Is the franchise route a viable option

Assignment Help Accounting Basics

Reference no: EM132972597

George Zegoyan and Amir Gupta face a difficult decision. Their private auto parts manufacturing company has been a great success - too quickly. They cannon keep up with the demand for their product. They must expand their facilities, but have not had time to accumulate sufficient working capital, nor do they want to acquire long-term debt to finance the expansion. Discussions with there accountants, lawyers, and stockbrokers have confronted them with the necessity of going public to raise the required capital.

Zegoyan and Gupta are concerned about maintaining control if they become a public company. They are also worried about loss of privacy because of the required reporting to various regulatory bodies and their their shareholders. Naturally, they are also pleased that the process will enable them to sell some of their shareholdings to the public and realize a fair profit from their past and expected future successes. They will be able to sell 40 percent of the shares for $500,000, which is ten times their total investment in the company. It will also allow them to raise substantial new capital to meet the needs of their current expansion program.

The proposed new structure will allow them to retain 60 percent of the outstanding voting shares, so they will keep control of the company. Nevertheless, they are somewhat uneasy about taking this step, because it will change the nature of the company and the informal method of operating they are used to. They are concerned about having "partners" in their operations and profits. They are wondering whether they should remain as they are and try to grow more slowly, even if it means giving up profitable orders.

DISCUSSION QUESTIONS
1. Do they have any other options besides going public? Is the franchise route a viable option? Explain.
2. Do you think they should try to limit their growth to a manageable size to avoid going public, even if it means forgoing profits now? Why?
3. Would you advise them to sell their business now if they can get a good price and then start a new operation? Explain.

Reference no: EM132972597

Questions Cloud

Quality at the ritz-carlton hotel company : Ritz-Carlton. The name alone evokes images of luxury and quality. As the first hotel to win the Malcolm Baldrige National Quality Award, The Ritz treats quality

Has helen got a case to claim compensation : Has Helen got a case to claim compensation? Helen has suffered from a manual handling incident at work and has been referred by her general practitioner

Discuss criticism of an ethic of caring : An ethic of caring conflicts with morality because morality requires impartiality. Discuss this criticism of an ethic of caring.

What options available for jj asian cuisine as business : What are options available for JJ Asian Cuisine as the business structure? Explain pros and cons for each? What were reasons do think Jason and James started.

Is the franchise route a viable option : Do you think they should try to limit their growth to a manageable size to avoid going public, even if it means forgoing profits now? Why?

Explain accept international assignments : Which of these motivations would you rank as positive reasons? Which would you regard as negative reasons?

Explain what the business plan is : Briefly explain what the business plan is and highlight major components within the business that Jason and James should have to assist them later

What will be the companys return on equity : What is its accounts receivable balance? Assume that it uses a 365-day year - what will be the company's return on equity?

How do individual differences influence negotiations : How do individual differences influence negotiations? What are the conditions that lead to conflict?

User Account

All Pages