Small & Medium business
managementInstructor: Sopheavy Ty
Student: Tran Thanh Thuy
24th of September, 2015
Outline of the case
About Firehouse Subs
• A chain of submarine sandwich shops
• More than 400 locations
• 21 States Robin and Chris Sorenson
Time Spent
Achi
evem
ents
Open the first restaurant
Expand to 300 locations in 17 states
Developing process of the Firehouse Subs
Grow to 30 restaurants & begin selling franchises to
expand business
1994 2001 Early 2008
Outline of the case
Outline of the case
Facing unexpected declining sales throughout its system caused by the recession in March 2008
Management’s Discussion Eliminate the 2% local advertising fee and allow franchisees to do their own marketing
Why the
sales decline even
worsen?
Advantages franchisees gain when they buy franchises ?
Gaining access to a successful business system with strong brand name recognition
Low range of investment ($200k - $425k)
Standardized Quality of Food National Advertising Program Extensive Training Program
Disadvantages they experience?
Franchise Fees ($20K) and On-going Royalties (a royalty of 6% of sales & a 3% advertising fee)
Limited Freedom
Domino effect of sales declining in a recession
Discussion
Develop a list of Advantages & Disadvantages for each of the three options the managers are considering
Continue the existing local marketing by franchisees
Advantages Disadvantages
Reduce fees for franchisees
Franchisees have their own freedom and authority to
create and try new marketing
programs
Inconsistency among franchise
ownersNegative impact on the
brand from poor
management of some
FranchiseesWaste of time and money
Discount sandwich prices
Advantages Disadvantages
Attract low-income
customers improve sale
declining
Increase competition
ability
Narrow the already thin
profit margins decrease profit
In danger of damaging the reputation for
ingredient quality
Launch a new marketing campaign
You should spend more on advertising per
store and collect higher royalties and advertising fees (double to
4%)Like Subway
and Quiznos did
Experienced advertising companyFirehouse Manager
Launch a new marketing campaign
Advantages Disadvantages
Advises of an experienced advertising company
Proved by other sandwich chains
Increase in advertising expensesAdditional
pressure for franchisees to their existing struggles with
lower sales and profits
Create a new marketing campaign
Proved by other sandwich stores
Objective and greater vision of the advertising expert
Better outcomes than Option 1 (continue current marketing) and Option 2 (discount)
Discussion
What should Firehouse Subs’ Unique selling Proposition (USP) be? What new key points if the managers decide to launch a new marketing campaign ?
USP and the key points
Reputation of quality
ingredients that
Firehouse Subs has
been using throughout 16 years
Special service style by featuring firefighting
theme