in the case Mike decided to invest in Bagelz because he felt that Bagelz had several distinct competitive advantages. An external threat in the future could be the franchise company Bruegger’s Bagel Bakery. The company has units all over New-England and it is one of the 50 fastest growing U.S. restaurants (ranked number 22 on the list). According to exhibit A Bruegger’s Bagels has during 1992 and 1993 established 20 stores and the company has increased the average sales per unit by $75,000. Since Fred Deluca is interested in investing in Bagelz, the franchisor Mike must have proved that the layout and location of the store, the pricing policy, the quality of the goods or service and the overall management system are successful.
According to Bagelz’s statistic (exhibit C) the company is doing well financially. An opportunity to get the