Case Study: Fundamentals of Franchising

FUNDAMENTALS OF CORPORATE FINANCE
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Institution Affiliation
True Story- J.P Morgan
John Pierpont Morgan was born on April 17th 1837. At a tender age, his father realized his leadership skills and groomed him for a career in business and arranged for his first job at a New York city banking firm where he begun his career as a clerk in a wall street bank. The partners at the firm were impressed by his remarkable business instincts and in 1860 he was sent to the south for a business meeting. It is in New Orleans that he stumbled upon his first business opportunity after he bought coffee and sold it in New Orleans market and made a profit. From that sale, he realized his ambitions were different from what the bank offered. In 1861, Pierpont left the bank and went into business where he worked with his father in investing European money into the American Industry. He became a one-man central bank and amassed wealth by creating partnerships with powerful people like Anthony Drexel and under his leadership a powerhouse in international finance was created. Among his investments was United Steel corporation and Northern Securities.
With his vast knowledge and power, Pierpont was consulted on many financial predicaments. In1879, he successfully sold 250,000 shares in the New York Central Railway for William H. Vanderbilt. He solved conflict between two of the largest railroads in America. Also, the government consulted him twice; during the great depression in 1893 and in 1895 when treasury was facing shortage of gold. Pierpont was considered a threat to the economy, which pushed the Federal government to form formal agencies to do what Morgan had done single-handedly to protect the national economy.
The untold story of franchising
Owning a business is everybody’s dream and one in every ten-business owner become their own boss by buying a franchise. Franchising is an arrangement between two parties, where the owner of the business (franchisor) sells the rights to their business logo, name, and model to third party retail outlets called franchisees.
Five Guys is a successful franchise opened in 1986. The restaurant had 745 stores by closing of 2010. It attracted the presence of President Obama in May 2009 and made it in Zagat fast food survey as America’s best burger. Proctor and Gamble is considered one of the world’s largest consumer companies that dived into franchise with two viable ideas, dry cleaning and car washing. It is one of the most successful franchises. Dunkin’ Donuts is an Asian founded franchise in America, with almost half of Dunkin donuts in Delaware owned by Indians and 80% in Illinois. The franchise is a success with the Second generation being run by American raised franchisees. On the other hand, Camp Bow Wow is a franchise created for people with a passion for dogs that experienced some set back by having a high number of sold but not opened franchise. And by end of 2010, 108 camps were opened, with 80 camps sold but not opened, 38 never successfully opened and seven opened a camp that failed. The CEO attributed the failure to economic downtime. Cold Stone creamery was not profitable to some franchisee. The ex- franchisees claimed they were unaware of hi...