Forest Of Flowers.docx

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Business Administration
Business Administration 1220E
Sean Burkett

Forest Of Flowers You: Brad MacDougall, account manager at the London Ontario branch of the Business Development Bank Of Canada (September 17, 2003) Them: Forest of Flowers Inc, a client of MDC, Wayne Watson Requesting: a loan of $120000 to finance the opening of two additional London retail locations (to begin business in January 2004) Forest Of Flowers  Founded in 1996 with the establishment of three retail outlets  Prior, Watson has 25-year career in retail specializing in merchandising, franchising and distribution  Forest of Flowers products and services ranging from plants and freshly cut flowers to customized arrangements for special occasions such as weddings, holidays, and funerals (excellent reputation with London) The 1998 Expansion  Great success with first three stores, Watson opened two additional locations 1998  Positioned stores in high traffic areas  Although rent in these prime locations was costly, he believed that the additional sales offset the premium lease payments  MacDougall arranged the loan for 1998 expansion; the loan was currently in good standing with all payments up to date Operations  Watson was highly committed  Continually reinvested operating profits back into the company and contributed up to $80K of personal funds to avert the need for additional bank financing  Each store was responsible for providing daily, weekly, and monthly reports  Staff grew to total of 10 full-time and 18 part-time employees, including 8 professional floral designers  Healthy profits allowed for the implementation of a management training program and employee pay rates up to 25% above the industry average  Forest of Flowers introduced a quality guarantee that promised the best service and permitted a refund on any item that failed to meet consumer expectations  Major difference is that FOF streamlined distribution chain and large volume purchases  Due to their small size, competitors in the London market were forced buy through wholesaler purchasing agents  FOF could meet the volume requirements demanded by international growers and eliminated wholesalers and purchasing agents from its buying process (allowed Watson to sell many floral products more cheaply than other florists could purchase from wholesalers) Sales  Over 72000 visited the five locations each year, producing average annual store sales of $432000 and bringing total sales in 2003 to $2.1 million  Floral market was subject to seasonal fluctuations  80% of FOF sales transactions were special occasion or gift purchases  Valentine’s Day, Mother’s Day, Easter and Christmas were the busiest times of year, 40% of annual sales (V-day could generate $180K in sales in three days)  Additional $66000 was needed between Oct-Nov to finance slower sales A Second Expansion  Early 2003, survey conducted and split local competitive landscape into two distinct segments- traditional florists and supermarkets, with traditional florists maintaining a slight edge for 54% of the
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