Vitalia Franchise

Introduction

Catherine (“Cathy”) Anne Hoffmann, founder and CEO of Vitalia Franchise, sat back in her airplane seat. “What a day!” she thought, “what a month, what a year!” The sun started to shine through the Madrid clouds on this bitterly cold January morning. As the plane started to take off, Cathy thought “Up, up and away, just like my company!”

Her head was still spinning from the meeting she had just ended in which an investor had put €3,000,000 on the table to open 10 new day care centers for the elderly next year. Opening 10 centers was the main focus of her strategic plan but she had designed it through a franchising strategy. She already had 12 other centers, one of her own and 11 franchised. “I need to discuss this in Monday’s executive committee; we need to analyze all the alternatives. As soon as I land, I’ll call Cristina, my deputy director, and Jesús, my CFO.”

Cathy was 32 years old but at that moment she felt 50. She had started her own center 6 years previously and the franchise expansion just 18 months ago. She provided care to elderly people using her own “Hoffmann Method.” She could vividly remember how, two years ago, she had decided to expand. It was a high-risk strategy, but she had always been sure that she would achieve her goals. Her passion had also convinced Cristina, and they had embarked on the adventure together. Cathy smiled to herself when she remembered the tiny office where they had started. Everything had changed since then, and this last year had been a roller coaster ride; to open seven centers in a year had taken an enormous effort. Her dream was coming true and she wanted to make the right decision.

Should she change her growth strategy?

Franchising had positive and negative aspects: On the one hand, maintaining control over the proper application of the Hoffmann Method was becoming an issue, and having her own centers would solve the problem. On the other hand, the investor would insist on having a say in strategy and management, which would alter her relationship with her Board. Her present board members trusted her and allowed her complete freedom to decide what steps to follow. The fact that she personally owned 64% of the company probably helped.

How should she face growth? Should she convince the investor to give her the money for other purposes? Was the growth rate going to affect the quality of service that she provided? Her motto for Vitalia was “Providing the same affection, with more resources.” Was she now putting that core element at risk?

Professor Regina E. Herzlinger and Professor Beatriz Muñoz-Seca of IESE Business School—University of Navarra prepared this case with the assistance of Catherine Anne Hoffmann, Cristina Gallego, and Jesús Tienda. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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