The U.S. is privileged to have more than 45,000 floricultural supermarkets and garden centers that sell flowers and floral decorations. 30% of the overall floral market is often made of freshly cut flowers. The floral shops earn an average income of 125,000 dollars and average sales of about 300,000 dollars every year (Adebayo et al. 2020). However, flowers have had a low market demand due to the increased demand for online gifts in recent years. Therefore, Floral Delights must capitalize on every simple pleasure brought by unexpected flowers.
Expected Annual Return on Investment
The strategic goal of the company’s return on investment is to increase franchisees, increasing the royalty funding for the franchise’s international expansion in the next year of operation after initially verifying the concepts and branding. By the end of the third year of operation, the company should achieve a 0.0006% international market share.
Furthermore, the franchise objective at the first year of operation should aim at achieving total annual revenue of more than 2 million dollars for the initial startup revenue and 3 million dollars for the same in the second year of operation. The objective for the second year of operation would be to achieve an average monthly revenue of 30,000 dollars to provide 2,100 the monthly royalties worth 2,100 dollars. Also, the franchisee’s objective would be to achieve a third of their revenues from independent sales of flowers and two-thirds from subscription contracts, implying 10,000 dollars in terms of individual sales and 20,000 dollars in terms of subscriptions, respectively.
The pricing strategy for the franchisee will rely on the form of cost-based pricing while considering geographical pricing. This pricing model will enable variations required in the supply chain flux and delivery fees; these are geographically dependent. Furthermore, cost-based pricing promotes natural fluctuations initiated by varying seasons and weather conditions that change the floral industry. The American franchisees will be encouraged to increase their costs to conform with the ones presented by global competitors such as Bloom Nation and Organic Bouquet. This similarly goes for overseas franchisees during the second year of operation, only to compare their prices with those of Teleflora and ProFlowers.
Nonetheless, subscribers’ offerings will be priced under the fixed recurring model to charge the customer in cycles. It will also be crucial to recommend plants instead of floral arrangements to reduce spoilage, subscription fees, and the cost of delivery. The cost presented to consumers will incorporate installment and regular maintenance costs and the setup display and replacement costs. The initial installation costs will be standard enough to offer 10% discounts to the subscribers for subsequent replacement installations.
Suppose all U.S. franchisees contribute approximately 5,000 dollars each in terms of royalties during the first year of operation and 60 dollars in average sales. In that case, they will be required to upgrade their sales to approximately 83 dollars monthly. However, these statistics will depend on the signed subscription services, successful daily and weekly deals, and the month’s season.
The Floral Delights will achieve its annual budget by estimating the need for increasing the number of franchisees during the first year of operation. This way, the business is likely to grow in the subsequent years, thus increasing the franchisees by 50% more in the second financial year to cover international markets. This increase is expected to occur in the third year while focusing on steady growth, promoting the foothold within the firm, and supporting franchisees to grow themselves.
Adebayo, I. A., Pam, V. K., Arsad, H., & Samian, M. R. (2020). The Global Floriculture Industry: Status and Future Prospects. In The Global Floriculture Industry (pp. 1-14). Apple Academic Press.