Peer review paper

Franchise Opportunity Analysis

Melissa Holden

Global Campus, Southern New Hampshire University

OL 640: Franchising

Dr. Carlotta Walker, SHRM-CP, DBA, MSA, BS

April 25, 2021

Franchise Opportunity Analysis

Summary

Three Dog Bakery is the perfect opportunity to franchise. It meets the requirements of a niche market that caters to many people. The Three Dog Bakery makes fresh treats for dogs that are all natural and healthy for pets. Their only clients are dogs and what a perfect cliental to have. They are loving and kind and appreciate everything.

Porter’s five forces discusses the threats of entry, threat of substitutes, bargaining power of customers and suppliers, and competition. This market does not have any barriers to entry while it does have some threats of substitutes. The only real bargaining is that of the customer as the suppliers can be bypassed since all ingredients can be found at local grocery stores. The competition is not fierce for this market however, the big box stores could cause reason for concern.

The target market for this niche market is just anyone who wants to pamper their pets. The perfect market for this type of industry is in the urban areas where the individuals tend to believe in eating healthier and having a more organic experience with their food and lives. They tend to be educated individuals whose salaries range from about $60K a year to $100K. This is an important demographic as they tend to be single and find companionship in their animals. These individuals also treat their pets as humans and expect their food to be equally as satisfying.

The action plan to reach the 12-month deadline to offer the company for franchise is discussed in detail later. It describes the necessary steps to offer the company up for franchising. The most important task is to create an operation manual and complete a Franchise Disclosure Document. It looks at hiring an attorney to handle all the legal aspects of franchising the business and then finally looks at who the best potential buyers would be.

Critical Points

The newest franchise opportunity comes in the form of a bakery that caters specifically to canines. This franchise opportunity is called Three Dog Bakery. They specialize in dog treats of all kinds. Three Dog Bakery uses the best ingredients that are safe for dogs to create artisan treats that are healthier. They work with pet owners to create customized birthday cakes and cupcakes for parties. Every holiday Three Dog Bakery creates treats that are themed for the specific holiday.

This business is unique in that it caters specifically to pet owners who only want to pamper their dogs. Using Porter’s Five Forces, it is the goal to show how profitable this industry could be. Porter described the five forces as threat of entry, threat of substitutes, bargaining power of customers, bargaining per of suppliers, and competitive rivalry.

Threat of Entry

In the Houston market there are many bakeries. They make some of the most extravagant cakes however they do not make pet safe products. Three Dog Bakery fills this niche market in that they cater specifically to canines and not to humans. There goal is to provide excellent quality products for the pampered pet. There are no barriers to entry and any baker could enter this market, however the baker must love pets to bake products for them every day.

Threat of Substitutes

There are many substitutes to great quality in the marketplace. These substitutes are however made with fillers and products that are not designed for a dog’s system to process. They create digestive issues over long-term use. As a pet owner, I only feed my dogs the best quality foods. Most of their foods are homecooked and prepared with high-quality ingredients. Feeding my dogs treats, I only want the same quality I provide at home. This can only be found at Three Dog Bakery where they believe in providing the same great ingredients in dessert form.

Bargaining Power of Customers

Customers always have the option to chose what to feed their pets. Therefore, opening this franchise in an area that is diverse with a good mix of professionals, retired individuals, and families will give the business a greater pull of customers. Any pet owner who pampers their dogs will look for local bakers rather than purchasing treats from the large box stores.

Bargaining Power of Suppliers

The bargaining power of suppliers does not affect this market. Since all the ingredients for the food created by this company can be purchased at any local grocery store, suppliers have no real bargaining power.

Competitive Rivalry

There are a few bakers in the Houston market that cater to this market. The prices are competitive, and the only factor would be location. A customer located on the other side of town might not drive to the location if there is a local baker closer to their residence.

What is the competition?

The competition for Three Dog Bakery is the big box stores. While there are other small bakeries that do the same thing, there are currently only about 15 in the Houston area. The real competition is PetSmart, Petco, Walmart, and others like these. These big box stores sell subpar products for less money giving people a false sense of what good quality is. All products on the market that are not baked fresh have fillers and by-products that are difficult for pets to process. The cheaper the product, the worse the quality.

Who is the target market?

The target market is anyone wanting to provide the freshest ingredients to their pets. Specifically, the newest franchise would move into the Montrose, TX area where the community has 35,723 residents (Areavibes) with an average salary above $60K a year. It has a population of roughly 30% married couples and 55% single individuals who love the urban area and all it has to offer. The average age of the residents is 37.4% (Areavibes).

Action Plan

The plan to franchise this business will take 12 months to complete and broken down into phases.

Phase I – Operations Manual

Writing down on paper what is done daily, weekly, monthly, and yearly seems overwhelming however, it is the most important step to franchising a business. Without an operation manual, any franchisee could ruin the business brand by doing things their own way instead of the tried and true methods that have worked for the franchisor. This phase will take the most time since there is no actual manual in place currently.

Section one of the operation manual will be the well-crafted vision and mission statement of the franchise. The vision statement tells others what the company wants to accomplish over the long-term. “It depicts a vision of what the company will look like in the future and sets a defined direction for the planning and execution of corporate-level strategy (Vision Statement - Definition and Example of Vision Statement, 2020, para 1). The mission statement is used to explain the purpose of the business. James Chen of Investopedia states that “A company’s mission statement defines its culture, values, ethics, fundamental goals and agenda (2021, para 3).

Section two of the operations manual is the nut and bolts of how to operate the business. It should include a list of contacts for suppliers, important personnel that can assist the franchisee, day to day task, policies and procedures. After writing the manual it is important to test the manual. Time will be spent ensuring that all task in the manual can be done by following the directions written in the manual. The policies and procedures section will address attire, work attitudes, dealing with customers, time off, vacations, sick leave, 401K, insurance, workplace safety, sexual harassment, etc. The final section of the manual will include all the recipes needed to make the treats that are sold daily to the clients.

Writing the operation manual will take between six and eight months to complete. This timeline includes writing it, proofing it, testing it, and correcting it. This process is the most important step in franchising the business. If this isn’t right, the brands name is on the line. It is imperative to provide the franchisee with everything they need to run the business smoothly and in the same manner as the franchisor has ran the original businesses.

Phase II – Legal

The second phase of franchising the business is to meet with a team of experts that can help with obtaining the necessary documents to franchise the business. The first document needed is the Franchise Disclosure Document. This document gives potential franchisees with the information they need to make an informed decision about investing in the franchise. It has 23 required items ranging from the franchisors name, litigation, bankruptcy, to the franchisee’s obligations to the franchisor. It addresses the cost associated with purchasing the franchise, and what the franchisor will aid with. To franchise the business in Texas, the franchisor must file a Form 2701 with the State of Texas and pay a one-time fee of $195. This notifies the state that the business is listed for sell as a franchise and ensures that the franchisor has followed the rules set forth in the state.

Phase III – Finding a buyer

The next phase will include vetting the right candidate for the franchise. Not just anyone can run and manage a business and especially one that caters to dogs. The baker that decides they want to buy this franchise must love dogs and not have any criminal record involving animal cruelty.

Conclusion

Three Dog Bakery is the perfect opportunity for a dog lover baker to expand his talents and provide healthy alternatives to the four-legged client. It is a very successful business in the River Oaks area of Houston and expansion into other areas makes sense. They have a niche market that caters to pet lovers who love to pamper their dogs. Porter’s Five Forces suggest that this business would be profitable. The five forces show that while there is some reason for concern this business would be an excellent opportunity to franchise.

As a pet lover and lover of all things organic, investing in the business would be a perfect fit for me. While I am not a baker, I understand the value of quality ingredients and only want what is best for my furry children. My love of creating high quality pet food at home can easily transfer into this business and gives me the knowledge of the best ingredients suitable for pets. It is important to the health and well-being of my animals that I know what is going in their food and this business gives me the opportunity to provide treats for them that fit in with my lifestyle of having a pampered pet at home.

Link to business

https://www.threedogbakeryhtx.com/

Reference List

Areavibes. (n.d.). Montrose, Houston, Tx demographics. https://www.areavibes.com/houston-tx/montrose/demographics/.

Chen, J. (2021, March 24). Why Mission Statements Matter. Investopedia. https://www.investopedia.com/terms/m/missionstatement.asp.

Vision Statement - Definition and Example of Vision Statement. Corporate Finance Institute. (2020, July 9). https://corporatefinanceinstitute.com/resources/knowledge/strategy/vision-statement/.