With only a few months of searching for a viable business to invest in, there wasn’t much of a search strategy. My first impression is that the three gentlemen are very eager to start their own business. If this excitement is sustainable, then it can do great good, but it can also cause you to Jump into things without thinking. The initial approach of telling everyone around them that they are in the market to buy a company is dumb and goes to show their over-enthusiasm. It’s good they were told to write up a least some brief specifications to describe the business they are interested in, but in the end, Sidelights falls outside of their brief specifications. More searching was needed before promising $75,000.
The three gentlemen should have gone to Florida to see what kind of market there was for this business, scope out their competition, search for real estate, and crunch the numbers on how much of the company they could afford to give up and still make a decent profit. Evaluate the Sidelights opportunity. What is the economic reward? Is this good for the founders’ careers? It seems the risks outweighs the potential returns and is not a good idea for the founders’ careers. Even if everything goes according to what is proposed in Exhibit 8, and they do in fact open 3 stores in the first year, this would be hardly enough to live on, especially post-graduation with loans due.
The growth pattern outlined in Exhibit 8 is extremely aggressive. When Bob Andrews purchased Sidelights, it only had 2 locations and it was noted that expansion past that point rough them problems, yet they are suggesting opening 3 locations in the first year, then 4 the second year, followed by 5 new locations for years 3, 4, and 5. The economic reward is dismal as the 3 gentlemen do not have any experience in Florida nor in the food industry, similar franchises seem to be having difficulty in Florida, competition in increasing with two new Goleta franchises being introduced, and the 3 gentlemen cannot even raise the large amount of capital needed to get going.