The company's staff travel to customer's houses
A young company thinks it has a solution to those flat-pack furniture blues.
Their business offers an assembly service.
Simon sees how the company works and how it plans to expand.
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Is there a household in the UK which hasn't driven a car full of boxes home from IKEA and ended up with a confusion of packaging, screws, bits of wood and instructions all over the living room floor?
There are people who like their products but just won't go there because they can't face the process of searching for the right boxes, waiting in lengthy queues to pay and then facing the challenge of assembling the furniture.
Unflatpack was set up by John Griffin who saw a business opportunity.
Have a look at the company website to find out how it works.
Explain the service that Unflatpack provides.
Why do you think people use it?
Can you see any problems for either the business or the customer?
If the business wants to grow, what would it need?
Unflatpack started of in London and Northern Ireland - but John wants to make it grow.
The business could employ people across the country to drive the vans, select the boxes, deliver them and put the furniture together - but John is taking another approach.
He's going for franchising. This means selling the right to run an Unflatpack business to other people across the country - and providing them with back-up support in return.
Why do you think the people who run Unflatpack have decided to sell franchises rather than run a business which employs people to do go to IKEA?
Why do you think people buy the franchise instead of setting up their own businesses?
In every high street there are franchises. McDonalds, Bodyshop, Printfast are just some examples.
The amount of money that you have to put up to buy a franchise will depend on
- The start up kit the company supplies to you
- The likely return on your investment
- The number of people who want to buy a franchise
It costs £175,000 for Snappy Snaps but an Unflatpack franchise costs just £10 to 15,000.
Why do you think there is such a difference?
Do you think a McDonalds franchise costs more or less than Snappy Snaps?
A risky business?
All businesses are risky. Some are more risky than others.
Plans that look good when the economy is booming can suddenly look very sorry for themselves when uncertainty sets in.
Buying a franchise is one way of reducing the risk.
You are responsible for knowing the local market for the product but the franchisor will be doing national marketing and keeping the product and image up to date.
They can do things that you couldn't dream of as a small business.
Keep you eyes open for marketing campaigns for well known franchises.
Could a local burger bar negotiate with the latest movie to use its images or give away model characters with every burger?
The fact that banks are happier to lend to someone who is buying a well known franchise than just setting up their own business, shows that the risk is lower.
Banks really don't like risks.
Explain why it can be less risky to run a franchise?
Why are banks happier to lend to a franchisee than someone who is planning to run a franchise rather than setting up their own business?
A strategy for growth
Running a business that deals with people's IKEA shopping across the country would be complex. How many people would you have to employ? John is aiming at running a business around every IKEA store! Just think about it!
People, offices and vans to maintain, etc, etc...
By selling franchises, he hands over responsibility for all these things to franchisees.
He plans to be in the business of selling franchises and looking after the franchisees. He will only gets a 15% cut of the money made by each franchise but his costs are much lower than if he ran a huge business.
He has to be sure that the franchisees are reliable. If Unflatpack gets a bad reputation because people don't turn up to appointments or put things together upside down, his business will start to fall apart.
It is really a two way arrangement
- A franchisor must provide good, reliable support. If supplies don't turn up when ordered, a local business will be unable to provide a good service. If the central business takes its eye off the market and doesn't move with the times, the local business will be left behind.
- The franchisee must run an efficient business which meet the standards of the big organisation. There are opportunities to show your flair but in a more secure environment.
Why do you think some people would be much happier running their own business rather than a franchise?
Why would some people want to be personally involved in the growth of their business rather than handing responsibilities to a franchisee?