can someone help me with my hw is a 300 word hw by respondinh ghe 3 question attach at the end of the reading

UNIVERSAL BUSINESS BROKERS Gary J. Castrogiovanni During the first week of May, George trom business and non-business prolessional Stokes was at a crossroads. A victim of service areas such as real estate, business corporate downsizing during the late 1990 s, brokerage, consulting, and dental services. Stokes had used his savings and severance pay The rapid growh of franchising stems to purchase a business broker franchise and from potential advantages that the franchisor estabish a local office - Universal Business (L.e, the parent firm) can ofler its franchisees Brokers of San Antonio, Texas (UBBSAT). By (L.e., outlet or franchise business owners). To now, that office had been operating for flive gain the competitive advantages, franchisees months, yet the business had not generated any typically pay the franchisor an initial franchise revenue whatsoever. As he began to run low on fee which averages around $25,000, royalties working capital budgeted to cover the startup on sales which average roughly 7-8\%, and often period, George was losing his patience. other charges such as an advertising fee. Concems of financial tailure and possible Compared to the owners of independent local bankruptcy were causing great anciety for businesses, the potential advantages gained by George and his wite, Helen. Together they franchisees include (a) established trade name, wondered what went wrong, and what they (b) proven business system, (c) diminished might have done differently. "Franchising is costs, (d) uptront training, and ( ) ongoing supposed to be a sale way to get into business," support. Together, these advantages are George thought to himself, "so why has this beleved to resull in significantly higher survival franchise been unsuccesstul so tar? And what rates for new franchises than for new can be done now to resolve the problems?" independent businesses. THE FRANCHISING ARENA THE UNIVERSAL BUSINESS BROKER NETWOAK During the past three decades, franchising has blossomed into a major form of business. In the United States, the small business By some estimates, over one-third of all retail sector has flourished in recent years. By some sales in the United States is through franchised estimates, roughly 70% of Americans droam of outlets, and approximately 20 percent of the owning their own businesses at some point, yet U.S. gross national product results from only 15% actually do attain business ownership. franchise operations. The importance of By the late 1990s, the number of small franchising is expanding beyond United States businesses in this country approached 20 borders with tranchising rapidly becoming the milion, with roughly 20% of them for sale at any fastest growing form of business in the global given time. In the past two decades, the smail economy. business sector was invigorated by such trends The essence of franchising is successtul as shifing immigration patterns and corporate replication of a business concept from one downsiaing. geographic market to others. In fact, franchising often is a key tactic for pursuing goals of is similar to its close cousin, real estate sales. ferritorial expansion and commensurate sales Like reallors, business brokers solicit and growth. Popularized by past successes in generate listings of businesses for sale. They product-oriented businesses such as then advertise those listings, facilitale convenience stores and tast-food restaurants. negotiations between seliers and buyers, and franchising has more recently spread to the make sure that al the legal and technical service sector. By the year 2000 , some suggest requirements are fulfiled so that deals are that most domestic franchising growth will come successtully closed. Athough prices and terms D1997, Gary d. Caspogiovarn. This case ie intended for dsansion pupeses onf. The asthor nethe condenes nor conderve any inlomation and the natres of af people, comperies and plsces have been dogused: "buyer" broker were the same individual.) On a buyer about the business sale process. In $10,000 commission. for oxamplo, the office contrast, some competilors would simply give would get $5,000 and the two brokers involved prospective buyers a list of the businesses that would got $2,500 each. they had for sale when they rret with them, without really taking time to talik to them. Other LOCAL. MARKET CONDITIONS competitors would not even have an initial meeting unless a buyer asikod for one, choosing With his franchise acouisition, George instead to simply fax a copy of all their listings Stokes was granted exclusive rights to open to anyone who incuired about businesses for Universal offices throughout the San Antonio sule. metropolitan area. Centered around one of the To establesh a presence in the local langest cities in the U.S., that local market market and to generate interest in particular consisted of nearly 125,000 small businesses. listings, classified newspaper advertising was During ary given year, an estimated 25,000 of essential-yot it was taitly expensive in that them would be for sale. area. One of two major metropolitan Yelow Page and other directories newspapers had recently gone out of business. indicated that there were roughly 50 business and the other had then used its monopoly brokerages operating in the local market. That position to boost the rates that it charged to number is misleading, however, for several advertisers. Consequently, the cost of city-wide reasons. First, two large firms and several midnewspoper advertising was above the national sized oporations dominated the market while the average. other brokerages were relatively minor players. This qave largcr brokerages cost Socond, there were many firms in related advantages on a per-listing basis because they businesses such as real estate and business could advertise several similar businesses in a consulting otfering business broker services in single ad. A broker with seven comvenience addition to the services of their primary store listings, for example, could reach businesses. Third, because there was no prospective buyers for all seven with only one licensing requirement for business brokers in the "comvenience store" ad, whereas a broker with state of Texas, just about anyone could start only one comvenience store listing would incur offering brokerage services at any time. And approximately the same costs. Additionally. indeed, numerous individuals engaped in broikerages with a variely of business types business broker activities on a temporary, part. fisted could reach buyer prospects without fime basis when opportunities arose for them to advertising each business or even each type. A do 50. buyer responding to a gift shop ad, for excample, Compotition was intense. Whereas might end up buying an antique store or novelty Universal commissions paralleled the 10% shop that had not been advertised. Brokerages national norm, some rivals in the local market not having as wide a variety of listings. charged as little as 5%, with only a $2,000 however, would not be able to direct buyers to $5,000 minimum. Aside from such differonces such unadvertised atrernatives. in commissions, listing agroomont terms and broker sales practices varied considerably as THE FRANCHISE STARTUP well. Unike Universal, nome competitors followed a "shared risk" arrangement whereby business selers would place their own business for sale" ads or pay uplront advertising lees to the brokers. That way, the broker would not lose money on a listing if the business could not be sold. Under the Universal system, prospective buyers were required to meet face-lo-face with a broker belore they would be given business information beyond that which could be found in newspaper ads. At that meeting, the broker would attempt to ostablish a rapport with the buyer and gain an understanding of hisher needs and interests while explaining the importance of confidentiality and educating the children were away at college, and since they were used to relocating during all of those years size. Additional information about George and in the military, George and Helen decided that Helen, as well as details on the other key they would not restrict their search for the right participants in the UBBSAT startup, is provided in Exhibit 1. business to the city of Waco, Texas where they had been living. During a month-long trip to That August, George participated in a twoFlorida, they talked to several business brokers week training program for new franchisees at and checked out a number of businesses that Universal's Aoanoke office. During the first two were for sale. George and Holen also days. Georpe learned the basics of business opportunities. Eventually, they docided to buy a gave periodically to new brokers. Then over the investigated various franchise acquisition brokering in a seminar that Mike Thompson Universal franchise, and they chose the San next two days, George learned the Antonio territory because of its large market fundamentals of running a business broker oftice and Universal franchise. The rest of the The biggest disappointment in January. During the next three days, the buryer visited the however, came when the office's first deal fell shops where employees told him about various through. Tommy Gates had listed an auto equipment problems. Since he had not been repair business on a nonexclusive basis, meaning that the owner could sell it himself, and since he did not know arything about the copy UBBSAT would only receive a commission if the shop business, the remarks about equipmont business was sold to one of its buyers. Scott problems scared him off. He pulled out of the Phillps located a buyer, and excitement was deal, retusing to accept the seller's counterofler high as Tommy and Scott mariged the negotiations between the buyer and seller. On on an unlamillar business. the last Friday in January, the buyer and seller came to terms, and a contract was signed. By seller to try to salvage the deal, but there was Monday, however, the seller had recoived a an omobonal clash between them. Bucking better offer from someone else, and withdrew under the stress of his. IPS problems, the seller from the deal that had been brokered by was excitable, ansious, and confused. He was UBBSAT. George felt that the selier owed an emotional wreck, while George was UBBSAT a commission because the brokerage somewhat impatient and hot-tempered by had done its part, and an agreement had indeed nature. After a briet shouting match, George been reached with a buyer brought to that seller tore up the listing agreement with the seller, by UBBSAT. Untortunately. Tornmy had feeling that it was impossible for them to work. neglected to get a form signed by the seller together any more. veritying that UBBSAT had fulfiliod its obligations under the listing agreement. George Disillusionment Sets In considered suing for the commission, but his lawyor advised him against it, stating that UBBSAT's case was woak bocause that one form had not been signed. In February, a second deal tell through. The owner of three photocopy shops met with George on a Thursday to list his businesses for sale. It seems that he had run into problems with the internal Revenue Service (IRS) for reasons unrelated to the copy shops, but now he had to sell the shops in order to pary back taves. The three shops were listed to be sold separately or together, and the total list price was $1.2 million. The very next morning. the seller called George and told him to drop the price to $750,000, and to do everything possible to make a quick sale because his atlorneys had advised him that the IRS was threatening to seize his assets if the tax matter was not seltled scon Glenn Digman contacted a buyer who had the money to make a quick purchase of that size, but who had been looking for a The first of March is coming up construction equipment business and really had quickly, and it we don't at least no interest in copy shops. Thinking that he harve a closing scheduled by could quickly sell the copy shops for a then, Ifm going to have to make significant profit if he could buy them at a low a big decision. Universal told price, the buyer offered $400,000 on Saturday the that I could expect to start morning. In that offer, hall of the price was to roceiving some commission be paid in cash, and the other hall was to be income by the end of the financed by the seller. On Saturday aftemoon, second month. Well, January the seller came back with a counterofler having was the first full month, and an even lower price. The seller was willing to February is the second. If accept $350,000 if he could got it all in cash. something good doesn't happen collateral might be necessary. receive any commissions for at least several and that they're qualified to run the business. So from now on. weeks. From this recruiting eflort, George don' show a buyer detalls on ended up hiring only one new broker-and he any listing without first getting quit after just one week when he recelved an offer for a salaried job. (a) written consent for us to do a crodit check, (b) a personal In mid-April, another deal fell through that financial statement, and (c) a caused George to think again about the kinds of resume from the buyer. listings that the office was getting. A small snack shop had been listed at a $32,000 selling Broker Fick Price questioned the value of price, and the listing called for Universal's standard minimum commission of $10,000. Although the business had been proftable for nine years, it had gotten run down over the past year because the woman who owned it had to spend considerable time caring for her sick mother. To ease her burden, she trimmed the snack shop's menu, laid oft all of her help, and decreased the shop's scheduled hours of operation. Even with the roduced schedule, the shop's hours were erratic because when personal problems demanded her attention, the Buyers have resumes - if owner would open the shop lnte or close it early. they're legitimate buyers and Consequently, the shop's operating income was not just "window shoppers." barely covering its overhead by the time the owner listed the business with UBBSAT. With When I went to Florida to check out businesses there, I brought no net income, the owner was working the shop a stack of resumes with me. for nothing. She kept it running, howover. We need to get resumes to bocause she was locked into a long-term lease keep on file so that we can on the facilities and would thus lose money if she closed it down. show sellers that we do things to qualfy potential buyers. One of UBBSAT's buyers offered the woman $20,000 for the snack shop $10,000 (Note: Universal marketing brochures explicitly informed cash up front, with the other $10,000 plus sellers that buyers get screened interest to be paid over five years. Broker to determine their financial Tommy Gates who had listed the business capability to buy a business, but nearly convinced her to accept the offer. He not their ability to run a pointed out that, though she would recelve nothing up front since the $10,000 cash would business once they buy it.) Just cover the UBBSAT commission, she would be getting out of a bad situation clean, with no debt. And instead of working the business for nothing. she would receive a small monthly payment from the buyer each month. Contrary to Universal's recommended practice, however. Tommy had never discussed the business sale with the real decision-maker - the woman's husband. When she took the otfer home to him that evening, he llatly tumed it down. The wanted ads for additional brokers. The husband insisted that she counter with a ponse to the ads was weak, and the quality the applicants who did respond frustrated orge. In job interviews, Georgo screened out ist applicants because he felt that they were qualified. Most of the others lost interest en George told them that the pay was 100% tmission, and that they should not expect to Uhwere business droders CASE Unveral Bushess drokers cAsE page H BACK TO THE FUTURE revenue since the office had opened. He carefully assessed his situation. If George During mid-April, broker Scott Phillips suddenly quit UBBSAT to take another job. He closed down, he would absorb all of the previous business losses, and he would incur explnined that he could no longer aliord to go additional costs to get out of the two-and-a-half without any income. That same week, Pick years remaining on his office leaso. If he kept Price told George that ho would be leaving at operating, howover, the business might soon the end of the month. The other two brokers. become prolitable-or his losses might grow very frustrated since they too had not received oven more. Geore any commissions. Thus, during the first week of May, The prossures and frustrations were George decided to cut back operations and taking their toli on George and Helen as well. Exhbit 3 shows UBBSAT's cash flows through refocus his efforts. Although he would replace the end of April, including all startup the two romaining brokers if they decided to leave, he would not hire any additional ones. expenditures plus cash flows for the December Instead, George would spend most of his time "training and practice" month. By the end of working as a broker himselt, delogating many of April, Goorge and Helen had spent nearly $60,000 on the UBBSAT venture, and the his administrative responsibilitios to Holen. In his broker role, he would work closely with the business was continuling to drain their savings at two remaining brokers to make sure that all a rate of $5,000 per month. Since they were detalls were covered and no more deals fell living off of their savings as well, their financial through. Together, George and the two brokers situation was deteriorating even more rapidly. Those financial pressures wore causiny would devolop a sultable business system and competitive strategy. Nevertheless, George problems in their personal relationship too, with kept thinking about how his hopes and dreams George "blowing off steam' by verbally lashing seemed to have been shattered. He repeatedly out at his wile on several occasions. asked himselt, "What went wrong? along with George still had hope that things would change even though there had been no sales or the related question. What should be done now to make things right? APPENDIX A rates for new franchises than for new THE FRANCHISING ARENA independent businesses. The rapid growth of franchising stems Established Trade Name from potential advantages that the franchisor (L.e., the parent firm) can ofler its tranchisees With the acquisition of a franchiso, a (i.e, outlet or franchise business owners). To franchisee usually obtains the right to operate gain the competive advantages, Iranchisees under an established trade name which often typleally pay the franchisor an initial franchise glves the franchised operation competive fee which averages around $25,000, royalties on sales which average roughly 787, and often locale. The risk that a customer will not be other charges such as an advertising fee. satisfied by the products and services of a Compared to the owners of independent local business can be considered a cost that a businesses, the potential advantages gained by customer bears when patronizing a business. franchisees include (a) establishod trade name. Because an established trade name roduces (b) proven business system, (c) diminished this risk and associated cost, a customer's costs, (d) upfront training, and (e) ongoing costbenefit tradeolf is more favorable. support. Together, these advantages are Customers are thus more likely to patronize bolieved to result in significantly higher survival businesses with established trade names, and therofore such businesses have advantages over competitors without established names. Untversal Bunines Brokers CASE pare 12 Thus franchise operating costs might Proven Business System diminish if economies are gained at the network level and the resulling cost-savings are then When starting a new business, there is passed down to the franchises. The impact on a always some uncertainty as to whether the franchise's total costs, however, may be business concept in general, and the products insignificant because of the sales royalties and and services in particular, will appeal to other franchising-related costs incurred. In customers. Even if a business concept itsell is other words, the cost-saving benefits enjoyed by appealing, the corresponding operating system members of a franchise network are sometimes may need refinement belore the concept can be offset by the costs of network membership itsolf. implemented successfully. And no matter how good a business plan looiks on paper, prospects Upfront Training are somewhat speculative until the business opens its doors and customers start spending Oiten prospective business owners have their money. all of the qualifications needed to succeed Through franchising, a prospective business owner may reduce this uncertainty and except for specific industry knowlodge and the corresponding risk of business falure. The experience. A person with a strong business background, for example, may desire to own a fact that existing units in the franchise network convenience store yot know nothing about the are operating successtully is evidence that the convenience store business. Without industry business concept can work and that the specific knowledge, experienced competitors corresponding operating system has been would have a competitive advantage, and she adequately refined. It there is more then one would thus be at a disadvantage. existing unit, there is evidence that the business concept and system can be replicated Franchisors typicaly resolve this problem by providing uplront training to new franchisees. successfully in different local markets. When During the training period, franchisees leam purchasing a franchise, therefore, a prospective about the business in general and the business owner has groater assuranoe that the franchisor's business system in particular. They business concept and system will work in hisher are trained to conduct the day-10-day operations local market than it he or she affempted to of the business, and to carry out the necessary implement a completely new system in an administrative tasks. With this training, new independent business startup. franchisees have less of a disadvantage relative to their experienced competitors. In fact, they Diminished Costs may oven gain an advantage if local competitors are relatively unsophisticated and In some cases franchisees benefit from the franchisee training covers some relatively cost advantages over their independent sophisticated business practices. business compethors because of their affiliation whth the Iranchise network. When certain Ongoing Support activities are centralized at the notwork level by the franchisor, various economies of scale and When problems arise, franchisees can scope can be gained. Because of enhanced turn to the franchisor (or to other franchisees) purchasing power, for examplo, a franchisor for ideas on how to deal with them. It the negotiating for, say, 100 franchises might be problem has previously occurred somewhere able to obtain lower prices on merchandise or else in the franchise network, then the insights supplies than those which would be charged to a gained from that experience can be shared. single independent business. When various When business conditions change so that business operations are conducted at thecompletely new problems arise, then the network level, it can be economical to purchase franchisor and tranchisees can "put their heads cost-saving equipment. When television, radio, together' to come up with solutions. In this or other advertising costs can be shared across sense, franchisees have avallable to them a multiple franchises in a local, regional, or national market, the average cost per franchise group of consultants with expertise on the type of business, the market, and the particular is less than that which a single, independent business concept. In contrast, independent business would have to pay for the same type of business owners have no such group to which advertising. they can fum, though in some cases they may be able to develop one for themselves by Universal Business Brokers Position Outline At Due Apr 10 by 5:30pm Points 15 Submitting a text entry box or a file upload File Types doc and docx Available until Apr 10 at 6:30pm After reading the \$. discuss the following in a total of 250-300 words. 1. What is the key issue facing George at the end of the case? How did that issue arise? 2. Consider the problems facing George at the end of the case. To what extent were they George's fault? To what extent were they Universal's fault? 3. What should George do to address the problems at the end of the case. Why