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My Friend’s Bookstore Plan

The paper would talk about a business plan that is implemented by the students at their university campus. They have initiated a bookstore named, My Friend’s Bookstore, that sells the books to the students online after purchasing the used books from the students when semester ends. The books are sold at a cheap price as compared to that of new books sold at the stationary shop of university and other outside bookstores; nevertheless, it doesn’t mean that profits are low, in fact profit margin over used books is higher than on new books.

The paper would answer some of the questions regarding the expansion of this business in terms of opening a franchise and other factors that need to be considered. Let’s start off with it. Cash Position and Cash flow Since the business is flourishing and giving a tough competition to its competitors by gaining a strong market share along with the customer satisfaction; therefore, the expansion of this business does make sense. This is to be understood that whenever the business is expanded or any franchise or outlet is opened, it requires the businessman to invest a huge sum of money for it (Brigham & Houston, 2004).

Hence, the cash

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position of My Friend’s Bookstore would decline because the owner would be investing more money after which the net profits or net savings that he has, would decline. As far as the cash

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flows are concerned, they will decrease due to the increase in the cash

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flows from investing activities that would include the investment made for another store. This investment would include the purchasing cost or rental costs of the room in another university for the purpose of storing books, storing cash, and supplying books from there. Franchising

Before we analyze the franchising position of My Friends’ Bookstore, let’s first have an idea about what is franchising. Franchising is basically a business strategy that is used by the businesses in order to expand and gain more market share. Not only this, it seeks customers’ attention and satisfaction by developing a positive image in the minds of the customers about the products and providing services to them (franchising. com, 2010). Talking about My Friends’ Bookstore, yes it is a good candidate for franchising; it is because of several reasons that are explained below.

First, the business is booming as the sales and profits are increasing every year. The reason behind that is that students prefer to buy second hand books at a low price because after the semester, they would be of no use to them so it is not suitable for them to buy new books at such a high price. Secondly, since the books are booked online and delivered immediately, the customer satisfaction is very strong also because of the low prices at which this bookstore sells.

Third, the breakeven point was reached in the second month, and profits started coming in very soon so there is enough cash generated from the sales. Therefore, the business is in a position to expand and gain more market share and profits. Fourth, the market share and popularity of the My Friends’ Bookstore is strong in this current university, but not in other universities. Therefore, there is viable chance for the business to gain more popularity, market share, sales, and profits by opening a franchise or franchises in other universities too. Preparation for Franchising

Franchising is not an easy task to be undertaken that can take place within the blinking of an eye. In fact, there are several other factors that need to be understood by the owners and plan accordingly putting those factors into consideration. First of all, the owners must have a clear idea about the place, university, or campus that has the greatest potential and can help them reap maximum profits. This means that the owners must analyze the potential market where the students are more; their demands for low-priced books are high; and the university or where this happens.

This would require them to conduct market research through questionnaires, personal interviews, and focus groups (Zikmund, 2003). Secondly, the owners must have to prepare the pro forma balance sheet, income statement, and cash flow statement before they go and open a franchise in any other university or place. This would give the owner a clearer idea about how much to invest, where to invest, what would be the sales, operating expenses, net profit etc.

After analyzing the potential market or university, the permission from the university must be taken for the opening of a franchise there in order to help students purchase the books immediately at a lower price. And finally, new recruitment must be done of the students who would operate and run the franchise in other university. Difficulties Since the business is owned by three partners equally, there are some of the difficulties that they may encounter in sharing management duties equally.

First, they would soon be graduating from this university so they would have to hire other students who can take on the responsibility of managing and running the business, since these owners might be doing some other job after graduation at different places. Secondly, the coordination, thinking pattern, and way of thinking of these owners might not be match after some time. It is because any of them might not want it to expand or shrink, recruit more personnel because wages would increase, and any of them might withdraw his or her ownership.

And finally, after franchising, if any of them is assigned to sit and operate at the franchise that is not at their current university, it might result in conflicts among them that can harm the business. Processes The processes that might be put in place by the owners to clarify their duties as equal partners would include the listing of the tasks and activities that are and can be performed at their best by the respective partner. The partner may also put down the tasks and activities that he ‘wishes’ to perform even if he is not good at them.

Secondly, cost-benefit analysis would be done by taking both the situations of performing of the tasks by the partners when they are and are not good at them. Third, skill level, skill variety, job rotation, job enlargement, and job enrichment are certain aspects of managing the employee morale and tasks, which might be applied here continuously (Daft, 1997). Another process or rule that might be developed can be the voting for a particular decision and absorbing the penalty.

If two of them votes for a same decision it would be carried out; moreover, if that decision results in loss then the penalty would be absorbed by ‘only’ two of them who voted for that decision. References Franchising. (2010). What is Franchising. Retrieved on July 25, 2010. From http://www. franchising. com/articles/49/ Zikmund. W. G. (2003). Business Research Methods. Seventh edition. Singapore. Thomson Asia pte Ltd. Daft. R. L. (1997). Management. Fourth Edition. U. S. A. The Dryden Press Brigham. E. F & Houston. J. F. (2004). Fundamentals of Financial Management. Tenth edition. Thomson Southwestern. USA.

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