Dragonfley Company Case Study Essay
DragonFly corporation case
Dragonfly Corporation is high end teenage clothing stores based in Seattle. It was founded in 1994 by Janet and Michael Thompson former buyers in a department store, and mostly financed by Janet`s parents.
Unfortunately once launched the store didn’t live up to the expectations; the sales were insufficient, margin too small, they had inventory management problem and started to fall behind in the rent payment. To offset their losses and the inventory surplus, they decided to open a second store in an enhanced location. Undeniably their strategy worked; inventory was down, sales were up, turnover had increase, and most payable were in time except for the Crossroad rent unpaid balance. Just when Dragonfly started
to finally breakeven, the Crossroad mall, the first store location, with over 20 000$ and one year contract left, was threatening legal action.
The Thompson were left with a choice to make; both to bankrupt and loose the family money, to put in additional financing or to cross their fingers and hope.
I reckon that the Dragonfly Corporation should not declare bankruptcy or neither crosses their finger and hope but they should restructure and downsize their company.
Given that the shopping centre Crossroad is quickly deteriorating by losing a significant number of tenants and is struggling to attract traffic and clients, I believe there is no potential and profitable future for Dragonfly Corporation there.
Therefore I think that the best option for Dragonfly Corporation is to negotiate an early exit from the rent by using the bankruptcy menace as a lever against the mall. However they may need a small investment to help settle the impasse in view of the fact that the landlord business is also going down the road and he might not be so incline in losing another tenant and additional money. Moreover since unpaid lease dragonfly biggest current debt, an arrangement with Crossroad would liberate them from most of their financial problem and help them focus on the Bellevue location which has proven to be a more profitable and sustainable.
Through a tight and realistic inventory management and an increase turnover, The Thompson can possibly rebuild a financial health. Once they significantly improved the company's financial position, they could eventually consider opening a second store and therefore benefit from all the previous advantages including spreading costs and a better inventory management.
I would also try to organize the subordination problem with the creditor and the personal liability issue to avoid additional trouble in case of bankruptcy.
Dragonfly Corporation is high end teenage clothing stores based in Seattle. It was founded in 1994 by Janet and Michael Thompson former buyers in a department store, and mostly financed by Janet`s parents.
Unfortunately once launched the store didn’t live up to the expectations; the sales were insufficient, margin too small, they had inventory management problem and started to fall behind in the rent payment. To offset their losses and the inventory surplus, they decided to open a second store in an enhanced location. Undeniably their strategy worked; inventory was down, sales were up, turnover had increase, and most payable were in time except for the Crossroad rent unpaid balance. Just when Dragonfly started
to finally breakeven, the Crossroad mall, the first store location, with over 20 000$ and one year contract left, was threatening legal action.
The Thompson were left with a choice to make; both to bankrupt and loose the family money, to put in additional financing or to cross their fingers and hope.
I reckon that the Dragonfly Corporation should not declare bankruptcy or neither crosses their finger and hope but they should restructure and downsize their company.
Given that the shopping centre Crossroad is quickly deteriorating by losing a significant number of tenants and is struggling to attract traffic and clients, I believe there is no potential and profitable future for Dragonfly Corporation there.
Therefore I think that the best option for Dragonfly Corporation is to negotiate an early exit from the rent by using the bankruptcy menace as a lever against the mall. However they may need a small investment to help settle the impasse in view of the fact that the landlord business is also going down the road and he might not be so incline in losing another tenant and additional money. Moreover since unpaid lease dragonfly biggest current debt, an arrangement with Crossroad would liberate them from most of their financial problem and help them focus on the Bellevue location which has proven to be a more profitable and sustainable.
Through a tight and realistic inventory management and an increase turnover, The Thompson can possibly rebuild a financial health. Once they significantly improved the company's financial position, they could eventually consider opening a second store and therefore benefit from all the previous advantages including spreading costs and a better inventory management.
I would also try to organize the subordination problem with the creditor and the personal liability issue to avoid additional trouble in case of bankruptcy.