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Published by: Stanford Business School
Originally published in: 2001
Version: 18 January 1999

Abstract

When the first Discovery Zone, opened January 2, 1990, was immediately popular, Chairman Jim Jorgensen and his small team decided to open multiple stores quickly in the belief that whoever was first would own the business. They decided to use franchising as the method of expansion because it would allow the company to expand rapidly, fund its growth, and secure dedicated management. However, the company was unprepared for franchising, as there was no clear market size to support each store. Jorgensen recognized that there were other questions to be answered as well: Should all the stores be the same size? Should Discovery Zone also have some company-owned stores? How would franchising change the nature of competition in this newly emerging market? At the time of the case, just three weeks after the company had been operational, the principals are thinking about these questions and what they should do next.

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Abstract

When the first Discovery Zone, opened January 2, 1990, was immediately popular, Chairman Jim Jorgensen and his small team decided to open multiple stores quickly in the belief that whoever was first would own the business. They decided to use franchising as the method of expansion because it would allow the company to expand rapidly, fund its growth, and secure dedicated management. However, the company was unprepared for franchising, as there was no clear market size to support each store. Jorgensen recognized that there were other questions to be answered as well: Should all the stores be the same size? Should Discovery Zone also have some company-owned stores? How would franchising change the nature of competition in this newly emerging market? At the time of the case, just three weeks after the company had been operational, the principals are thinking about these questions and what they should do next.

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