1.

Assuming Bachands proposed system is accepted; compare the profitability of a

franchised PK store to a corporate-owned store.
Profitability would increase because:
Recruitment
In terms of recruitment, The Bachand's Corporate store model is more flexible than Franschised
PK store as more potential managers can be recruited if constraint of $60,000 of un-borrowed
funds can be removed. This is reducing the option of having more stores and ultimately affecting
the profitability.
Budgeting
The budget preparation process followed by Bachand's model is more logical than that of
franchise model. Interacting with district managers would give a more reasonable variance rather
than submitting the budget to the corporate. It would reduce the misleading notation to managers
from poor performing segments.
Evaluation
The evaluation reports of different managers will be used to improve the service delivery and
hard work of the managers since they will be rewarded and motivated hence it will increase
future profits of the stores.
Profitability would decrease because:
a) Corporate stores managers may not deliver because they are not committed in any way to their
stores, some may even go up to an extent of defrauding the money for the organization
because they know the organization will buy the store back and run corporately.
b) The Cost of motivating corporate managers may increase as time goes by and the ratio could
be adverse to the profitability of the organization hence may not even meet optimum
obligation.
c) There would be no team work to meet the one vision for the organization i.e. some would be
doing so good and others could be doing so bad hence there would be no profit maximization.
2. What changes, if any, would you make to the current control system?
a) There is only one change I would suggest for the current control system, incentives and
bonuses should be realistic and achievable after a certain period of time.
b) Transfer pricing is not realistic for corporate store model because they will have expense
nearly the same percentage as the 40% on Franchise model to execute as a unit for the purposes
of the support that it would have been given by the corporate division in franchise model.
3. What recommendations would you give to Bachand regarding his proposed control
system for corporate-owned stores?

a) To exhaust all possible expenses to be incurred and the effect to its profitability.
b) To take a survey of non-participatory management and teamwork in an organization to explore
all means and ways to manage and optimize the profitability of the organization.
4. Should Hawthorne move to the corporate-owned store model for PK retail stores?
Explain your position.
Yes, Hawthorne should move to corporate owned store model other than franchise FK model
because:
a) The system in Corporate owned store model is more bureaucratic than in Franchise FK model
which is more Rigid and demanding.
b) For fast pace in expansion of business the motivation of stores managers in corporate owned
model is the most appropriate but after some time to be reviewed and maximum targets to be
met not to overcome the organizational Mission and Vision.