Chocolate Remedies Case Study Solution
Introduction:
Anita and Mark an African American couple are running Chocolate Remedies for almost five years; the couple faces tremendous difficulties in the early days of the business which mainly due to the inappropriate location and harsh weather conditions. The first outlet of Chocolate Remedies was opened in 2011, the initial years of the business was less profitable. The original outlet of the café was opened up in the area where the foot traffic is high but due to the extreme cold season, the business generates heavy losses, and the operational performance was also not up to the mark. However, the couple immediately relocates the café to a new expensive location which plays an important role in theexceptional financial performance of the business. The couple also considering to open a franchise of well-known brand but the costs of the franchise were very high which pushes the couple to make their brand. Chocolate Remedies distributes the revenue stream into three different channels, retail network, whole sale network, and Events network. However, the main focus of the couple is on the retail channel because of extremely positive future aspects.
Major Issues which are facing Mark and Anita:
It can be said that there were many issues in the business plan and management of Chocolate remedies which led to the failure of the organization in the initial years. Firstly, the chocolate industry was seasonal, and the couple fails to recognize this fact which results in the performance below the expectation. Due to the heavy reliance on the foot traffic, the business of Mark and Anita suffers drastically, the foot traffic in the extreme winter is minimal and many people want to avoid unnecessary traveling in the winter months. Furthermore, the nature of the product of Mark and Anita also makes the products unattractive to the customers in the winter season.
Due to the extreme cold weather, the business suffers, and in the summers the business also suffers because many people of the region travel to other parts of the U.S. As the foot traffic is also very lower in the summer seasons, this results in the underperformance in the summer season as well.
The place which is selected for the shop is also played a major role in the failure of the business, the couple has anticipated the location which will attract many people, but the actual results are against their anticipation. Had the shop was located somewhere else, the results might be very different. The strategies of the couple are also played an anchor role in the failure of the business; it can be said that chocolate products have minimal demands in the winter season. If the couple offers some stuff which is consumed heavily in the winter season, the results might be many positive. Usually, the soups and coffee are consumed more in the winter season, different kinds of soups and coffee products might results in the better results for the couple.
Should Mark and Anita purchase a franchise?
It can be said that the purchase of franchise might be more beneficial for the couple, there might be many benefits for the couple if they entered into the franchise contract with Schakolad Chocolate Factory. As the Schakolad have a relatively big brand as compare to the new brand of Mark and Anita which would have been increasing the sales. Typically, the franchiserhas high brand recognition in the market, and the brand of franchiseris well established in the normal practice which might reduce the risks of franchisees to some extent.
Advantages of Franchise:
On the other hand, the top management of Schakolad might assist the couple greatly in designing the strategies for the franchise which might increase the profitability of the franchise. It is clearly mentioned in the case study scenario that the franchisor will offer substantial training to the franchisee regarding the location of the franchise and they also provide the franchisee with the contact of vendors which might reduce the costs as well. In addition to this, the franchiser will also compensate for the losses which the franchise has generated due to the unfavorable trading condition. If the couple had entered into the franchise contract, the losses which they have to face in the winter season might be compensated by the franchiser. However, Schakhold would not pay all the losses, but it can forgo the license fee in the month in which the demands for the products is low, this benefit seems to be little, but in conjunction with other benefits of afranchise, this benefit might be very attractive for the couple.
Chocolate Remedies Harvard Case Solution & Analysis
Disadvantages of Franchise:
Despite the benefits, there are many drawbacks of the franchisees which mainly includes high costs, reputational issues, and inflexibility in the franchise arrangement. Usually, there are many costs which pertain only with the franchise arraignment; the couple must have to pay franchisor royalty fee, management fee and license fee which can make the franchise arrangement less profitable. Furthermore, the reputation of the franchisee might be damage because of the other franchisees, if the quality of one franchise deteriorates it also affects the business of other franchises because of the common name attached to all the franchises. In addition to this, Mark and Anita can only offer products which are described by the franchis or; they cannot offer their products because of several restrictions imposed by the franchisor. The greater inflexibility makes this arraignment unattractive for Mark and Anita...................
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