Marketing breakthroughs are rare because customer insights are subjective. Nevertheless, a brand is the most durable and productive asset any company can have. This company is a vintage stock investment opportunity since it combines so many consumer delights into its sandwiches and pizzas. The brand name is not only appealing, but is also a blend of the most strategic marketing values.
The company provides an unusual dining experience within an affordable price range, typically less than $10 a head for a satiating meal in a refreshing ambience. There are virtually unlimited permutations to meet individual preferences, and the appeal is to people of all ages, and across the globe.
The company has incurred enormous losses since its inception, largely because it operates its own restaurants as training hubs, from its base in Denver, Colorado. The management has decided to take this business model further, by opening a new training restaurant. The formula for future profits seems to rest on each training restaurant serving around 40 franchised outlets. It appears that the ingenuity of the company’s marketing experts is not replicated in its finance function!
Since franchise management is so central to this company’s profitable operations, the training expenses should be amortized rather than get written off altogether in a single financial year. The franchise is so valuable that some of the training expenses should be borne by beneficiaries, and the royalties could also follow a balloon pattern. This would not only improve the company’s Net Present Value for investors, but would also protect it against probable losses of know-how.
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