Franchising Model Assessment: Guzman Y Gomez Restaurant Expansion Plan

This report provides a literature review and analysis of the franchising model for Guzman Y Gomez, an Australian Tex-Mex restaurant chain. The report explores the restaurant's current operations, expansion plans, and the benefits of using a franchise model to expand its business nationally and internationally. It examines the potential market, marketing mix, and strategic considerations, including the advantages and disadvantages of franchising. The report also discusses business expansion strategies, market trends, customer demand, and the legal and financial aspects of franchising. The analysis includes a comparison of different restaurant franchise models, such as fast food and full-service restaurants, and examples of successful franchises. The report concludes with a discussion of the contractual agreements, financial implications, and the overall potential for growth through franchising, emphasizing the importance of market analysis, customer satisfaction, and strategic planning for the restaurant's expansion.

Running head: Franchising Model for Guzman Y Gomez 1
Literature review
Guzman Y Gomez restaurant

Franchising Model for Guzman Y Gomez 2
Literature review
Guzman Y Gomez is a licensed restaurant of Australia. It has specialization in Tex-Mex
dishes such as nachos, burritos, and quesadillas and may other special items. It is a business of
franchised with more than 65 stores in operation throughout Australia. Along with that it has 3
franchisee in Singapore and 4 in the country of Japan. It is the restaurant which wants to expand
its business with new stores around Australia. The first store of this restaurant has opened in
Newtown, Sydney in 2006. It wants to expand its business in near future by using franchise
model. The taste of the food of this restaurant will enhance the range of customers. The idea
about opening franchisee of restaurant will allow them to earn more profits. Guzman Y Gomez
has five strong restaurant chains in Sydney involving a new store in the bustling Centre of MLC.
It is planning to expand its business nationally as a franchise. It is the business which put lot of
efforts to develop its business. in the begin point there were only 15 staff operations in Newtown
but now it has more than 100 staff and $4 million annual revenue. It is essential for restaurant to
analyze all factors before expanding its business by using franchisee model. Guzman y
Gomez needs to analyze the potential marketers, marketing mix, STP analysis, communication
plan, promotional plan and resources. It wants to expand its business because it found that its
taste is liken by many customers and it would be benefit for the company to adopt the franchise
model because it will support to enhance the growth of the restaurant in particular stream
appropriately.
Guzman Y Gomez is the fastest growing brand in Australia that serves fresh and
delicious Mexican food and delivers rapidly. It is the passion and pride of Guzman Y Gomez to

Franchising Model for Guzman Y Gomez 3
make Mexican food and make customer satisfied about the taste. The menu of this restaurant is
to make the real and delicious dishes of Mexican and cut above the competition. It is the belief of
this restaurant that there are two kinds of people in the world. One is who prefer fresh guacamole
and other one is wrong. It is the concept of this restaurant to deliver the fresh food to the
customer because it is the meal only as good as it is made up of. It believes to make the
foundation of the business solid without any compromising and to develop its concept it never
compromise with its products and services. There are three store of Guzman: strips, food courts
and thru, but they have common ting in three stores that is fast delivery.
There are so many benefits of expanding the business. The purpose of Guzman restaurant
is to enhance the franchisee of this restaurant in so many places. New personnel, broad customer
base, relocation possibilities, favorable financial opportunities and considerations are some
benefits of expanding the business. Guzman would get opportunity to staff the restaurant with
new skilled, qualified and experienced personnel with new range of ideas and views. It would
enhance the opportunities of employment along with the growth of the business. These new hired
people will be helpful for streamline process and would be able to bring then fresh ideas for the
organization. Business expansion offer has a point of advantage to wider their business in to a
broader customer. It will enhance the pool of potential customers and bring the possible benefits
in the favor of the growth of the restaurant. Effective expansion is able to come in the mind of
customers foremost and they get attract towards experience the latest changes. Successful
business expansion is able to put the business in the positive place when it comes in the situation
of acquiring necessary financing. This financing might be the lifeline of the business in the time
of expanding process.

Franchising Model for Guzman Y Gomez 4
Figure 1: Guzman Y Gomez
Source: (Nadine, 2013).
Effective business expansion will be helpful to enhance the market share and a solid
financial position might acquire financing. Along with that the major benefits of expanding
business is get the opportunity of relocation possibilities. Relocation will allow business to get
the experience of different countries and their political, geographical, technological and legal
challenges. These all challenges Guzman has to face wisely because wise business owners
consider the benefits of such scenarios if relocation is possible. Increased access to suppliers and
logistics suppliers can also be considered as essential element to contemplate relocation.
Business expansion is only good when organization is ready to accept the changes and potential
challenges otherwise it may cause the issue for the growth of the business. It is important for the
Guzman to focus on profitability level while expanding the business in the comparison of growth
level. The owner of the business can periodically review the return on investment from an
expansion. Guzman wants to expand its business with using the franchise model. It is required
for the Guzman to analyze the franchise model positively and negatively and know about the

Franchising Model for Guzman Y Gomez 5
pros and cons before implementing it. Along with that it should consider other model or sub
model of franchise model to expand its business widely. It will help organization to take decision
appropriately (Lee, Hallak & Sardeshmukh, 2016).
To expand its business effectively, restaurant should consider the business expansion
strategies as well. Business expansion strategy will be helpful to analyze the different factors for
the business from local to global. It is a strategy which is adopted by the organization to attain
the high level of growth in the comparison of past experienced. It is the plan of Guzman to
expand its business with using the franchising model. It should consider the business expanding
strategies initially. There is some ways which has to follow by the restaurant to expand its
business in effective way. These ways are increasing the sales of products and services in the
existing market because it is the risk free initiates to expand its business. As Guzman has
specialized in Chinese foods, little changes in the menu will enhance the attraction of the
customer towards the business. Business expansion is required to develop the market segment to
move into new geography. Guzman should analyze the market trends by researching the market.
It can be done via new marketing strategies. A restaurant is able industry to run and expand its
business via making supply chain. But for this it must be cognizant of what made the first
location a success. Franchisee or license is the elements of fast growing (Maslova, Timyasheva,
Nikishin, Tyunik, Nikishin & Pankina, 2016). Franchise agreement cost is very high to prepare.
It needs to be flexible because it is the factor which can be successful if the owner of the
organization are willing for travel and handle the business globally. Join force and strategic
alliance are an idea of expansion of business by merging the two companies (Stanković, 2017). It
has the trick to find the new partners. These partners can be new distributors that should have the
expectations of higher profitability. Guzman can expand its business and move global by

Franchising Model for Guzman Y Gomez 6
growing markets, rising customers spending and improve the climate of business environment.
To expand its business within the use of franchising model, Guzman need to focus on demand of
customer, attain legal and assistance of accounting (Kacker, Dant, Emerson & Coughlan, 2016).
As it mentioned in the point of rationale that business want to expand its business through
franchise model because it is the safest model which is beyond from all potential risks.
Franchising has various benefits which is helpful for not only to the seller but also for buyer. It is
the benefit of franchisor to use money of other’s people to expand its business appropriately. The
benefits of franchise model include a great chance of success in a sole proprietorship, initiate
training and ongoing support, the power of selling of particular brand, use of manufactured
business model, lead generation of customers, network of peers and national and regional
advertising campaigns to provide moral support through an intranet of company, franchisee
associations and annual conference (Sohn, Tang & Jang, 2014). Franchise model is seceded
particularly with known franchises such as McDonald’s, Subway, and Panerra Bread. Every coin
has two aspect one is able to show the positive part and another one is able to negative parts.
Same with franchise model, it has some downsides as well. Guzman Y Gomez needs to utilize
the positive factors of franchising model instead of seeing negative aspects.
Franchisees need to use the colors of the company and approved those colors on their
walls. At significant expenses, Guzman Y Gomez can redesign their units. The franchisee is
done with the basis of long term contract which make ensure that the business of this particular
brand will be grown effectively. The model of franchising is all about following the systems
(Noh, Yun, Jang, Jung & Cho, 2014). With the support of franchisee, the restaurant will grow
certainly. It is because the franchisee has the confidence about the model of franchisee and
purchases it (Boulay, Caemmerer, Evanschitzky & Duniach, 2016). Franchisee feels that it

Franchising Model for Guzman Y Gomez 7
would be possible for him to expand its business and grow easily if they follow the system
perfectly. It is important for the Guzman to consider regional variations appropriately and
suggest some for amendments. Business expansion is essential factor for the purpose of growth
and if organization needs to expand its business, it needs to analyze the trend of market and taste
of customers by taking reviews from them (Chiou & Droge, 2015). A good franchisor know that
if they are leaving the system without attaining approval from the first franchisor, theory would
be able to violate the agreement if franchise. It may cause them to have their responsibilities by
utilizing the name of franchisors and can revoke the business model.
There is a various kind of restaurant franchises such as fast food, fast casual and full
services. Fast food is also known as quick services restaurants which are not specialized in
provide table services. Fast casual is considered as the between medium of full restaurants and
fast food restaurants such as café and takeout restaurants. Full services are franchise restaurants
that offer table services and a complete selection of core menu of food and drink options and
allow customers to payment after having the dinner or leaving the table (Emerson, Mulley &
Bliemer, 2016).
The model of franchisee will be advantageous for the restaurant because it is the model
which can be expanded easily in local and global. There are so many examples of restaurant that
has utilized the franchising options of marketing entry and proved that they have chosen most
correct option to expand its business globally (Chen & Tsai, 2016). These examples are
McDonalds, KFC, Pizza hut, Doca bell and Buffallo wild wing which used franchise model. The
main question arises that how it works. In a model of franchise, Guzman as a franchisor and
franchisee involve in the contractual agreement which is made on the basis of selling the
products and services of Guzman. The franchisee of the products of Guzman takes the burden of

Franchising Model for Guzman Y Gomez 8
enhancing the restaurants, staffing, overseeing the daily activity operations and handling the
costs for running the restaurant. The franchisor (Guzman restaurant) may own the place of the
restaurant and lease it to a franchisee. In such process, franchisee will pay a certain initial fees
along with royalties from the sale of restaurant to the franchisor. It is the form of profitability and
the Guzman will be able to gain the advantage in the form of royalty. In case if the franchisee
leases the destination from the franchisor, in such case franchisee will be liable to pay the rent of
an entity as well. It is the condition of the franchising model that franchisor need to report entire
incomes in the form of revenue. The margin goes at higher range because of eliminated
operational (Carins & Rundle-Thiele, 2014).
The literature review notes that this model has the benefits which involve the opportunity
for the company to grow faster in same industry by expanding its menu globally. It is done
because in that case the franchisor provides the capital for building the ready restaurant for
operation. It would be the benefit point for the Guzman if the store under forms. Along with that
it would be the benefitted point for the franchisor because franchisor will get more time to focus
on products and research on operations in an appropriate manner (Gerhardt, Hazen & Joiner,
2017). Since the restaurant and its products is owned by the franchisee, who is highly
enthusiastic to make the restaurant a success. The other benefits point for the restaurant of
Guzman that it would be able to get the instant brand recognition and gain the trust of the
customers which usually take many years to build (Calderón & Ruiz, 2015).
Each line has two ends which show advantage and drawback, same strategy is applying
on franchising model. The downside of this model is that company or business has less control
over the management. Along with that the business enters into the formal agreement (Das Nair &
Dube, 2015). It has been analyzed that selling a franchise has the potential risk as well such as if

Franchising Model for Guzman Y Gomez 9
the performance of franchisee is not good and franchisee is unable to perform good at higher
level or as per expectation, it may fall the reputation of the company in the view of customers. It
decreases the value of products and gives the opportunity to competitor to move ahead. A weaker
core community is another disadvantage of franchising model. Innovation challenges can be the
core reason of drawback of franchising model because it is not possible every time that
franchiser adapt new technology in easiest manner (Slater, Mohr & Sengupta, 2014). The outlet
of Guzman restaurant will be in other country and it would be difficult for the restaurant to force
its franchisor to adapt quickly because a change depends upon the environment.
However, there are so many drawbacks of franchising model but Guzman is able to grab
the opportunity systematically and appropriately by leaving the disadvantageous point. It has
been stated by the Steven Marks founder of Guzman to expand plan which is focused initially on
Newtown and then interstate. “We plan to open the franchise in our existing hub in Sydney
including north and west store. We are planning also to sell our franchises in our existing
location. It would be big initiation from our side to expand our business nationally buy sing the
franchise model. As we have seen that the great response we achieved from the launching and
many inquiries for franchise opportunity.” It has been realized by Guzman that so many
potentially great owners were out there that was eager about the food of Mexican and its culture.
However, it has been decided by the founder of Guzman that franchise of its business open
within the first 12 months to just for 12 outlets. The business model of Guzman Y Gomez was
purpose to build the current economy Marks said, “We have inaugurated niche which is rapid
casual revolution that has been accepted in the US, the quality of serving is very fast. Australia
has quality food and expensive restaurants. The main aim of this restaurant is to provide the high
quality along with affordable food (Coombes & Nicholson, 2013).

Franchising Model for Guzman Y Gomez 10
The main aim of this literature review to focus on the Mexican restaurant Guzman Y
Gomez that wants to expand its business by adopting franchise model. It is required for the
business to analyze the business environment before adopting any model for its business.
Restaurant has to research on potential marketers (Dahles & Susilowati, 2015). To find the
Potential marketers, restaurant needs to analyze the marketing mix which contains four Ps of
product, place, promotion and price. STP analysis helps Guzman to analyze the situational,
targeting and positioning of the business. It would be helpful to analyze the current condition of
the market and make able business to set up the target market. Positioning helps Guzman to
establish the image of brand in the eye of the customer. To expand its business, Guzman should
be active to find out the resources to develop its business. Without promotional activities, no one
can be able to see the changes and growth of the business. It is required for the business to
explore new strategies of promotional activities that enhance the promotion of the restaurant
(King & King, 2016). The promotion of product and services is most common form of
marketing. Promotional activities for Guzman can be done via advertising in news paper, radio,
online pages, television and many more. It is the key element of marketing mix. Communication
plan is the business plan that describes the strategy of the organization that what it wants to
accomplish with the information. It is considered as the important element for daily activities. It
is a living document which involves media activities as per internal and external
communications. Along with that it is able to clarify the priorities of an organization, staff
assignments and target audience (Santos, Pache & Birkholz, 2015).

Franchising Model for Guzman Y Gomez 11
Figure 2: Business Choice model
Source: (Kacker, Dant, Emerson & Coughlan, 2016).
It has been identified that franchising model has the lesser risk. It would be able to
enhance the business without putting a lot of efforts. There is a choice of business model which
reflected the high and low factor of franchised business. it can be seen that education , risk
tolerance, family participants, support provided, training provided, proven system, positive view
of franchising and investment level are some factors which enhance the interest of franchising. It
is required for the business to analyze the environment appropriately before adopting the
franchise model. It suggests that franchisees are enthusiasm to make an option and when
evaluate in alliance with time taken which is tend to be voluntary (Chiou & Droge, 2015). It has
been appeared that Guzman should be aware of the upper level of research and information that
substitute investors are likely to need. To take benefit of the pool, franchisor need to win the bad
perceptions of franchising as a business model, which conquer in the group of potential
customers.

Franchising Model for Guzman Y Gomez 12