Famas French Bakery

Posted: September 9th, 2013

 

 

 

 

 

Famas French Bakery

Business Plan

 

 

 

 

 

 

 

 

 

Table of contents

Executive Summary……………………………………………………………………………3

Risks involved in Famas French Bakery………………………………………………………3

Famas French Bakery SWOT analysis………………………………………………………..3

Business risks………………………………………………………………………………….3

Identification of business risks………………………………………………………………..4

Different risks in Famas French Bakery ……………………………………………………..4

Recommendations…………………………………………………………………………….9

Conclusive recommendation…………………………………………………………………12

Conclusion……………………………………………………………………………………13

Work Cited……………………………………………………………………………………15

 

 

 

 

 

 

 

 

 

 

 

 

Executive summary

            Business expansion is a holistic process that involves all the key elements of a business entity. Famas French bakery is a company that provides baked goods to restaurants. Famas French Bakery is experiencing growth from a business that started out as a hobby in baking; it has now established itself among the 30 companies that offer services in the baking industry. The new contract between Famas French and a major fast food outlet will offer an opportunity for the business to expand. The unique products from Famas French also make it a leader in the industry while appealing to its customers.

This plan sets out to identify the liabilities and risks both internal and external that face Famas French. These risk factors threaten the business and financial stability. The risks are also relatively sustainable and can be managed. This plan therefore highlights the particular risks that confront Famas French and the potential implications they have on the business. Through risk identification, the plan sets out the numerous choices for Famas French Bakery that will avert any crisis. The final analysis establishes a conclusive set of recommendations to remedy the existing dangers and potential hazards.

Risks involved in Famas French Bakery

Famas French Bakery SWOT analysis

SWOT analysis refers to a strategic planning method that is used in the evaluation of the strengths, weaknesses or limitations, opportunities and threats that are engaged in a business venture.

Strengths

• Unique and high quality products. The products at Famas French have special and appealing qualities because of a special type of grain used in production acquired from Canada.
• Close personal involvement of the owners of the company. Gene Fama and Rich Thaler are involved in all the processes of the company offering effective management.

Weaknesses

• Unavailability of proper risk identification procedures for employee insurance.
• Sections of the management are opting to buy out their shares. The partners who are also part of the management are reconsidering their role in the business because of the increase in time and financial constraints.

Opportunities

• Venturing into new markets. Famas French has reached a new agreement that will provide a mainstream fast food restaurant with all the bakery products.
• Opportunities for expansion. Famas French has increased chances of expansion with available land.

Threats

• Cost of expansion. Famas French will have to consider the cost of expansion especially with production, storage and transportation facilities.
• Venturing into new market. The Bakery is offering products to a new market that may cause many problems in adapting to the terrain of large-scale fast food restaurants.

Business risks

Business risks refer to the possibility that a business entity may incur losses or have less than the anticipated profits for a given financial period. These problems can be experienced by a company in the course of daily operations. Business risks are influenced by a myriad of factors. These factors include; government regulations, overall economic outlook and climate, cost of input, competition, price per-unit and the level of sales volume. Companies are at not only business risk but also liquidity risk, country specific risk, exchange rate risk and financial risk. Business risk is calculated through four main ratios: financial leverage effect, contribution margin, total leverage effect and operation leverage effect. Statistical methods are incorporated for complex calculations.

Identification of business risks

Identification of business risks is important to prevent business failure especially for Famas French Bakery. The first step in risk identification involves an analysis of the source of potential external and internal triggers that can lead to problems. The potential risks are further analyzed. Events that may adversely impact the company and prevent it from achieving the strategic objectives are also considered. Possible sources of risks are also considered in the process of risk identification. Common risks associated with conducting business in a particular company’s industry or sector is also taken into consideration. Famas French bakery will consider the common hazard in the bakery industry such as health and safety risks of the employees. The risks are later classified or categorized in order to take efficient and appropriate action.

Different risks in Famas French Bakery

The categories of risks in Famas French Bakery are both internal and external. Internal risks arise from the events that happen in the business enterprise. Risks that are internal compose of those hazards that can be controlled within the company by management. These include human factors, physical risks, transportation, technological and physical factors. External risks occur because of the events that take place outside the business organization. These risks are political factors, economic factors and government regulations. All these factors affect operations at Famas French Bakery and the process of expansion.

Businesses expansion carries many implications for any type business. Growth in business causes pressures to a system or structure that may not have at that particular time or the experience required for the increased production of goods and services. Among the internal factors affecting the bakery is an unknown market. Famas French bakery is venturing into an unfamiliar market in the major fast food business. Even though the bakery provided products to restaurants, they were not mainstream restaurants. Pushing existing products at the bakery into new markets that are unfamiliar may also have unanticipated results.

In terms of human factors, some of the dangers for Famas French Bakery include; management issues, embezzlement, fraud and theft by employees. With the growth of the bakery some of the partners who also perform management roles are already citing problems with conforming to the new system. Time and financial constraints have proved to be a challenge to the partners. This is a great problem as the company risks losing some of the most efficient managers. Management plays a significant role during the growth of a firm. Managers give directions that will relieve the company of most of the negative consequences of the growth process (Robbins, et. al., 122).

Another risk posed by the exit of the managers is that their ownership interest will be “brought out’. The ownership interests may be bought by one or more of the remainder partners. These partners may have more interests as compared to the others. Therefore, they will have more power and control in the decision making process. Such managerial settings generally offer supreme power to a few individuals without the involvement of minor partners. The partners may also manipulate policies and the decision making process. Disputes and wrangles may backtrack the company from the success it has established so far (Henricks, 89).

The current management may not have the ability to cope with change or the most appropriate skills for a growing company. The bakery administration has been running a relatively small business dealing with small companies. The managers who are also the partners are not professionals in the field of management. They might be unable to control the business that is undertaking new ventures that will cause structural and financial changes. The company structure has changed with the new contract and the mainstream restaurant contract has set stringent conditions for the management in the provision of all baked products. It is clear that the fast food chain demands effectiveness and efficiency after the previous provider was dropped for failing to meet the requirements of the agreement.

Transportation of goods and services is liable to many dangers. Famas French bakery has an affiliate transport company that reduces these hazards. However, the bakery faces the risk of loss of goods during transportation or destruction of goods. Accidents can harm the health of transport workers and prevent the goods from reaching the market. Storage and warehousing is a key element for a business entity. The warehouses owned and operated by Famas French bakery that store the production inputs and outputs are under threat of theft that may lead to financial damage for the company. Famas French Bakery is on a growth process and there is need to expand the warehouse and production facilities to avoid congestion.

Financial losses can also occur in the bakery in the expansion process. Venturing into new markets may cause the company to overestimate or underestimate the financial costs. These uncertainties could cause damages in capital. Other losses can be because of embezzlement, fraud and theft by staff. As the bakery develops, some employees might see the process as an opportunity to embezzle funds suited for the expansions process. Fraudulent activities are common in most companies especially when a business is experiencing growth. Theft is also a hazard posed by some of employees. Liquidated damages can also cause loss because of the unexpected event that Famas French Bakery fails to meet the needs of the client. The contract imposes monetary penalties for Famas French if it fails to meet the product output requirement in the contract.

The company needs to enhance and expand the production facilities. The management will have to make a choice to consider the proposal to take the land next to Cuyahoga River in Cleveland, Ohio. However, they also have the option of expanding at their own area that has space for expansion. The Cuyahoga River zone is an area that has experienced a lot of controversies owing to the environmental factors. Business implications of such an environment include pressure from environmental groups to conform. Ohio State council may also control the facility because of the incentives it has given Famas French Bakery. They will impose laws that might be stringent and conditional.

Expansion in the company facilities within the space at their production area may also limit future expansion processes. Construction is also going to be a major activity within the company. Construction processes always have a variety of risks. These risks include environmental, financial and human. Problems with employee insurance can lead to financial consequences. Without proper insurance policy identification, the company may not be able to handle the financial implications that come with insurance cover. Generally, employees at bakeries are liable to a variety of health risks and other hazard because of handling machinery and accidents in the course of work.

The bakery also faces technological risks. The extension of services will mount pressure on the existing facilities. The bakery will be supplying the major fast food chain with all the needs in terms of baked goods. Their current technology may not be able to cater for the increased demands in goods. If the company does not advance in technology, there is a risk in not reaching the requirements of the clients. Lack of technology that is adaptable to future changes can be dangerous in the process of production and low quality goods. Other technological risks include power outages and machine breakdown, which occur randomly, or changes in weather such as storms.

Recommendations

            Problems at the management level can be solved with a few options. The partners who feel that their time is being stretched can move a motion that allows them to maintain the share of the company. They will however lose their position at the management level and allow the other partners to be involved in the day-to-day activities of the Famas French Bakery. The role the partners will be to oversee the processes, policies and decisions made by the management involved in the running of daily activities (Morden 24). However, they must be consulted in the major decisions within the entity.

The partners can also sell out their ownership equally to all of the remainder of the partners. Each partner will therefore have equal ownership and prevent control and manipulation from the partners with majority ownership. The partners can also consider hiring professionals in the management level. The history of Famas French Bakery as a company that started out as a hobby to grow into an enterprise may make the current management lack knowledge and expertise in an expanding business. They therefore need a professional outlook to also establish trust among clients. Hiring a professional management team or individual could help the company deal with the challenges that arise in a growing business. However, because of the hands on approach by the initial owners of the bakery, they will still be involved in key policy formulation and decision-making.

The partners can also hold their managerial position as the new manager is incorporated into the organization. The role of the manager is to offer professional leadership to boost the growth of the company without interfering with the structure and agreement between the partners. While considering the person to fill the position the person must have a vast knowledge of the bakery industry and supplying to mainstream fast food restaurants. Consideration can also be done to an individual who has overseen the growth of a company and success after establishment of an enterprise (Hastings 80). The manager will help Famas French Bakery to suitably deal with the complications that arise with the new market of a major fast food restaurant.

The bakery can prevent embezzlement by establishing a system of double signature as a necessity for the process of checks and balances. Payable and invoice verifications can be done to prevent fraud and embezzlement of funds. The company will need new employees in the course of growth. Prior to hiring staff, the management can undertake thorough background checks on the candidates seeking positions. This will help establish their level of integrity at their former workplace (Reaich, 2001). In addition, previous financial and fraud offenses can be uncovered in the past of the applicant. Stringent and analytical accounting procedures must be implemented especially because the size of the company has increased. These procedures will prevent fraud or embezzlement.

Technological risks can be countered by employing new technology that is proficient and environment friendly. The technology should cater for the increase in production and adapt to future changes in technology. Power surges and outages can be regulated by establishing a good back up system in the provision of electrical energy for lighting functions and other uses until the utility power is restored. Famas French bakery can also use green energy that is environment friendly and saves the cost of energy. This type of energy also integrates government laws on the environment and can be a form of corporate social responsibility.

            The process of expansion shows that the company can reach greater heights. It is therefore necessary that the facilities in production, transportation, storage and warehousing be expanded to suit future growth rather than focusing on the growth at the moment. The leadership at the state of Ohio is offering an opportunity for this expansion. The state offers an agreement that will grant the company tax benefits to build their new facility at a “Brownfield Rejuvenation District” that is positioned next to the Cuyahoga River in Cleveland Ohio. The region has a large area for construction. Advantages abound for such a company that is on a gradual growth process (Hess, 2010).

Construction requires a large area and even though the region near the river has some structures that are usable, Famas French can take advantage of the state incentive to improve the current facilities. In addition to expanding with the facilities in Ohio Famas French can also be incorporated into the expansion program. However, Famas French can opt to expand in the current facilities to avoid the overall costs of acquiring new land and restarting construction in the new premise. These facilities will accommodate the production area, storage and warehouses. The construction process also requires enhancement and upgrading of new equipment to cater for the increase in demand of products. Transportation at Sharpe-Linter Trucking Inc. will also experience a lot of improvement. Famas French can increase the total number of trucks or outsource transportation responsibility to another company and focus on the production process.

The overall processes of the company need to be insured. The transport department, the workers, production, output and storage require suitable insurance policies. Management has the responsibility of reaching out to the staff and uncovering some of the personal risks that may occur as they work. Once the risks are identified management can provide the best policies for the members of staff (Saxena, 92). This will help manage the problem of risk identification and reduce costs that arise from accidents and other human risks. Transportation insurance will also provide compensation for the delays and accidents that might occur in the transportation of goods and services. Insurance over the construction is necessary to protect both the public and those involved in construction. General insurance can help sustain the business from the costs and losses that may be incurred in the process of expansion.

Advantages of insurance

• General liability insurance and product liability insurance can help stabilize Famas French after loss or other issues such as accidents and injuries.
• Insurance will replace finances or income that has been lost after risks particularly during expansion at Famas French.

Limitations

• Under the process of expansion, Famas French may have greater than average risks causing many exclusions.
• In the event of a huge lawsuit or massive disaster, the policy may just cover a section of the total losses.

Conclusive recommendation

The expansion at Famas choice requires a large section of land. The offer by the State of Ohio is very essential in the process. Famas Bakery will take advantage of the tax benefits and comply with the state. Even with the risk of control, the benefits accrued from the land offer will help future expansions within Famas French, as they will have available land. Management has to consider employing the expertise of a professional manager. This individual has the potential and knowledge of corporate leadership that is necessary for the process of expansion. Professional managers also have the skills required to establish and expand a company to new terrain and markets. Partners and owners of Famas French will oversee the manager and how he implements the established policies. Therefore, the partners will not lose their influence and control over the assets and management of the company.

Enhancement of technology will help the bakery deal with the overwhelming demand and pressure to produce numerous products while still maintaining quality. The company should also increase the number of trucks in use to avert the consequences of delays. Instead outsourcing the transportation of products, the company can invest in new trucks that are more spacious. This will also reduce the overall transport cost. Risk identification is also very important. A professional and sustainable insurance cover will aid management in finding solutions to employee insurance. The policies can be purchased as a part of a bundle referred to as a business owner’s policy or separately (Briys, 2001). Fraud or embezzlement can be managed by having regular checks and balances in the finance department. Famas French can hire the service of a professional auditing body that can assess the financial records.

Conclusion

In conclusion, most business face a myriad of challenges during the process of expansion, However, the challenges should not be seen as a set back to uptake opportunities in the market but as a stage that strengthens the structure and sustainability of a business entity. The above risks should not be overlooked at Famas French Bakery. Proper implementation, restructuring and policy formulation of the above recommendations will help Famas French manage the implications of an expanding business.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Work Cited

Briys, E., & Varenne, F. . . (2001). Insurance. Chichester: John Wiley & Sons.

Henricks, Mark. Grow Your Business. Irvine, CA: Entrepreneur Press, 2001. Print.

Hess, E. D. (2010). Smart growth: Building an enduring business by managing the risks of growth. New York: Columbia Business School Publishing.

Reaich, N. (2001). Business finance. London: Letts.

Robbins, Stephen, and David  DeCenzo. Fundamentals of Management: Essential Concepts and Applications. Upper Saddle River, N.J: Prentice Hall, 2001. Print.

Morden, Tony. Principles of Management. Aldershot Ashgate, 2004. Print.

Saxena, P K. Principles of Management: A Modern Approach. New Delhi: Global India Pub, 2009. Print.

Hastings, Hunter. Improve Your Marketing to Grow Your Business: Insights and Innovation That Drive Business and Brand Growth. Upper Saddle River, N.J: Wharton School Pub, 2008. Print.