Question

Judy Patterson, Connie Post, and Kriste Burnside were all friends, working together in the accounting department of a local manufacturing business in Waco, Texas. They enjoyed working out at a local exercise facility during their lunch hour. One day, they learned that the owner of the gym was planning to move to Arizona and needed to sell the business. "We kind of hoped the owners of the company we worked for would buy it so we'd have free memberships," said Patterson. But that didn't happen, so the three friends formeda corporation to consider the purchase of the franchise.

Question 1 What sources of information about this franchise would you recommend that the friends consider?

Question 2 Is their work-out experience sufficient to prepare them for ownership of this franchise?

Question 3 Would the three friends be making a wise decision if they decided to buy this franchise? Why or why not?

Answer 1

1. The trio must need to know the reason behind the owner moving to other place and selling the facility. It is very much possible that the facility is not making enough money to keep it sustainable or there might be many other reasons such as presence of a strong competitor, a legal issue or statutory regulations among others. They should also investigate as to why their employer did not show interest in buying it.For information, they should see the financial performance of previous years and should see if it has ever violated any norms. They should also seek information from the previous owners ( if any) current and past customers, and law enforcement agencies.

(ii) Having ownership of and running the franchise is very different from using it. It is just like travelling in a Uber car and running a taxi service. They would find it difficult to run the franchise even if they have previous managerial experience, because every business has its own tricks of trade and only specific experience would work. Only because they would like to have a good ( and free) workout experience, it does not make a point to buy it.

(iii) The decision seems to be a childish one, because the only motive of the purchase is to have a free and convenient experience. Their current experience and position is not good enough to justify a purchase. It is most likely to be a disaster if they buy it.