The write-up case: Mike Bellobuono
Recommendation:
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.
Legal challenges could arise if the relationship between Frank Deluca and Mike results in conflict.
Irv, Bagelz’s chief bagel-maker, has two important qualities. He has 20 years experience in the business and he is an innovative person. To have an employee with such knowledge and skills is a huge benefit for the company and it will strength their competitiveness.
Mike appreciates the flexibility of Bagelz’s management. Furthermore Bagelz is quick to spot and react to new market trends and direction and maybe that is one of the reason that Bagelz has got so popular and established seven retail locations in only three years in Connecticut. If Bagelz decides to franchise, the flexibility will be more restricted. To get a new idea through and furthermore to have it accepted will be a longer process under franchising.
Mike took over interest in the business in 1991 in the form of a limited partnership. He has already proven that he has the knowledge and skills to run a business. Within a year Mike became full partner in the company.
After negotiating for six months they have still not decided whether they should franchise or not.