VB is an established vegan burger chain in country X. Its Unique Selling Point (USP) is high quality, good value vegan meals. Hilda, the Managing Director, grew the business without external investment and within 5 years had 10 restaurants in the north of country X. VB was featured in a documentary exploring successful entrepreneurs in country X. This boosted VB's national brand awareness. As a result, VB changed its objective from developing brand awareness to increasing market share. VB chose a franchise model to meet this objective. VB sold 25 franchise licenses in country X in 5 years. Two years ago, primary market research indicated pizza was a popular fast food in country X. VB added vegan pizza to its menu. Each pizza oven had a significant capital cost and required on-the-job training of the employees. VB invested in a six-month national television marketing campaign to promote the new menu item. Table 2.1 shows the financial data for producing pizzas. Table 2.1 Financial data for producing pizzas | | per restaurant ($) | |:---------------------------------|:-----------------------| | Fixed costs per month | 1000 | | Average variable costs per pizza | 2 | | Average selling price per pizza | 6 | Vegan pizza has been sold by VB for two years. Tony, the Business Development Manager, provided sales data for these two years. Each restaurant sells on average 500 pizzas and 4500 burgers per month. Tony is worried that Patel's Pizza, an established pizza franchise, is more popular. Tony has suggested removing pizza from the menu and repurposing the pizza ovens to cook hot desserts such as apple pies that complement the main burger meal. Hilda wants to continue marketing vegan pizza, as vegan food is currently very popular and the brand needs time and more marketing to be successful.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. [1] the legal right/contract for another business to use the: name; logo; marketing methods
2. [1] need to follow franchisor's requirements
3. [1] franchise fee
4. [1] share of profits (royalty fee) to franchisor
5. [1] trades under an established brand name
6. [1] franchisee has access to training/support
7. [1] franchisee cannot make decisions without franchisor's approval
8. [1] Knowledge of market share: sales of the business/product / total market sales × 100 OR the sales of a specific business/product
9. [1] Explanation of market share: comparison to the sales in the total market
10. [1] Context: Application to a business context, e.g. VB's objective changed to increasing market share after selling 25 franchise licenses in Country X.
11. [3] Correct answer: 250 (units) (allow 250)
12. [2] Correct formula for the breakeven output (words or figures) AND correct calculation of the contribution per pizza OR an incorrect answer for the breakeven output with one mistake allowing OFR for final stage.
13. [1] Correct formula for the breakeven output (words or figures) OR correct calculation of the contribution per pizza
14. [1] Knowledge of a reason to have accurate cost information: to calculate profit or loss / to make pricing and business decisions / to predict cashflow / to measure performance / to set budgets / to allocate resources
15. [1] Explanation of a reason to have accurate cost information: e.g. to calculate profit or loss, a business needs to know its costs and revenues.
16. [1] Context: Applied to VB, e.g. accurate cost information for VB's vegan pizza with fixed costs of $1000 per month and variable costs of $2 per pizza would help calculate profit per pizza.
17. [2] (AO1) Knowledge of benefits of on-the-job training: provided by managers or experienced colleagues – so trainers use first-hand experience to train / methods include demonstration/instruction/coaching/job rotation / low cost/off-the-job training is not needed / learn while doing the actual job / employee will produce output whilst training / training in a live/real situation / training tailored to working at VB / the employee will get to know colleagues / the employee will learn about the organisational culture
18. [2] (AO2) Context applied to a benefit for on-the-job training: breakeven output is 250 pizzas per month / any data from Table 2.1 / objective changed from developing brand awareness to increasing market share / franchise / vegan pizza has been sold by VB for two years / each restaurant sells on average 500 pizzas and 4500 burgers per month / Patel's Pizza is a competing business / VB ran a six-month national television marketing campaign to promote the new vegan pizza
19. [4] (AO3) Developed analysis identifying connections between causes, impacts and/or consequences of two points:
20. on-the-job training is cheaper than off-the-job training; low risk – increase profits
21. utilise trainers from within the business; motivates the employees chosen to do the training – increased productivity/reduced labour turnover
22. increases productivity; employees trained while working – increases revenue/profits
23. tailored to the needs of VB; trains on the specific machinery used/menu served – less induction training needed
24. trainee will get to know colleagues whilst training; better team working – better customer service/customer satisfaction
25. [2] (AO1) Knowledge of marketing: the marketing mix (four Ps) – getting the right product at the right price and making customers aware of it using the right promotional methods / market research / the nature of marketing
26. [2] (AO2) Context applied to features of marketing: established vegan burger chain – USP for high quality, good value vegan meals / featured on a documentary for successful entrepreneurs in country X / breakeven output is 250 pizzas per month / any data from Table 2.1 / objective changed from developing brand awareness to increasing market share / franchise / primary market research two years ago found pizza was a popular fast food / vegan pizza has been sold by VB for two years / each restaurant sells on average 500 pizzas and 4500 burgers per month / profit for vegan pizza is 1000 per month (500 per month × 4 = $2000 – $1000 fixed cost) / Patel's Pizza is a competing business / VB ran a six-month national television marketing campaign to promote the new vegan pizza
27. [4] (AO3) Developed analysis identifying connections between causes, impacts and/or consequences (Impacts of continuing to market vegan pizza):
28. pizza is a popular fast food – VB has a USP for high quality, good value vegan meals – may gain a higher market share - increase revenues
29. VB restaurants sell 500 pizzas per month – loyal customers – removing the vegan pizza from the menu may upset loyal customers - could reduce overall sales revenue
30. Patel's Pizza may capitalise on the vegan trend – pizza is their USP – VB may lose market share – reduce overall profits
31. changing to hot desserts means that the pizza ovens need to be repurposed – expensive to change – reducing profits
32. demand for hot desserts is unknown whereas two years ago primary market research stated that pizza was a popular fast food - little demand for hot desserts - reduced sales revenue
33. [4] (AO3) Developed analysis identifying connections between causes, impacts and/or consequences (Impacts of not continuing to market vegan pizza):
34. VB vegan pizzas need more marketing to be successful – increased cost – reduced profitability (if revenue does not increase by a sufficient amount to offset the increased cost)
35. 90% of VB's sales are burgers – pizza only accounts for 10% of sales – pizza reduces brand identity – reduced market share
36. hot desserts complement the main burger meal – increased demand for burgers as customers can enjoy a complete meal - increased market share
37. market share/investment into marketing campaign for pizza is lost – reduces offering – could lead to a negative impact on entrepreneurial success – impact on personal reputation
38. new marketing campaign may be needed to support the launch of the hot desserts – may be added to the franchise fee – could lead to loss of franchises - reduction in the number of outlets
39. [6] (AO4) Evaluation: A developed judgement/conclusion made in the business context, balancing arguments:
40. a judgement over whether VB should continue to market vegan pizza.
41. a judgement over the most likely/important impacts of continuing/not continuing to market vegan pizza
42. what the judgement might depend upon, including the importance of current trends, levels of customer loyalty, impact on USP and reputation, impact of competition, appetite of franchisees for more training costs/increased marketing, impact of potential loss of reputation
43. Exemplar (L3): VB should continue to market vegan pizza because it has spent money purchasing pizza making equipment in each of its restaurants which would be wasted if it withdrew from the market. The business currently sells 500 pizzas per month which is likely to grow as it takes more than two years to become an established pizza seller.
44. Exemplar (L3): VB should not continue to market vegan pizza and sell hot desserts which complement the main burger meal and therefore attract new customers seeking a complete meal to VB. Patel's Pizzas is more popular and VB cannot compete with this business.
45. Exemplar (L3): Whether VB continues to market vegan pizza depends upon its level of experience. VB is experienced in vegan food. The capital expenditure for pizza making equipment was low so the business will not lose a lot of money by withdrawing from the pizza market.