Small us retailers fight for surviving amid gloomy signs

Traffic is heavy along Maryland's Rockville Pike, outside Washington, DC. But the look of this commercial zone has changed over the last three years. Many large and small stores, restaurants, and other retail establishments are gone. In their place are vacancies and signs advertising space for rent. "In the last two years, from big brand stores to the little guys, I would say 20 percent of them are gone," said Paul Phan, a small business owner.

Paul Phan owns a home furnishing store on Rockville Pike. Although his showroom is full of merchandise, there are few customers these days. He says sales this year are down 30 percent. He and his wife had to lay off workers, reduce inventory and stay open longer hours just to remain in business. "We needed to look at all the avenues to reduce our costs and the number one, of course, is our rent, and I asked the landlord to help me out, which they agreed," he added. Developers who own shopping centers have slashed rents in an effort to keep tenants. But finding new shopowners to fill empty space is increasingly difficult.

The space next to Paul Phan's has been vacant for three years. Phan says when shoppers see empty storefronts, it reminds them how tough the economic environment is and they feel less inclined to buy. Phan doesn't see the trend changing anytime soon. "I wish I could give you the good answer, 'Yes, tomorrow will be a better day'," said Phan. "The thing is that consumers' habits have changed - or the way they are buying has all changed already. So for us to go back to the good old days is going to take years to rebuild."

Ellen Davis, with the National Retail Federation, notes that smaller stores have been harder hit than large retailers. "Right now for the American shopper, it is all about low price," she explained. "And because small retailers don't have economies of scale to be able to order a lot of merchandise at once, they are not able to negotiate the best prices or offer the best deals to their shoppers."

Small storeowners like Paul Phan have begun to slash prices. But for him and others that means making little or no profit. He also says he cannot get a business loan from the bank. "I want to put more money into advertising to bring more customers in," said Phan. "I want to put money into bringing in more merchandise to give the customers more choices. However, I don't have the resources in terms of the capital."

President Obama, after a White House meeting with bankers whose firms received government bailouts, said the banks should help the economy by lending more."So I urged these institutions here today to go back and take a third and fourth look about how they are operating when it comes to small business and medium sized business lending," the president said at a news briefing. Paul Phan says if he can make it through the first two quarters of 2010 he might be able to survive through some of the hardest times retailers have ever faced.

 

8. What do you think about family business within the framework of small business? Which are the major advantages and disadvantages of such ownership? Which spheres of production and service area may be involved in such business? Hope the following broadcast transcript will help you to answer these questions. Read and translate the text and be ready to discuss it from the positions of economy and linguistics:

 

WHERE EVERY DAY IS CRISTMAS

Profit reinvestment and strong community ties have made family-owned Bronner’s into possibly the world’s biggest Christmas store.

There is a place where Christmas lives all year long. It is called Bronner's CHRISTmas Wonderland in Frankenmuth, Michigan. The family-owned business calls itself the world's largest Christmas store. The late Wally Bronner started the business in nineteen forty-five. Wayne Bronner, Wally's son, is president and chief executive of what is now a multi-million dollar corporation. He learned the business from an early age. Some of his best memories are traveling to other countries with his father to find new products for the store.

Bronner's sells more than fifty thousand holiday products from seventy nations. Half of the products cost less than ten dollars. Wayne Bronner says demand for small objects to hang on Christmas trees has expanded over the years. People put more time, effort and money into decorating their homes with these ornaments, lights and religious scenes. Bronner's is famous for its nativity scenes which show the birth of Jesus Christ.

Michigan has the nation's highest unemployment rate. Bronner's has been affected by the recession, too. But not in reduced sales. WAYNE BRONNER: "Even though people are spending less, we're having more people visit here. And as a result we've actually had a sales increase."

Bronner's success is also linked to community cooperation and investment. Frankenmuth is a town of five thousand people in eastern Michigan's farm country. The town was settled by Bavarian Germans in the eighteen hundreds. It has kept its traditions alive in buildings and restaurants. Bavarian cultural themes and Bronner's huge store bring three million visitors a year. The town is the most popular place for tourists in the state.

Bronner's business is aimed at a single day of the year. But that is not too different from other businesses. WAYNE BRONNER: "About half of our business is done in the last quarter of the year, in the last three months. And actually when you contrast that with most retailers that follow the same pattern."

Wayne Bronner says the family's long-term planning and willingness to reinvest profits has grown the company into what it is today. Still, it does not hurt to build a business on a holiday celebrated worldwide. Currently, about two percent of sales are overseas. But Wayne Bronner sees room for growth, especially through the Internet.

 

9. What is franchising? Why is it such a vital element of the small-business sector of private enterprise?

10. List the advantages and disadvantages of franchising. Give some examples using your own knowledge of the market place in the region of your residence.

11. Read and translate the following franchising agreement abstracts and be ready for its discussion from the positions of business and linguistics:

 

FRANCHISING AGREEMENT

RECITALS

A. The Franchisor is the operator of the business of a Marine travel agency ("the Business ") operating under the trade name Star International ("the Trade Name") and has developed a business System (as hereinafter defined as StarSYS) and established a high quality reputation within the industry.

C. The Franchisor has agreed to grant a license to the Franchisee to operate the Business in accordance with the terms of this Agreement.

NOW IT IS AGREED AS FOLLOWS

GRANT OF FRANCHISE

2.1. In consideration of the payment of the Franchise Fee by the Franchisee to the Franchisor on the due payment dates and subject to

a) strict compliance by the Franchisee of the terms of this Agreement; and

b) the Franchisor grants to the Franchisee with effect from the Commencement Date.

2.2. The Franchisee shall not grant any sub-franchise of the Franchise Business or of any part of it or delegate any rights granted in the Agreement to a third party.

2.4. The Franchise rights extend to the Territory only and the Franchisee shall not actively offer the Services to any customer who does not have a business address within the Territory. However, for the avoidance of doubt the Services may be performed for or in connection with travel in any part of the world.

FRANCHISOR'S OBLIGATIONS

5.1. In order to assist the Franchisee in the commencement of the Franchise Business and in consideration of the payment of the Franchise Fee, the Franchisor shall:

provide an initial training programme for the Management and such other employees as may mutually agreed at a place and time designated by the Franchisor in the operation of the System (InstoneSYS) and the provision of the Services. The cost of such training shall be included in the Franchise Fee. The Franchisee shall be responsible for traveling and subsistence and accommodation expenses;

5.2. Subject to full and complete compliance by the Franchisee with the terms of this Agreement at all times the Franchisor shall:

(а) provide the Franchisee with the benefit of the Franchisor's knowledge and expertise and guidance (by way of updating and improvement of the Manual or otherwise) with regard to the application of the System (InstoneSYS) to the operation of the Franchise Business by such means at the Franchise expense as the Franchisor shall determine in agreement with the Franchisee.

(с) conduct such advertising and promotion of the Business in accordance with clause 9 below

(d) respect of as it in it's absolute discretion deems fit both within and outside of the Territory;

PAYMENT OF FEES

The Franchisee shall pay to the Franchisor the franchise fee in monthly within 30 calendar days after the date of receipt of relevant invoice.

6.1. To the extent there are additional Fees payable for additional services, the Franchisee shall make payment in accordance with the Manual upon production of an invoice. – comments: for the avoidance of any troubles with Russian control authorities it is necessary to expressly provide in this agreement the terms of payment of all fees, costs and expenses due to Franchisor.

6.5. Where any payment is required by law to be made to the Franchisor under or in connection with this Agreement such payment shall be deemed to include an obligation to pay VAT and the Franchisee shall make payment of sales tax and/or VAT to the Franchisor at the same time as it makes payment to the Franchisor.

FRANCHISEE’s OBLIGATIONS

In order to maintain the highest standards of service to be provided by the Franchisee and the Franchisor's other franchisees the Franchisee at its expense during the Term of this Agreement shall:

7.1. Initial obligations:

(a) Establish a separate company under the name of “Instone International” and the Premises for the operation of the Franchise Business and ensure they are forthwith refurbished, equipped decorated (both internally and externally) and fitted out as agreed by the parties hereto.

(b) register for Value added Tax purposes with the appropriate authorities in the Territory in case a separate limited company owned by the Franchisee is established, in order to carry on the franchise business;

© commence the Franchise Business;

(d) register and comply with all applicable laws in the Territory which are relevant to the Franchise Business including but not limited to an IATA licence and registrations and notifications which may be required in respect of personal data;

(e) Begin the process of ISO registration to ISO 9001/2000;

(f) Ensure that the franchise nature of the business is clearly stated on all correspondence and communication media as prescribed under clause 7.6(n) below.

7.4. Trade Mark.

(a) The Franchisee undertakes that it will not in any way infringe or harm the rights of the Franchisor to the Trade Name and the Trade Marks;

(b) The Franchisee shall enter into a licence agreement in respect of the Trade Marks and any other trade marks or service marks which the Franchisor may require to be used in the Franchise Business if and when required by the Franchisor at the Franchise expense with the Franchisor;

(с) The copyright property and goodwill in the Manual shall at all times be and remain the property of the Franchisor;

7.7. Employees

The Franchisee shall:

(a) procure that all staff enter into a formal contract of employment and a confidentiality undertaking with the Franchisor and the Franchisee and the Franchisee shall not permit or suffer disclosure of the Manual to any staff unless and until they have signed such a confidentiality undertaking. The Franchisee shall employ an adequate number of staff in the operation of the Franchise Business so as to ensure the highest standards of service shall ensure that all staff are properly and suitably qualified and trained and retrained as set out herein and in the Manual at the Franchisee's expense;

(b) ensure that there are an adequate number of employees allocated to the Franchise Business;

(с) ensure that all working practices for its staff comply with the relevant health and safety regulations;

7.12. Business and Marketing Plans

(a) The Franchisee has prior to the date of this Agreement agreed with the Franchisor a Business Plan and marketing plan for the first two years of this Agreement on a month by month basis (with assistance to be provided by the Franchisor);

(b) Not later than [1 ] months prior to the commencement of the second and subsequent years of this Agreement the Franchisee shall agree with the Franchisor its revised Business Plan and marketing plans for the following two years;

(c) Notwithstanding agreement by the Franchisor to such Business Plan, the Franchisor shall have no liability to the Franchisor in respect of the contents of any Business Plan.

IN WITNESS of which the parties have signed this agreement on the date set out above.

 

12. Outline the popular methods of small business operation in the global market. What do the terms licensing agreement and exporting through intermediaries mean?

13. Choose an entrepreneur or small-business owner in your area. Interview him or her about the experience of owing one’s own business. What advice would this person give about starting a business? What mistakes do new business owners commonly make? Share your findings with the class.

14. Choose a franchise company that operates outlets both in the United States and other countries. Compare the operations of the U.S. outlets with those in at least two foreign countries. Are they different, and if so, in what ways? (For example, you could compare the menu of a North American fast-food franchise with its menus in other nations). If there differences, explain you think they exist.

15. Prepare the oral composition, “Small businesses and their role within the frameworks of the private enterprise system.” Let’s discuss your composition.

16. Prepare the plan of organizing, starting and running your own small business. Chose any sphere of business activity you like. Let’s discuss your plan.*

 

 

* С дополнительными материалами для изучения и закрепления пройденной темы Вы можете ознакомиться в разделе Приложения (Chapter VIII “REFERENCE SOURCES”; APPENDIX VI).

CHAPTER II

MARKETS AND MARKETING

UNIT VII

MARKET

I. Listening

GETTING STARTED AS AN INVESTOR