11-11-08 - Entrepreneurship I Class Notes 11/11/08 What are...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Entrepreneurship I – Class Notes – 11/11/08 What are the 3 companies of this case? - Huston , major oil company - Super Lube , #1 franchisor (WHAT IS A FRANCHISOR) of quick lube and oil change - Quick Lube Franchise Corporation (QLFC) largest franchisee o 7% of revenue goes to the parent company o Follow the rules and procedures of the franchisor o Pay the royalty o Buy some of the product In what situation does QLFC find itself at case outset Quick Lube has to purchase the oil from Huston Which company takes over – Huston’ o They have the franchisee covered with debt – debt incurred from custom oil Huston is the principle oil supplier How did Super Lube come about? Who seized the opportunity Martin gets the system worked out – he is the original inventor On his team – Frank Herget on founding team Why was QLFC founded? Herget is more interested in operating service centers, which are franchisees Swaps his Super Lube founder’s stock to purchase his first franchise o Is it successful? YES What was Herget’s growth strategy for QLFC? o Buy more to expand – expand in the pacific West o From 1982-1991 service station centers rose from 2 to 47 Greatest growth Was QLFC (Quick Lube the franchisee) highly profitable?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Sales of $31 million – Net income was 3% of sales How was the franchisee’s growth financed? Through debt o Financed through debt $7 million from banks What was the chief purpose of incurring debt? The system is not expensive in terms of capital, but the land was expensive! Is Super Lube (the franchisor) successful in funding growth? At first yes, but ultimately no; ends up in technical default Secured bridge financing for $10M (1985) and had a successful IPO, but …. What solved Super Lube’s financial troubles Why were franchisees unhappy with this The oil company could control everything leverage Under license agreement franchisee pays 7% of sales Franchisor failed to do product development and quality insurance tasks – it didn’t do that – franchisees unhappy to franchisor because they still have to pay royalties and they are not getting anything for it What management changes do Super Lube’s new owners make? Entirely new management team New CEO is from K-Mart subsidiary TERRIBLE DECISION What happens at first national convention after Huston takeover Franchisees unhappy with emphasis by franchisor on selling motor oil rather than with franchise profitability – wait a minute, you guys are forcing us to buy this custom motor oil we DON’T NEED!
Background image of page 2
What study does Herget conduct? What results?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/03/2009 for the course ECON 290 taught by Professor Goldenandallison during the Fall '08 term at Allegheny.

Page1 / 11

11-11-08 - Entrepreneurship I Class Notes 11/11/08 What are...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online