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Introduction
The Thai Lay Fashion Company is a well-respected garment exporter situated in Hong Kong with production facilities located in China. At present, the company caters to wholesale importers from markets in Europe and the UK. The success and acceptance of the company’s products have encouraged the management to enter the retail garment industry in the UK. There are many methods that may be used when entering a new market. Due to the lack of funds that is required for a traditional stand-alone entry, it is proposed that the company franchises its business to prospective entrepreneurs in the country. The initial franchise fee for obtaining a license will help to bring in the capital at a later stage which can be used to develop the business. This paper is a marketing plan for the franchise business plan.
Franchising industry in the UK
Over the years franchising has grown to be a powerful business concept in many parts of the world including the UK. A study done by Research and Markets shows the following figures for the country. According to the company, “This study on UK Franchising Industry—2009™ identifies the market as one of the significant components to UK’s economic line valuing £9.82 billion, particularly a strong foothold with retailing and B2B services.” (U K Franchising Industry 2009). This figure shows that the concept is very popular and effective in the UK.
The Company
The Company is to be called the Thai-Lay Organic Garments Company and will concentrate on the sale of organic cotton garments through its franchise outlets. The Company will be headed by the managing director of its parent company (in Hong Kong) and will be managed by a competent team of experts from the UK and Hong Kong. They will experts in the field of management, finance, and organic textiles and will be supported by a competent team of support staff.
Product
As mentioned earlier, the product will be organic cotton garments supplied by the parent company in Hong Kong. The textile market in the UK is highly competitive and hence a product differentiation strategy has to be used here. Concerns for the environment have made people aware of organic materials and will serve to differentiate the product from other types of garments. This concept of product differentiation can further be enhanced through customization. “Customization is an element of product differentiation that cannot be over-emphasized. The more you know about your customers’ needs — and the better you do in serving those needs to your customers’ satisfaction — the stronger your competitive position will be in the market.” (Walsh 2009). It is intended that a tailoring section be added to each outlet where customers can get their clothes stitched (made from our garments) as per their design or requirement. They can also alter any readymade garments purchased from our stores. The pricing will be slightly above non-organic garments, but the appeal of going green and customization will offset this disadvantage.
Target customers
Unlike retail marketing, franchising business has two types of customers namely primary and secondary. The primary target customers will be the individuals and companies that will take up the franchise. The customers of the primary customers will form the secondary ones. (Primary Target Audience, P.365). Information about both categories must be obtained. The primary customers will be approximately 25 to 40 years of age. They will be ambitious and energetic and should have the mind of an entrepreneur. If wealthy, they can invest using their own funds. If not they have the option to avail themselves of financing opportunities like bank finance, borrowing from friends and families, and angel investors. “Angel investors are a private source of investment money, which is usually used to help a promising company.” (Private Business Investors Scotland: Angel Investors Overview). The amount required may be too small to interest venture capitalists. With regard to end customers, they can be from the middle income and upper middle-income group.
The Franchising strategy
Place: It is proposed to concentrate in the city of London for the first two years. There is enough scope within this large city to get enough franchisees. The firm will have an administrative office in the city. The franchise outlets should ideally be around 1,800 to 2,000 square feet. This will make the franchise more affordable to potential investors.
Promotion: Promotion is required in two areas here. One is to attract franchisees and the other to attract the end customer. The media that can be used to address franchisees can be through advertisements on television and business and trade magazines. The advertisement will focus on calling potential investors to become franchisees. All the details of franchising including products, promotion, place, pricing, start-ups, running the business, training, support, etc will be provided in a printed handbook. Potential investors can be met by our marketing team and details worked out. Ideally, the contents can be based on the headings that appear on the McDonald’s webpage on franchising opportunities. It should be noted that this company is one of the world’s most successful franchisors. “McDonald’s has always been a franchising company and has relied on its franchisees, our Owner/Operators, to play a major role in the System’s success.” (We Have Always Been a Franchising Company. 2009). The contents can include reasons for choosing Thai Lay, the cost involved, the franchising application form, a FAQ, and other details mentioned above. It is proposed that franchisees invest 60% of the total costs involved (in starting a new store) as a down payment.
Service delivery system (SDS): The service delivery system in franchising forms the backbone of the business. According to Francorp, a leading franchise consulting and development firm, “the key is that you start with an exceptionally sound baseline service delivery system.” (Francorp What Makes a Successful Franchise Company: Adaptability. 2008). An SDS also helps in efficient running and bringing about uniformity of operations and tasks among all franchisees. It provides detailed knowledge of doing the tasks and is basically what the franchisor buys in exchange for the franchise fee. The SDS is also the basic document that tells the franchisee what to do to meet the demands of the customer. (Franchising). A proper service delivery system has been developed which includes detailed instructions on running a garment franchise business.
Porter’s five forces
“The Porter’s 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation.” (Porter’s Five Forces. 2009). Buyer power is only moderate in this segment as the number of outlets selling organic cotton garments is not as high as conventional ones. But this will bet higher as the concept of going green gets more popular. Supplier power is low as Thai Lay has its own supplier in Hong Kong. If the only production stops in China that supplier power will become high. The threat of competition is high since awareness and concern for environmental issues are not too much. Till it increases, we have to compete with traditional garments. But this too can increase over the years with rising environmental awareness and concern. The threat of substitution is very low. The only substitution that can take place is to switch over to the same other fiber or silk. This will be very costly for the customer. The threat of new entry is low because the availability of organic cotton is limited at the moment.
Financial requirement
It is estimated that an initial investment of 200,000 pounds is required to start the administrative facilities. Out of this 50,000 pounds can be obtained as a loan from Thai Lay Fashion Company in Hong Kong. The rest will have to be raised from banks as loans. Additional working capital of 50,000 pounds will be required as working capital. With this investment, the company can be ready to accept franchisees. Once it happens capital will start to come in. it is proposed to fix the franchise fee at 25,000 pounds and twenty franchises are expected in the first year. This will bring in an additional 500,000 pounds for further expansion of training, support, and promotional purposes. The franchisees will have to invest an amount of nearly 100,000 pounds to start a retail outlet. A royalty of 20% can be got from the franchisees out of sales and income from the tailoring section.
Conclusion
The franchise marketing plan has been given here in brief. A market survey and literature study show that the concept of garment franchising is not in vogue here. So there is every possibility that this will be seen as a novel concept and be accepted by investors. It will take some time to build the market, but rising environmental concerns and even statutes can help the business to sustain and grow in the long run. There is every chance that the franchising option of Thai Lay Organic Garment Company will be successful and the company will grow in the United Kingdom.
References
Franchising. [online].
Francorp What Makes a Successful Franchise Company: Adaptability. (2008). [online]. PRLog: Free Press Release.
Private Business Investors Scotland: Angel Investors Overview. [online]. Directory M Articles.
Primary Target Audience. P.365. (Provided by student).
Porter’s Five Forces. (2009). [online]. Mind Tools: Essential Skills for an Excellent Career.
U K Franchising Industry 2009. (2009). [online]. Research and Markets.
WALSH, Michael. (2009). The Three Elements of Product Differentiation: Customization. [online]. Business Growth Blog.
We Have Always Been a Franchising Company. (2009). [online]. McDonald’s Corporation.
Order from us for quality, customized work in due time of your choice.