Case Study on RELE-Rouen: Language Immersion in Normandy Essay

Executive SummaryMaxime is the co- effecter of RELE-Rouen, a franchise langu jump on civilise under RELE at Rouen, France. The bloodline took a downturn during the economic crisis from 2009 to 2011 and it has been losing coin for trine consecutive years. The franchise contract with RELE is due for renewal in two month. At this time, Maxime is presented with terzetto options1. Renew franchise contract with RELE2. thumb to OILT programs3. Sell the edifice to EFELThis report first explored the constrains that Maxime faces in this decision devising process. And then the three options are analyzed and compared in details by using a set of criteria, including financial return, franchise models comparison, and other chore outline related considerations, i.e. customers, company, distribution channels and market out find. The people location in this decision making process is also being examined. found on the findings, RELE-Roune exit face another year of prejudice if RELE does not forfeit Maxime and Beatrice to run their pass programs any more than(prenominal) than in 2012. OILT is only more emolumentable if they disregard sell at a much high quantity than they do now. And the 1.5m pop the question from EFEL is much below the valuation of the twist and their business.Therefore, it is vitally important that Maxime first determine RELEs impartingness to grant Roune more exemption in program offering in the incoming. If RELE refuses to, Maxime and Beatrice has to choose among OILT and selling at a loss to EFEL. Maxime and Beatrice should also look for an OILT franchisee that is in a similar geographical location, i.e. a rural area in determination proximity to a metropolitan city, to understand their marketing scheme and the new company identity in order to estimate their necessary initial investing and future business authorization if they are to beat toOILT.ConstraintRELEs centrally controlled gross revenue activities and program offerin gs are mostly the reason why Maxime and Beatrice chiffonier do very little to invigorate their business in times of crisis. It volition continue to be a constrain in their future with RELE. Maxime and Beatrices financial situation shag also restrict their decision-making. The up-to-date asset RELE-Rouen held as of 31 celestial latitude 2011 is just enough to cover its current liability. Any new coronation kitty create a considerably cash flow twoer for the company. Maxime has already guaranteed a loan of 800,000 personally. It buttocks be difficult for them to line for new loan or cash investment given the precariousness of their business future. The mental synthesis, which Maxime and Beatrice used to run RELE-Rouen, is jointly owned by the volt siblings. It is a family heritage. Any decision made related to the use of this building will keep to be in all siblings best interest.CriteriaThe three options are being evaluated establish on the following criteria Economic s, Business scheme and lot.EconomicsThis section details the financial analysis of the three options1. For RELE, three business scenarios are constructed and evaluated. An estimate of financial returns from OILT, assuming the akin train of sales, is also calculated and compared with RELEs. Lastly, an estimate for the valuation of the building and business provides an perceptivity to EFELs offer. survival 1 Renew franchise contract with RELEScenario 1 RELE-Rouen offers only weekday programs. It is deduced from the case that Fabienne, the CEO, chose not to object to RELE-Rouens new weekend program because of the understanding that time was difficult. When the economy bugger offs to recover, Fabienne whitethorn not allow this program to be offered anymore. It is estimated that RELE-Rouen will face a loss of close to 82,000. Scenario 2 RELE-Rouen continues its current offerings. Based on their own estimation, RELE-Rouen will suck a profit of close to 30,000. Scenario 3 RELE-Rou en is allowed to offer both four-weekend and side of meat program. This is the best-case scenario for RELE-Rouen. It is not clear whyRELE rejected Maxime and Beatrices proposal to offer English program in 2011.One of the possible reasons toilet be that RELE necessitateed to avoid new investment in selling to a new segment during crisis while their main focus was to maintain advantageousness of their own center. It is reasonable to assume that Maxime and Beatrice permit a stronger bargaining former now given the fact that they demand been approached by OILT and the economy will recover more in 2012. It is estimated that RELE-Rouen will take a profit of close to 91,000. From the computer science, it is clear to see that the profitability of RELE-Rouen is flatly bear on by the fictitious characters of programs they cannister offer. If RELE put a stop to their weekend program, they will shake another year of loss.Option 2 Switch to OILT programsIt is assumed that they will be offering both French and English classes during weekday and weekend with OILT. entirely without a clear understanding of the new targeted market, it is difficult to estimate a sales number. In this calculation, instead of looking at the profit based on an assumed number of sales, the profitability of the OILT programs is evaluated using the same train of sales as proposed in Scenario 3 with RELE. The comparison of the profitability can reveal the different franchise fee structure and its impact on profitability. It is also expected that certain amount of initial investments is required when electric switch to OILT. But at this stage, there is not sufficient information yet.The calculation simply assumed a similar cost structure as RELE, and did not include any additional investment. Based on the calculation, they will face a loss of close to 36,000. Compare this calculation with Scenario 3 at RELE, it can be concluded that by selling the same amount of classes, the RELE model is more profitable. Another calculation is done to ascend the hypotheses that the OILT model is more profitable selling by quantity. By change magnitude the number of classes sold by 10% (which is still within their current capacity, therefore the same fixed cost applied), the profit almost doubled.Option 3 Sell the building to EFELThe valuation of the building and the valuation of the business is, in total, around 2.6m. Details of the calculation can be found in Exhibit 3.Based on the calculation for the three options, it can be concluded that the 1.5m offered by EFEL is definitely not an attractive offer. rase if Maxime and Beatrice do not want to continue with their business, they should negotiate another visual sense with EFEL.Business StrategyFranchise modelSince RELEs only customer base is executive and it is assumed that the weekday programs are mainly sponsored by merged, maintaining long-term corporate relationships would be RELEs primary marketing focus. It also gi ves RELE reasons to centrally control their marketing effort because it is costly both in wrong of time and money to build and maintain relationships with corporations and any mishandling of this relationship can adversely affect RELEs image. The advantage of a centrally controlled sales operation reduces the franchisees cost in business development.The disadvantage is, RELE may not have the local association to develop marketing strategy specific to the franchisees region and during economy downturn, franchisees have little to no freedom to recoup demand on their own. OILT on the other hand, is targeting at the masses individual consumers. It hardly controls any aspects of its franchisees operations. It also means that franchisees will have to decide every aspect of their growth strategy themselves.CustomerAs discussed earlier, RELE program is for executives while OILT program is for all adults, especially international tourists. A companys customer base determines the identify of a company. If Maxime and Beatrice want to take up the OILT program, they may have to offer different type of food, different methods of teaching, different ways to promote their programs, different incentives to attract tell customers and may be even different styles of decorations in the building.CompanyMaxime is a CEO of their family business apart from running RELE-Rouen with Beatrice. Even though they have been offering the RELE programs for 9 years now but because of the franchise policy, they have only been engaged in academic, administrative and hospitality related operations. similarly due to the single type of customers, i.e. executives, they may not have the knowledge and skills in managing mass market. The professors operative at RELE-Rouenhave an average age of 52. They may not adapt to new teaching methods of using multimedia system very quickly.CompetitionCurrently RELE-Rouen is enjoying a relatively low disputation in the region. But OILT and EFEL are targetin g at the same type of customers and both of them are interested in entering the region. If Maxime and Beatrice are to take up franchisee from OILT, EFEL is a competitor.ChannelsAccording to the financial estimate for the OILT model, it was concluded that in order to make a better profit, they have to sell a better quantity than they have now. Beatrice has little experience in sales and OILT franchise model requires an international sales coverage. OILT offers 10,000 international agents. Choosing the right agents and exploring substitute(a) sales channel would directly determine the success of their business with OILT. Paco Valls, the OILT franchisee in Barcelona may not be a good reference to foretaste Rouens business potential because of their different geographical location. In Barcelona, Paco Valls has direct access to both a large pool of tourists and the local residents, which Rouen does not provide.Market outlookAs the economy scoops to recover, Maxime and Beatrice should start to see a pick up in demand both in corporate spending and tourism. The potential of growth of the market also makes EFELs 1.5mn look less attractive. If Maxime and Beatrice is to switch to OILT, it is a good time to make the investment as well so that their new business will be up and running when the demand is back in full swing.PeopleMaxime is 62 years old and will retire in 3 years. He may not want to engage in a new adventure and would prefer a horse barn income from a stable business. Beatrices only source of income is from their language school. And further losses can adversely affect her financial security. Their other siblings and the three teachers who have been working with them for close to a decade will also be affected if they decided to sell the school and the building.SynthesisAfter examining the three options Maxime has, it can be concluded that they will face another year of loss if RELE does not allow them to run their weekend program anymore. OILT is only mo re profitable if they can sell at a much higher(prenominal) quantity than they have now. And the 1.5m offer from EFEL is much below the valuation of the building and their business.Action PlanIn view of the various potential and risks in their current business and their future alternatives, Maxime have to get an understanding with RELE if they can continue with their weekend programs in 2012 as soon as he can and if possible, he should make sure the contract reflects this provision. Maxime should also start negotiating with RELE on allowing them to offer English courses. At the same time, Maxime and Beatrice should also start doing market research in order to better understand the potential demand for OILT model in Rouen, such as the amount of tourists in the region, they can also look for OILT franchisees that are in similar geographical locations and learn from their experience and also help them estimate their financial future with OILT.