Analysis of Franchising Strategy

Analysis of Franchising Strategy FreshDirect is the leading online grocer, who serves more than 300 zip codes in Manhattan, Queens, Brooklyn, Nassua County, Riverdale, Westchester, Staten Island, New Jersey, and some areas of Connecticut, and they are providing a new way to shop for food. They are based in a 300,000-square-foot production building in Long Island City and they are the largest employers in the city. Joseph Fedele and Jason Ackerman cofounded FreshDirect in July 2001. Before FreshDirect was established, most other online grocery businesses had failed. Even with the demise of online grocery businesses for the previous decade, cofounders strongly believed that they would succeed in their business as their efficient operating strategy was built to provide high quality at lower prices. At first, however, FreshDirect was blamed for the limited service area until it expanded its area slowly. The company started to become popular by providing high quality products, such as locally grown fresh products and or ganic food at lower prices to local residents and offices. Then a few years later, people could see many refrigerated trucks of FreshDirect all over the Manhattan streets. FreshDirect has proven their efficient operating strategies, and it led to success in the online grocery industry. Since FreshDirect made profits, there has been a movement toward this online grocery industry, and they are facing a few challenges. Today, FreshDirect is facing fierce competition from traditional retail grocery, local restaurants, and other online grocers with delivery services. People have consistently questioned how fresh the products delivered by FreshDirect are because they have a limitation for seeing and feeling the products as an online grocer. According to one article, FreshDirect spent $600,000 for parking tickets as part of their operating expenses (Moskin, 2005). In addition to that, in 2007, the New York City government required a congestion charge for FreshDirect because FreshDirect has contributed to traffic jam, and the increasing gas prices are adding to their delivery expenses. One major challenge for FreshDirect is environmental issues. People complain about their idling delivery trucks which are contributing to additional exhaust fumes and taking parking spaces. Another environmental issue is using too many cardboard boxes. Their choice of which neighborhoods to deliver to is related to accused discrimination, and they have faced union related problems for unfair wages. Analysis SWOT Analysis One analytical framework that can be used for the internal and external environment of FreshDirect is SWOT analysis. The analysis of the FreshDirect issues will be broken down into â€Å"strengths, weaknesses, opportunities, and threats† (Dess, Lumpkin, Eisner & McNamara, 2012). Strengths Their wide choices of products with high-quality information on the foods that were sold Low operating expenses due to not renting expensive retail space. FreshDirect†™s efficient supply chain with no middleman. Low-cost marketing approach Cost-effective operating strategy of FreshDirect for their production facility. Extremely high standards for safety, health, and cleanliness in all areas. Strong partnerships with well-known chefs and restaurants in Manhattan Overall, FreshDirect has lots of strengths that are superior to competitors. They have provided various products to select with high quality at low cost on their well-designed website with high-quality information on the foods which are sold. With no retail location, they have lower operating expenses, resulting in more net revenues relative to traditional retail grocery businesses. Rather than having the middleman, they order all fresh products from individual suppliers and deliver directly to their customers. The less intermediaries between the distribution channel, the less the product costs. This allows FreshDirect to provide their high-quality goods at lower costs. They ha ve adopted a low-cost marketing approach by using a recommendation-based campaign from actual customers, which increases the credibility among new and existing customers. Their production facility is located close to their Manhattan customer base with 12 separate temperature zones and an SAP manufacturing software system, which have kept the best condition of their products at the optimal temperature. High standard for cleanliness leads to high quality products. Strong partnershisp have enhanced the quality and taste of the four-minute meal.