Livoria Case Study

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Register to read the introduction… Between 2012 and 2014, Livoria will see a rapid increase in its operating profit margin from 28.68% to 38.17% (Appendix 3), indicating that the company has good cost control and its sales are increasing faster than its costs. Due to a $ 500,000 provision made for litigation, 2011 Operating Income of 0.29% is well below its main competitor Souvlaki Odyssey’s Operating Income of 19.26%.
Analysis of Alternatives

Alternative #1: Franchising Livoria Sandwiches (Appendix 6)
Pros
• More stores would allow Livoria to capture higher market share. • Generate additional net income by $180,000, $210,000, and $240,000 in years 2012-2014 (Appendix 6) which exceeds Livoria’s objective in reaching $1.1 million by 2014 (Appendix 8). • Capitalizes on Livoria’s reputation for using high quality ingredients and fresh sandwiches. • Does not require Paul and Sam to generate personal capital or borrowing for expansion.
Cons
• Livoria does not carry a recognized brand name beyond Zone 1. This might cause an issue for Paul and Sam to attract potential franchisees. • A large number of eateries are already established in the other Zones. This might be a
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However, if Paul and Sam sell franchises, they lose some control over the business. Although the franchisees must follow operational guidelines, they may run the business differently or use different business practices. The parent company has a lot of control over the overall direction of the company and can introduce products or services, institute new procedures and implement or change marketing strategies. All of these have a great effect on the franchisees. Changes that the franchisees do not agree with can cause conflict and tension between the parent company and the franchisees. Also, by Franchising, Livoria losses it’s family-oriented business atmosphere, which is a key part of its success.

Alternative #2: Enhancing Livoria’s Menu (Appendix 7)

Pros

• Provide more sandwich selections on the menu by introducing new vegetarian

sandwiches to the growing health-conscious customer segment in Dawkins

• Achieve $ 1.1 million in Net Income, with the 5,396 productive direct labour hours

available by 2014 (Appendix

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