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Below is a chart that accurately portrays the relationship between impact and likelihood for the franchising proposal.

High Likelihood
High Likelihood
Low Impact
High Likelihood
Medium Impact
High Likelihood
High Impact
Medium Likelihood
Medium Likelihood
Low Impact
Medium Likelihood
Medium Impact
Medium Likelihood
High Impact
Low Likelihood
Low Likelihood
Low Impact
Low Likelihood
Medium Impact
Low Likelihood
High Impact
Low Impact Medium Impact High Impact

1. Political Environment

La Vie lacks experience conducting business in Asia, and this is the company’s first expansion outside of Europe. To minimize the risks, La Vie should 1) employ a local expert to assist with political and cultural differences or 2) form a joint venture with an experienced Asian retailer. Medium Impact, High Likelihood

2. Fast Growth

The franchising proposal increases the number of shops to be opened over the next 4 years from 150 to 250. There is inherent risk with fast growth, since the company must scale other operations accordingly. Appropriate and mindful scaling mitigates this risk. Medium impact, Medium Likelihood

3. Legal Issues

Laws and regulations differ greatly from country to country. Some Asian countries (specifically China) require some local ownership of all business (i.e., foreign companies must form joint ventures with Chinese firms in order to conduct business legally in China). Franchising would overcome these hurdles and could also bring local expertise to La Vie’s expansion in to the Asian market. High Impact, Medium Likelihood

4. Capital Expenditure

Average capital needed to open a shop is €4.4 million. Under a franchising agreement, the franchisee would be responsible for producing the capital. This significantly reduces the financial risk for La Vie. Low Impact, High Likelihood

5. Operating Profit

The average operating profit that La Vie generates from its own managed shops is considerably higher than the profit that it can make from franchised shops. However, the lower profitability of franchised shops is offset by a greater number of shop openings over the 4-year period. Medium Impact, Medium Likelihood

6. Franchise Management

La Vie will need to manage all aspects of the franchised shops to ensure adherence to the franchising agreement (i.e., conforming to La Vie’s branding, and not selling non-La Vie products). However, management time will not need to be spent on managing day-to-day operations or staff recruitment, as that will be the responsibility of the franchisee. Low Impact, Medium Likelihood

7. Recruitment Issues

It will be difficult to quickly find and recruit 150 franchisees with the requisite capital and experience, who want to own and run shops in Asia. High Impact, Medium Likelihood

8. IP Issues

The rights to intellectual property are not as highly regulated and enforced in most Asian countries as they are in Europe. La Vie would be supplying franchised shops with all of the current new clothing designs; it is a risk that the franchisees could “copy” the clothes to sell in other shops, or sell the designs to other retailers. High Impact, Low Likelihood

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