BMGT1101 – Principles of Business

Scenario:

Your best friend inherited a large sum of money from a distant Aunt and wants to start his own small business. He has been interested in opening a franchised store and has narrowed his choices to two options and since you are taking business classes at CSCC, he has asked you to review his plans with recommendations on their feasibility.

Option One:

Operation: Hair salon that services both men, women, and children of all ages.
Industry: Similar to Sport Clips or Supercuts.
Location: 1000 Square feet with seating area and 8 open booths.
Hours of Operation: 10 hours per day from 10am – 8pm, 7 days a week.
Estimated Fixed and Variable Costs:
- Fixed Costs:
  - Yearly Building Lease: $60,000
  - Yearly Utilities Costs: $40,000
  - Yearly Marketing Expense Budgeted: $10,000
  - Owner Salary/Year: $50,000
- Variable Average Costs:
  - Products used per Customer: $0.50
  - Commission to Stylist: 50%
- Estimated Sales:
  - Average Sale per Customer: $25.00

Option Two:

Operation: Small Operation Fitness Center
Industry: Similar to an Anytime Fitness or Snap Fitness.
Location: Any strip mall in the cities of Pickerington, Ohio or Reynoldsburg, Ohio.
Hours of Operation: 16 hours per day from 6am – 10pm, 7 days a week.
Estimated Fixed and Variable Costs:
- Fixed Costs:
  - First Year Franchisee Investment: $50,000
  - Second Year Franchisee Investment: $25,000
  - One Time Equipment Fee: $100,000
  - Yearly Utilities Budget: $12,000
  - Yearly Building Lease: $24,000
  - Owner Salary/Year: $50,000
- Variable Average Costs:
  - Very little to Zero per customer
- Estimated Sales:
  - Monthly Membership: $50.00

Write an Executive Summary addressing the following points for your friend:

Conduct a break even analysis on BOTH options using only the costs provided. (Worth 20 Points)
- HINTS:
  - Be sure to break it down to how many customer sales are needed per HOUR or per MONTH, based on the operations of the business.
  - Do some research. How do the average sales compare to other competitors for example?
  - Attach a chart with your calculations. (Graphs are not necessary – Just show details of your math!)
- Discuss which option you believe is the better investment: (Worth 10 points)
  - Which plan seems more feasible?
  - Is he missing any possible expenses?
  - Other issues, suggestions, or changes you might explore?
- Pick one option and develop a Marketing Plan for the business explaining the following:
  - What are the four P’s involved for this venture? (Worth 4 Points – 1 points for each area)
  - What type of Market Research needs to be completed? (Worth 10 Points)
  - What type of Market Segmentation would be appropriate? (Worth 10 Points)
  - What type of Pricing Strategy would be appropriate? (Worth 10 Points)
  - What type of promotion would be appropriate? (Worth 10 Points)
    - HINT: Use terminology from Chapters 13 & 14.
  - Cite one outside resource that might help your argument that your friend should pursue one of the options. (Worth 6 points)
  - Your final recommendation – Do you think your friend should pursue the hair salon, fitness center, or neither? Why? (Worth 5 Points)
  - List any research sources in MLA format. (Worth 5 Points)
  - Spelling and Grammar Corrected! (Worth 10 Points)

PAPER FORMAT REQUIREMENTS and ORGANIZATION:

Page 1-2: Executive Summary – No longer than 2 pages.
- Double spaced
- 12 points Times New Roman, Arial or Tahoma Font
- In top right hand corner list:
  - Your Name
  - Date
  - BMGT1101
- Page 3 and thereafter: Charts with Break Even Analysis Calculations
  - Do not use a separate Excel document. Must be included in one Word Document after the Executive Summary.
- Last Page: Any sources listed in MLA Format