Small Business Management Franchise Assignment

Butlers Chocolate Cafe

Submitted To: Sir Sultan Raza Submitted by: Mohammad Bilal Khan (Roll # 19) Mohammad Osama (Roll # 23) Rehman Siddiq ( Roll # 34) Syed Qamar (Roll # 39)

Butlers Chocolate Cafe

Contents
Company Name:............................................................................................................................................ 3 Butlers Karachi (Ownership Details) ............................................................................................................. 3 Contact Details .............................................................................................................................................. 3 Type of Franchise .......................................................................................................................................... 3 Butlers History............................................................................................................................................... 3 Franchise Territory ........................................................................................................................................ 4 Tenure of Franchise ...................................................................................................................................... 5 Succession Clause ......................................................................................................................................... 5 Initial Down Payment/ Deposit Amount ....................................................................................................... 5 List Products Offered by Butlers ................................................................................................................... 5 Salient Terms of Franchise Agreement ......................................................................................................... 6 System of Income Sharing............................................................................................................................. 7 Approximate Annual Sales ............................................................................................................................ 7 Type of Transactions (Cash/ Credit Ratio) ................................................................................................... 7 How Financial Resources were gathered ...................................................................................................... 7 Features of Marketing Policies ..................................................................................................................... 7 Features of Human Resource Policies........................................................................................................... 8 Main Features of Operations ........................................................................................................................ 8 Technology Used ........................................................................................................................................... 8 Conclusion ..................................................................................................................................................... 9 Appendix ..................................................................................................................................................... 10

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Company Name: Butlers Chocolate Cafe Butlers Karachi (Ownership Details)
It is a family owned business that is owned by group of individuals, and our contact refused to give us the names of key individuals owning this franchise. He told us that it is a family owned business that is owned by a group of people and not any single person. However we found out through our sources that Master Franchise in Pakistan is held by Habib Gheewala.

Contact Details
Name: Mustafa Chagla Telephone: 35301927 ; 3530 2006 Fax: 3583 7345 Mobile: 92 312 288 5377 Email: mustafa.chagla@pk.butlerschocolates.com Office: Plot 10-C, 6th Zamzama Commercial Lane, Phase V, DHA, Karachi Facebook: www.facebook.com/butlerspk

Type of Franchise
Butlers Chocolate Caf has its origin in Ireland and its Master franchise for Pakistan is bought by a local group of people here in Karachi. As these people hold the Master Franchise so any new investor or businessmen willing to open up a butlers franchise anywhere in Pakistan will have to go through these people.

Butlers History
Butlers Chocolates began in Dublins Lad Lane in 1932. The company was founded by a pioneering lady called Marion Butler who named her luxury chocolate creations Chez Nous Chocolates. Marion established the company in the heart of fashionable Georgian Dublin, making her delicious confections by hand. The company is still owned and run by the Sorensen family. Chez Nous luxury chocolates were regularly sold at the very popular Horse Show and Spring Show in the RDS in Dublin and the company's first retail store was opened in the Grafton Arcade in 1960. The brand was renamed Butlers Irish Chocolates in 1984, in memory of Marion Butler. To mark the companys relationship and early beginnings with the Dublin Horse Show, a rider and horse remained part of the Butlers Irish Chocolates logo for many years.

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Butlers Chocolate Cafe

The first Butlers Chocolate Caf opened in 1998 in a beautiful corner building on Dublins Wicklow Street - a popular shopping street in the capital city. Butlers Chocolates could now be bought in a new style of shop, a modern day chocolate emporium specialising in all things chocolate with the best coffee, Butlers signature hot chocolate and the complete Butlers Chocolate range. Each hot beverage purchased in a Butlers Chocolate Caf was accompanied by a free chocolate of choice. The inaugural Butlers Chocolate Caf was a resounding success and was soon followed by many cafs. There are now fifteen Butlers Chocolate Cafs in Dublin, Cork, Galway and London. The Butlers Chocolate Caf concept has now been successfully franchised in several locations around the world. The most recent addition to the network has been in the U.A.E. where the first Caf opened in August 2012. The first franchise opened in New Zealand in 2007; there are now 5 Butlers Chocolate Cafs there. Pakistan is also home to Butlers Chocolate Cafs. Excellence in product quality, taste, packaging and service are at the heart of the company's philosophy. The product development team at Butlers has always looked to international markets for trends in flavours and taste and to fashion for trends in colours and patterns. The purchasing team sources the finest quality ingredients, locally produced as much as possible, to enable our chocolatiers to create the best tasting chocolates. The company is outward looking and in recent years has introduced Butlers Chocolates to chocolate lovers in many locations across the globe, from Dublin to Dubai and Shannon to Sydney. In fact Butlers Chocolates are now on sale in over 35 countries including England, USA, Australia, Singapore and Russia. Over the years, Butlers Chocolates has evolved; from Chez Nous to Butlers Irish to Butlers Chocolates. The company has never strayed from its mission to create irresistible chocolates that are accessible to all and, by doing so, to add a little moment to of happiness to everyday life. Butlers Chocolates are an affordable luxury that we would like people all over the world to enjoy.

Franchise Territory
They are currently operating in Karachi only with their caf at zamzama. However, they have plans of expanding their business and opening up more cafes both in Karachi and other cities of Pakistan. Though they have one single caf currently, they keep on putting up stalls in malls to market themselves and get access to their customer base.

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Butlers Chocolate Cafe

Tenure of Franchise
The tenure of franchise was not exactly told to us by the contact person. However, he told us that they usually have tenure of between 5 to 20 years.

Succession Clause
No explicit and absolute succession clause was told to us by the contact person but he said the succession if ever happens would not necessarily be by the family member only. It can be or cannot be by the family members. There is no such clause that only family successors can take on the business and business can also be sold to a third party considering the liabilities and other contingencies business have. Though this was not an absolute answer to our question but we still got an idea about the succession plan of business that there is not such clause of only family successors owning the business and business stakes can be sold to third parties as well depending on the needs of the business.

Initial Down Payment/ Deposit Amount

A very vague answer was given to this question. Contact did neither disclose its terms and conditions with the parent company, nor did he tell us about any down payments or deposits made initially. He refused to tell us anything related to financials or to even give us any estimates. He said that all these down payments, deposit amounts, and other guarantees depend on the relationship of franchise holder with the company. If franchise holder has got a good relationship with the holder company then he would probably not be required to make any deposits. All the personal details, business history, and other details of franchise applicant along with his ability to generate cash flows and pay the company in future are researched and analyzed by the company before giving any franchise rights. The applicants are also required to show their bank statements and guarantees to ensure that they have strength of paying required amounts in future, so deposits are not generally an issue with the company, all they care is the future cash flows they can generate through that particular franchise.

List Products Offered by Butlers

72 flavored chocolates Fudges Truffles Irish Breakfast Continental Breakfast Bacon Cheese Cakes

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Omelet Salmons Waffles Pancakes Confectionaries Muffins Scones Cookies Sandwiches Baguettes Iced Drinks Milk Shakes Teas Coffee Cocktails Smoothies Soups Pastas Garlic Breads Potato Wedges Toasts Chicken Pieces Chocolate Toffees Chocolate and Milk Drinks Chocolate and Milk Drink Powders Chocolate Baking Powder for Deserts

Salient Terms of Franchise Agreement

Other salient terms of this franchise agreement include the payment of royalty to parent company as a percentage of sales. There is no fixed charge for royalty and the royalty is paid as a percentage of sales only. We are again sorry that they again refused to tell us anything or give any idea about the percentage of royalty paid or the annual sales. There is also another salient feature of this franchise agreement that all the chocolates are imported from the parent company in Ireland and no chocolates are produced here. Franchise is not allowed to produce the chocolates themselves, However they can offer other products like breakfast etc.

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System of Income Sharing
Royalty is paid to the company as a percentage of sales.

Approximate Annual Sales

There are seasonal fluctuations and this is a seasonal business without any doubt. The sales increase during winter times (from December to March), holidays, and vacations. Probable reasons for this increase in sales as mentioned by our contact person are the increased hanging out habits of Karachi people during winter times and holidays. As he mentioned an example that people of Islamabad and Lahore hangout lesser in winter times, while the people of Karachi on other hand loves hanging out in winter times and their out dinning increases during winter season. Another probable reason for increased sales during winter season can be the increased demand for chocolates and coffees by the customers. People generally like having chocolates and coffee more in the winter season as compared to any other seasons.

Type of Transactions (Cash/ Credit Ratio)

**did not get a proper answer to this question. It was a very confused and vague answer, but yes the transactions with customers are on cash.

How Financial Resources were gathered

This was again not told to us by him. He refused to tell us anything about their financial resources and how they gathered it. However, as we tried probing in he told us that yes we use the same financial resources like other businesses that include the personal contributed capital of owners, bank etc. He further told us that the nature of financial resource to be used depends on the purpose for which it is being used and the amount needed and there are no particular hard and fast rules or policies for it.

Features of Marketing Policies

Yes they do market themselves. Some of the marketing tools mentioned by our contact person were vintage car show, malls sales, magazine advertisements, and radio programs. Bultlers market itself through various media but not the television. They market themselves through magazines (with advertisements and discount coupons in magazines like home express etc.). They also market themselves on different radio shows.

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Other techniques they use include putting up stalls in shopping malls and different events. The contact person also mentioned that they do not usually pay any charges for putting up stalls in malls as its for the mutual benefit of both the mall and caf. He told us that different malls and event organizers approach us asking to put up a stall in their mall or event. It is in their benefit because it adds value to their event and for our benefit because we get to market ourselves and reach our customer base easily. He also mentioned that they do not very actively market on social media as they think it is not very effective for them. They can have a better access to their customer base using the above mentioned tools.

Features of Human Resource Policies

They do not have a separate HR department but do have some policies regarding HR and hiring of employees. Employees report directly to the General Manager and there is no one like an HR manager in the organization. Anyone can apply for a job at their franchise and they do not have any policies of recruiting referenced people only or people of a particular ethnicity etc. They do not have any such policies so everyone have an equal chance of being recruited. They also use third party resources sometimes for the recruitment purposes.

Main Features of Operations

There are no separate departments like marketing, finance, or HR but there is a general manager who deals with all these things. They have no particular hierarchies or organizational structure but they have a group of people who manages the business and everyone has defined responsibilities. So they are found to be still being professional though they do not have any professional structure, defined polices, or departments.

Technology Used
They are technologically advanced and understand the need of keeping the pace with time. Though they do not have an ERP or other such integrated software but they have different softwares being used for different purposes. For example, they have a different software for accounts, another software for inventory keeping etc. They do not go for an ERP or other such integrated softwares because they think they do not currently need it. They think the benefits derived from such a software would not be enough to compensate for the high costs incurred on it and they are not currently as big that they need an ERP or integrated softwares. However, they plan to get such software systems implemented in their organization if they grow big enough for that in future.

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The parent company also has an access to their accounts and other details due to technology. So, this use of technology is very useful for both the franchise and parent company.

Conclusion
Through our research we found out that the holding company acts only as a supplier to the franchise and they do not really interfere much or have much to do with the franchise. They just supply the product (chocolates) to the franchise and gets royalty on sales. The interesting part was that though franchise is not given the permission to produce chocolates and they can only import them from the parent company, they have still been able to innovate and add value to their franchise with snacks (sandwiches etc.). Butlers Chocolate Caf is a family owned business that has been able to innovate and managing the business professionally. Though they do not yet have separate departments for marketing, finance, HR etc. or any particular organizational structure but that is because they do not find a need for it yet and they have planned to have all this implemented in their organization as they grow big enough.

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Appendix

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