can someone do case synopsis and problem statement of this case study?

The Body Shop Canada "You're not the kind of franchise applicant we usually get," said Richard Peddie, company lawyer for the Body Shop Canada, as he opened his meeting with potential franchisee Paul Kingston, I suppose we'll find out whether that's an advantage or disadvantage," replied Mr. Kingston Mr. Peddie's comment had taken Mr. Kingston by Murprise, and though he was pleased with his response, the comment bad produced a sinking feeling in the pit of his stomach Paul Kingston Me. Kinston, uge 36, was in his final semester of the M.B.A. program at the Ivey School of Business, Western Universaly in london, Ontario. Prior to starting the MBA, his employment backstround included a stint as a high school business education teacher and seven years of retail management. He had managed independent stores and also had managed for one of Canada's national department store chains He had investigated a number of job posibilities, but had received so offers and was still unclear about the direction he wished to follow. His strengths appeared to lie in the marketing and human resources son. He had little interest in joining a major retail company: "I've been on that treadmill before," he said. He felt that whatever his eventual career chouce would be, he wanted to do something that will make some differences to me and to others. The idea of working for himself was uppealing "At least I'd be sweating to put mooey in my own pocket." While peruning the job advertisements on troeden, he came acrom one placed by the Body Shop Canada The notice stated that the company had a number of operating stores available for franchise, including locations in London, Ontario and Sarnia, a smaller city about 100lum away. Mr. Kingston was aware of the company's enormous international success and was surprised to discover that franchises might be available. Furthermore, he had never known the Body Shop Canada to advertise for franchisees The Body Shop The Body Shop was the brainchild of Anita Roddick a forward thinking Briton with a strong commitment to an ideal. The company offered conventional consumer products with a twintit cold only naturally based products and disdained its competitons exaggerated product claim. In fact, it did no advertising at all. The company positioned itself as a champion of social responsibility and activism. It promoted bolistic health, en ironmental responsibility, charitable acts. Third World development, women's issues and other causes. It generated considerable publicity for itself by these means It generated considerable publicity for itself by these means In the 34 years since its founding, one little store had grown into a chain of over 90 stores located in 37 countries worldwide. la Canada there were 72 shops 56 franchised and 16 I Corporate owned The Body Shop Canada stores, uveraging about 100 square meters (1100 square foot), were in prime retail locations, either on main shopping arteries or in mall. Stores sold only proprietary products, always at "list prices." There were no sales and there was no discounting. The line consisted of nearly 400 items that could be purchased at every store or ordered at stores and delivered through the mail. All stores were of similar appearance, they were decorated in identical colour schemes, with displays, fixtures, and even window displays standardized from store to store across the country. Customers tended to be loyal, even fanatical, in their support of the company. Once someone became a customer, he or she would probably not purchase a competitor's product again. The Initial Contact Mt Kingston was well aware of the soccer record of franchise Operations, and of this one in particular. In fact, he had just attended a conference where a major national retailer had spoken of the Body Shop Canada in glowing terms. However, he had never give way to consideration to purchasing a franchise. He thought that for someone with imagination and good business sense, a franchise would be far too restrictive. However, with a "What have I got to low mentality, he emailed the address listed in the advertisement and asked for more information. Within a week he received a reply, on recycled paper Franchise Information The package that sved contained 35 pages of information about the company and its operations. The presentation seemed almost amateur, with much of the material poorly scanned Nonetheless, Mt. Paul took a night off from soalyzing cues to study the documents. The material consisted on Company background Environmental issues foformation on the franchise streement Financial data popes 15 pages 3 pages 6 pages List of current franchises 3 pages The synopsis of the franchise agreement outlined the standard elements of a franchise agreement and included the following additional facts The Body Shop Canada would use the premises and sublet it to the franchise; The franchisee must operate the business and be in the store at least 40 hours per week, The franchisee must purchase the complete product line from the franchisor (The Body Shop) The franchisee must retain effective ownership and control; Any sale of the franchise to a new franchisee must be approved by the franchisor, The firschner may terminate the franchise i the franchisee fails to operate within the law or fails to carry on business as prescribed by the franchise agreement and No royalty fees would be paid except a monthly administration fee of $200, and a promotion and publicity fee of 2 percent of gross sales Cost to start a new franchise were estimated as Franchise fee $15.000 Fixtures 100.000 120,000 Design Fee 5.000 Opening inventory 20,000-110,000 Legal Fees 5,000 First and last month's runt 5.000-6.000 Training accommodation costs 6.5.000 6000 Publicsta Site selection Public relations 0-3,000 Management aptitude test 900 Total $ 226,900 $257.900 Potential amounted as program is Tocadas. At the rates they must pas cher hom wwwted This fervuld do the the Boy Songs *** The Hody Shop and places. Althodische Jest wiedy to choose betoppabowocheretid Mr Kingston estimated that he could come up with a maximum of $125,000 himsed through a combination of savings and a personal line of credit from his back. He would have to finance the inventory and part of the fixtures through a bunk loan. Given the excellent track record of the Body Shop Canada and his experience and qualification, Mr. Kingston believed he would have no trouble bonowing the necessary capital from a bank Using the company's sales and operating projections, be created pro forma financial statements for the first two years of a single new franchise Exhibe I shows the statements.. Mt. Kingston thought that the members looked promising and that it was worth devoting time, ves at the expense of preparing cases, to find out more about the Body Shop Canada Mr. Kingston's Plan If buying a franchise for the Body Shop made sense, then why not try to buy tvo? Me Kingston's edocation and personality combined to make him ambitious. He had examined the list of franchisees and realized that 13 of them had multiple ones One couple owned five Mr. Kingston reasoned that there would be economies of scale for a multi-store operation because some of the start-up costs and operating expenses would be higher than for at single store operation would he have enough capital? Would be able to secure competent management to opent on a broader scale? Both problems seemed resolved after discussions with two close friends He had to friends, both wooden who were trendously estate about the posibility of becoming involved with the Body Shop Both and they would get their current jobs at a moment's potice and would want to purchase a minority equity position, probably 10 to 15 percent of the store they managed around $20,000). Mr. Kingston was certain the two women would be ideal managers and business parties. Their equity holdings would provide bum with additional capital od them with a strong incive to work hard. I worse came to worst, he would be in a strong position to buy them out in the force Mr. Kingston thought that the best organizational structure would be to create a bolding company with him as a sole owner, and for the company to enter into separate partnership agreements with each of the women. Each partnership would hold one store. He revised his pro forma statements to account for two new franchises (see Exhibit 2) I Mr Kingston was thinlod with the projected results. We believed that he had used a conservative set of assumptions and that even under these conditions be could expect to climinate all debt within three years. Even if there were nero sales growth after the second year be could expect after-tax amnings in the area of 5150,000. That might be completed the formal application for a franchise and began to dream... The Option of Buying Existing Franchises in the course of his investigations, Mr. Kingston had been able to discover more about the two existing locations available for franchise. The store located in Sarn, Ontario was already a franchise operation. The current owner had been experiencing personal problems and was keen to sell the business. The store was small, caly 40 square meters (approx. 450 square foot), bat was favorably located in the best mall in the Surna. Many people described the location as the only good retail location in the city. A friend who lived in Samia expressed some concern that the store had not always been well masagod, sometimes appearing to be poorly staffed and inadequately stocked The London store was corporately owned and was being offered as part of a plan by the parent company to divest itself of all corporate stores (except for some in Vancouver and Toronto). It was one of three outlets in London and was located in one of the newest malls in an area surrounded by up-scale housing and extensive development. A major university (Western) was less than five km away and plans were under way to expand the mall by some 70 stores within two years. The Body Shop had recently been moved to a better location within the mall and almost doubled in size to sbout 80 square meters Mr. Kingston felt certain that sales in these stores would well above the levels projected for start-up operations, but had no way to determinat by how much. The locations really interested him. He owned a house in London and he would be happy to stay. One of his two potential partners alio lived there, and the other had recently moved to Satnia, near the United States border: The Body Shop's Chonden operation had the right to expand into the virgin territory of several United States Border States, including the one nearest to Samia Growth prospects seemed unlimited tappeared to be a perfect fit. The only question was how much of a premium the on-going operations would command, About 10 days after completing the franchise application, Mr. Kingston received a phone call from the Body Sloop inviting him to go to Toronto for a meeting with Richard Pedeke. Mr. Kingston fell he had already passed a major handle because the tranchise application had required extensive personal and financial information. If the company wanted him, so must be an acceptable candidate On a beautiful spring day he pulled into the parking lot of the Body Shop Canada head office, full of excitement at the prospect of what was about to unfold meet The Meeting M. Peddie described the typical Body Shop Canada franchise "female 35 to 45, married with school age adolescent children, limited formal ducation, and crazy about the Body Stop. Anyway, none of our franchisees have MBAY Mt Kingston realed he had a fight on his hands. It seems to me you have a view of what MBA's are like that they're all fanatical, hard-nosed, money-hungry tyrants," said Mr. Kingston "I don't think that's fair, any more than it would be fair to say that all lawyers are alike." This comment seemed to break some of the ice. But if the relationship between the two teen had begun to thaw, the discussion that ensued and the information that surfaced over the next hour did nothing to cheer Mr Kingston. His plus bad obviously been a pipe dream Mt. Peddie was adiant on a number of points. The Body Shop Canada would not grant multiple franchises to a new franchisee, the company first wanted franchisees to demonstrate their potential to handle more than one outlet. The franchisee must personally work in the store full-time. Although many Body Shop franchises were held in partnerships, the company was cautious it was particularly wary of non-operating financial partners. If the company did acquiesce, it would want absolute discretion over the content of the agreement "We want operators, not investors Mt. Kingston peunted for information about the Sarnia and Lodoutores. The news on these front was no better. Goodwill charges would be about $125,000 for Samia and S250,000 for Londoal Texpected sales for the two stores for 2015 were $600,000 and $750,000 spectively. Apparently, volume at the London had increased 6 percent since it relocation. Sarnis sales were up 33 percent over the previous year. The meeting ended on amicable note with Mr. Kingston promising of Mr. Pedie know within two weeks whether he was interested in proceeding If the answer wereyes," M. Peddie would consider whether to place Mr. Kingston a shoes Instof candidates. The short bit would be subjected to a 12-hour battery of interviews and the placed in a store for a week. After the trial both parties would decide whether to commencerning The Body Shop Canada would not award the franchise until after training had been completed However, even at this stage, the franchise could still see the potential cusce and leave him or her without recourse. The Decision When Me: Kingston reamed home from Toronto his immediate act watoto his computer to create new profon statements, but before dog so be bought it would be helpful to note down his options and his concerns The Decision When Mr. Kingston returned home from l'oronto his immediate instinct was to rush to his computer to create new pro forma statements, but before doing so he thought it would be helpful to note down his options and his concerne Mr. Kingon knew he had a touch problem on his hands, Ile docidod to produce pro forma statements along the lines of his first projections. He had fly accurate percentage con data that Me Peddio had provided for the existing stones. He wanted to compare performance for each of the existing operations to a start-up, suming each was operated as a single entity by a sole proprietor. Exhibit contains the statements Mr. Kingston bad some important questions to consider beyond the financial analysis Could he see himself in den 80-square metre store for the next 10 years! Could Mr. Peddie be persuaded to compromise! After all, how many people could let his ideal profile of someone with the right balance of spiritual devotion to the Body Shop's philosophy, bastes acumen, and access to the required capital of and 5250.000 Also, what was be able to afford? Was there anything Mr. Kingston bad mood in his analys? Somehow this was going to be a lot more difficult than doing a Chery. This was his life! Notes: Tory of the Body She Madchodom, 1991) The Body Shop Canada "You're not the kind of franchise applicant we usually get," said Richard Peddie, company lawyer for the Body Shop Canada, as he opened his meeting with potential franchisee Paul Kingston, I suppose we'll find out whether that's an advantage or disadvantage," replied Mr. Kingston Mr. Peddie's comment had taken Mr. Kingston by Murprise, and though he was pleased with his response, the comment bad produced a sinking feeling in the pit of his stomach Paul Kingston Me. Kinston, uge 36, was in his final semester of the M.B.A. program at the Ivey School of Business, Western Universaly in london, Ontario. Prior to starting the MBA, his employment backstround included a stint as a high school business education teacher and seven years of retail management. He had managed independent stores and also had managed for one of Canada's national department store chains He had investigated a number of job posibilities, but had received so offers and was still unclear about the direction he wished to follow. His strengths appeared to lie in the marketing and human resources son. He had little interest in joining a major retail company: "I've been on that treadmill before," he said. He felt that whatever his eventual career chouce would be, he wanted to do something that will make some differences to me and to others. The idea of working for himself was uppealing "At least I'd be sweating to put mooey in my own pocket." While peruning the job advertisements on troeden, he came acrom one placed by the Body Shop Canada The notice stated that the company had a number of operating stores available for franchise, including locations in London, Ontario and Sarnia, a smaller city about 100lum away. Mr. Kingston was aware of the company's enormous international success and was surprised to discover that franchises might be available. Furthermore, he had never known the Body Shop Canada to advertise for franchisees The Body Shop The Body Shop was the brainchild of Anita Roddick a forward thinking Briton with a strong commitment to an ideal. The company offered conventional consumer products with a twintit cold only naturally based products and disdained its competitons exaggerated product claim. In fact, it did no advertising at all. The company positioned itself as a champion of social responsibility and activism. It promoted bolistic health, en ironmental responsibility, charitable acts. Third World development, women's issues and other causes. It generated considerable publicity for itself by these means It generated considerable publicity for itself by these means In the 34 years since its founding, one little store had grown into a chain of over 90 stores located in 37 countries worldwide. la Canada there were 72 shops 56 franchised and 16 I Corporate owned The Body Shop Canada stores, uveraging about 100 square meters (1100 square foot), were in prime retail locations, either on main shopping arteries or in mall. Stores sold only proprietary products, always at "list prices." There were no sales and there was no discounting. The line consisted of nearly 400 items that could be purchased at every store or ordered at stores and delivered through the mail. All stores were of similar appearance, they were decorated in identical colour schemes, with displays, fixtures, and even window displays standardized from store to store across the country. Customers tended to be loyal, even fanatical, in their support of the company. Once someone became a customer, he or she would probably not purchase a competitor's product again. The Initial Contact Mt Kingston was well aware of the soccer record of franchise Operations, and of this one in particular. In fact, he had just attended a conference where a major national retailer had spoken of the Body Shop Canada in glowing terms. However, he had never give way to consideration to purchasing a franchise. He thought that for someone with imagination and good business sense, a franchise would be far too restrictive. However, with a "What have I got to low mentality, he emailed the address listed in the advertisement and asked for more information. Within a week he received a reply, on recycled paper Franchise Information The package that sved contained 35 pages of information about the company and its operations. The presentation seemed almost amateur, with much of the material poorly scanned Nonetheless, Mt. Paul took a night off from soalyzing cues to study the documents. The material consisted on Company background Environmental issues foformation on the franchise streement Financial data popes 15 pages 3 pages 6 pages List of current franchises 3 pages The synopsis of the franchise agreement outlined the standard elements of a franchise agreement and included the following additional facts The Body Shop Canada would use the premises and sublet it to the franchise; The franchisee must operate the business and be in the store at least 40 hours per week, The franchisee must purchase the complete product line from the franchisor (The Body Shop) The franchisee must retain effective ownership and control; Any sale of the franchise to a new franchisee must be approved by the franchisor, The firschner may terminate the franchise i the franchisee fails to operate within the law or fails to carry on business as prescribed by the franchise agreement and No royalty fees would be paid except a monthly administration fee of $200, and a promotion and publicity fee of 2 percent of gross sales Cost to start a new franchise were estimated as Franchise fee $15.000 Fixtures 100.000 120,000 Design Fee 5.000 Opening inventory 20,000-110,000 Legal Fees 5,000 First and last month's runt 5.000-6.000 Training accommodation costs 6.5.000 6000 Publicsta Site selection Public relations 0-3,000 Management aptitude test 900 Total $ 226,900 $257.900 Potential amounted as program is Tocadas. At the rates they must pas cher hom wwwted This fervuld do the the Boy Songs *** The Hody Shop and places. Althodische Jest wiedy to choose betoppabowocheretid Mr Kingston estimated that he could come up with a maximum of $125,000 himsed through a combination of savings and a personal line of credit from his back. He would have to finance the inventory and part of the fixtures through a bunk loan. Given the excellent track record of the Body Shop Canada and his experience and qualification, Mr. Kingston believed he would have no trouble bonowing the necessary capital from a bank Using the company's sales and operating projections, be created pro forma financial statements for the first two years of a single new franchise Exhibe I shows the statements.. Mt. Kingston thought that the members looked promising and that it was worth devoting time, ves at the expense of preparing cases, to find out more about the Body Shop Canada Mr. Kingston's Plan If buying a franchise for the Body Shop made sense, then why not try to buy tvo? Me Kingston's edocation and personality combined to make him ambitious. He had examined the list of franchisees and realized that 13 of them had multiple ones One couple owned five Mr. Kingston reasoned that there would be economies of scale for a multi-store operation because some of the start-up costs and operating expenses would be higher than for at single store operation would he have enough capital? Would be able to secure competent management to opent on a broader scale? Both problems seemed resolved after discussions with two close friends He had to friends, both wooden who were trendously estate about the posibility of becoming involved with the Body Shop Both and they would get their current jobs at a moment's potice and would want to purchase a minority equity position, probably 10 to 15 percent of the store they managed around $20,000). Mr. Kingston was certain the two women would be ideal managers and business parties. Their equity holdings would provide bum with additional capital od them with a strong incive to work hard. I worse came to worst, he would be in a strong position to buy them out in the force Mr. Kingston thought that the best organizational structure would be to create a bolding company with him as a sole owner, and for the company to enter into separate partnership agreements with each of the women. Each partnership would hold one store. He revised his pro forma statements to account for two new franchises (see Exhibit 2) I Mr Kingston was thinlod with the projected results. We believed that he had used a conservative set of assumptions and that even under these conditions be could expect to climinate all debt within three years. Even if there were nero sales growth after the second year be could expect after-tax amnings in the area of 5150,000. That might be completed the formal application for a franchise and began to dream... The Option of Buying Existing Franchises in the course of his investigations, Mr. Kingston had been able to discover more about the two existing locations available for franchise. The store located in Sarn, Ontario was already a franchise operation. The current owner had been experiencing personal problems and was keen to sell the business. The store was small, caly 40 square meters (approx. 450 square foot), bat was favorably located in the best mall in the Surna. Many people described the location as the only good retail location in the city. A friend who lived in Samia expressed some concern that the store had not always been well masagod, sometimes appearing to be poorly staffed and inadequately stocked The London store was corporately owned and was being offered as part of a plan by the parent company to divest itself of all corporate stores (except for some in Vancouver and Toronto). It was one of three outlets in London and was located in one of the newest malls in an area surrounded by up-scale housing and extensive development. A major university (Western) was less than five km away and plans were under way to expand the mall by some 70 stores within two years. The Body Shop had recently been moved to a better location within the mall and almost doubled in size to sbout 80 square meters Mr. Kingston felt certain that sales in these stores would well above the levels projected for start-up operations, but had no way to determinat by how much. The locations really interested him. He owned a house in London and he would be happy to stay. One of his two potential partners alio lived there, and the other had recently moved to Satnia, near the United States border: The Body Shop's Chonden operation had the right to expand into the virgin territory of several United States Border States, including the one nearest to Samia Growth prospects seemed unlimited tappeared to be a perfect fit. The only question was how much of a premium the on-going operations would command, About 10 days after completing the franchise application, Mr. Kingston received a phone call from the Body Sloop inviting him to go to Toronto for a meeting with Richard Pedeke. Mr. Kingston fell he had already passed a major handle because the tranchise application had required extensive personal and financial information. If the company wanted him, so must be an acceptable candidate On a beautiful spring day he pulled into the parking lot of the Body Shop Canada head office, full of excitement at the prospect of what was about to unfold meet The Meeting M. Peddie described the typical Body Shop Canada franchise "female 35 to 45, married with school age adolescent children, limited formal ducation, and crazy about the Body Stop. Anyway, none of our franchisees have MBAY Mt Kingston realed he had a fight on his hands. It seems to me you have a view of what MBA's are like that they're all fanatical, hard-nosed, money-hungry tyrants," said Mr. Kingston "I don't think that's fair, any more than it would be fair to say that all lawyers are alike." This comment seemed to break some of the ice. But if the relationship between the two teen had begun to thaw, the discussion that ensued and the information that surfaced over the next hour did nothing to cheer Mr Kingston. His plus bad obviously been a pipe dream Mt. Peddie was adiant on a number of points. The Body Shop Canada would not grant multiple franchises to a new franchisee, the company first wanted franchisees to demonstrate their potential to handle more than one outlet. The franchisee must personally work in the store full-time. Although many Body Shop franchises were held in partnerships, the company was cautious it was particularly wary of non-operating financial partners. If the company did acquiesce, it would want absolute discretion over the content of the agreement "We want operators, not investors Mt. Kingston peunted for information about the Sarnia and Lodoutores. The news on these front was no better. Goodwill charges would be about $125,000 for Samia and S250,000 for Londoal Texpected sales for the two stores for 2015 were $600,000 and $750,000 spectively. Apparently, volume at the London had increased 6 percent since it relocation. Sarnis sales were up 33 percent over the previous year. The meeting ended on amicable note with Mr. Kingston promising of Mr. Pedie know within two weeks whether he was interested in proceeding If the answer wereyes," M. Peddie would consider whether to place Mr. Kingston a shoes Instof candidates. The short bit would be subjected to a 12-hour battery of interviews and the placed in a store for a week. After the trial both parties would decide whether to commencerning The Body Shop Canada would not award the franchise until after training had been completed However, even at this stage, the franchise could still see the potential cusce and leave him or her without recourse. The Decision When Me: Kingston reamed home from Toronto his immediate act watoto his computer to create new profon statements, but before dog so be bought it would be helpful to note down his options and his concerns The Decision When Mr. Kingston returned home from l'oronto his immediate instinct was to rush to his computer to create new pro forma statements, but before doing so he thought it would be helpful to note down his options and his concerne Mr. Kingon knew he had a touch problem on his hands, Ile docidod to produce pro forma statements along the lines of his first projections. He had fly accurate percentage con data that Me Peddio had provided for the existing stones. He wanted to compare performance for each of the existing operations to a start-up, suming each was operated as a single entity by a sole proprietor. Exhibit contains the statements Mr. Kingston bad some important questions to consider beyond the financial analysis Could he see himself in den 80-square metre store for the next 10 years! Could Mr. Peddie be persuaded to compromise! After all, how many people could let his ideal profile of someone with the right balance of spiritual devotion to the Body Shop's philosophy, bastes acumen, and access to the required capital of and 5250.000 Also, what was be able to afford? Was there anything Mr. Kingston bad mood in his analys? Somehow this was going to be a lot more difficult than doing a Chery. This was his life! Notes: Tory of the Body She Madchodom, 1991)