THE XAVIER JACKET
In late December of 1989, Joe Bradford and Erin Deyell sat over coffee at the Student
Union Building of St. Francis Xavier University, discussing Edford Enterprises, their
partnership to market university jackets. They had just completed their first year of
business and the preliminary Income Statement showed net profit in excess of $5,000.
W hile pleased with the results, they were also concerned. Now that the business had
been established, they didn't want it just to evolve...they wanted it to grow! The
question they were wrestling with was...HOW !
It all started in September of 1988 when Joe, the High School Liaison Officer, was
discussing with his co-worker how to attract students to St. Francis Xavier University (St
FX), in Antigonish, Nova Scotia. W hile the university certainly had a lot to offer a
prospective student, Joe wanted something to wear on his many high school recruiting
visits that would provide instant identification, like a university jacket. But, in Joe's
opinion, all the currently available St FX jackets looked more appropriate for high school
students than for university students. They did not have the look of a university jacket--something to be worn with pride and passed on to the next generation of "X"ers.
St FX students could order leather or nylon jackets from a Halifax based manufacturer
of sports clothing, Maritime Campus Stores (1985) Limited, who came on campus twice
a year and Stewart's Jackets based in nearby New Glasgow. However, there had been
some delivery problems with Stewart's Jackets in the past. Jackets could also be
purchased locally from stock either at Jim's Shirt Locker, a downtown Antigonish store
which carried a full range of "X" wear or at the University bookstore which sold various
nylon jackets, all under $60. Joe felt that the leather jackets were of questionable
design and quality and that the nylon or lined ones were "transitional" - not likely to
survive the four years at "X". In fact, Joe felt this so strongly that, during his four years
at St FX as an Honours Bachelor of Arts student majoring in Political Science, he had
refused to purchase any St FX jacket. Joe had _______________________
This case was prepared by Professor M. Jan Charbonneau, formerly of St. Francis
Xavier University, now at Athabasca University, for the Atlantic Entrepreneurial Institute
as a basis for classroom discussion and is not meant to illustrate either effective or
ineffective management.
Copyright
1990, the Atlantic Entrepreneurial Institute. Reproduction of this case is
allowed without permission for educational purposes, but all such reproductions must
acknowledge the copyright. This permission does not include publication.
noticed that a few students on campus were wearing melton clothi or leather jackets
which dated back as far as the 1950's. Obviously, they had been passed down from
their parents or from an "X" alumnus.
Of all the old jackets he saw, Joe's favourite was the Xavier jacket - a plain navy melton
cloth jacket, with a navy and white striped knit waist and white felt letters spelling
"XAVIER" prominently displayed across the front. It had served as the University
football team jacket in the '60's. He felt that not only was it of extremely good quality,
but was both unique and representative of St FX. Joe was hooked! As the Liaison
Officer, he wanted to show up in that jacket at high schools across Canada to recruit
students.
Seven of Joe's friends were also prepared to buy. The problem was that the jacket they
all wanted dated back to the early '60's. Joe had the design he wanted, but no way to
get it produced. He decided to approach the manager of the St FX University
Bookstore who was investigating the production of university jackets.ii The Bookstore
Manager determined that any jacket made from melton material with hand cut letters
would be too expensive; therefore he wasn't interested.
One of the students on campus who wore an Xavier Jacket was Joe's friend, Kate
McIntyre. She had her father's Xavier jacket which she allowed Joe to borrow. Kate's
jacket and eight orders in hand, Joe travelled the 220 km distance to Halifax where he
approached Juergen Riedel, the President of Maritime Campus Stores (1985) Limited.
Joe was specific about what he wanted. He refused to switch to an in-stock royal blue
jacket - it had be navy, which Juergen would have to special order! He also wanted
four inch hand cut letters from a heavy stock of white felt that Juergen would have to
order from the United States. He was forced to compromise on the collar, settling on a
flatter one since the original design was not available. Overall, he was satisfied that the
jacket was "as original as possible".
On September 21, 1988, Joe negotiated a unit cost of $100 each.iii Juergen required a
$50 deposit per jacket, which Joe collected from his friends. Joe decided to travel to
Halifax to collect the jackets rather than pay delivery charges to Antigonish on Acadian
Bus Lines or by courier.
Despite a promised December delivery date, the jackets didn't arrive on campus until
January 1989. Juergen had experienced trouble getting delivery of all the materials.
Apparently the plain jackets had been taken from the supplier's inventory left over from
the '60's when clothing was worn tighter. To accommodate current tastes, the normal
size plus 2 would be required because these Xavier jackets fit quite small. Undaunted,
Joe and his friends proudly displayed their jackets.
Once the jackets appeared on campus, word spread quickly. Joe and Kate appeared in
the W inter edition of the Alumni News (Exhibit 1), published in January 1989iv, both
sporting Xavier jacketsv. Joe was constantly being approached on campus, mainly by
3rd and 4th year students who wanted jackets. (Exhibit 2). Because of the demand,
Joe agreed to arrange for another order. At this stage, he wasn't thinking of the Xavier
Jacket as a business venture but mainly as good public relations for St FX. He was
also pleased to see that others shared his taste in university jackets.
Knowing he would have to travel to Halifax to take delivery of the jackets and that some
of his time would be involved, he decided to charge $130 per jacket - with a deposit of
$65 required at the time of ordering. At this stage, he did not anticipate continuing
orders and felt "if there really was a market for the jackets, some company, either
Maritime Campus Stores or another school jacket manufacturer would snap it up". He
accumulated the orders, hoping that he could reduce the cost if he ordered in bulk. He
also hoped to ensure uniformity and maintain control. Students who asked for
variations in colour, style/design or the addition of crests or names were flatly told, "no".
The Xavier jacket of the '90's was going to be as true to the original as possible! W hen
he had accumulated 25 orders, it was time to negotiate. Maritime Campus reduced
their selling price to $91.50, requiring a deposit of 50% when the order was placed.
After paying the deposit to Juergen, Joe still had $481.25 ($19.25 per jacket) to deposit
in his bank account. Now he realized that there was real money to be made! To Joe's
amazement, students kept ordering and a second order for 11 jackets was quickly
placed. A subsequent order of 9 was placed in late February.
The first two orders arrived on campus mid March. Joe had once again travelled to
Halifax to take delivery and pay the remaining $45.75 per jacket. He used the $19.25
per jacket from his bank account and financed the remainder out of his own pocket. He
was offered credit terms by Juergen but declined, fearing that interest would be
charged. At this point, Juergen appeared "overly friendly" and Joe was wary, thinking
that Juergen was "feeling out" the market with hopes of undercutting Joe.
The jackets were distributed over two days at the Blue and W hite Centre, a central,
high traffic location in the Student Union Building, just outside the cafeteria. As the
jackets were being distributed, more orders emerged. The orders continued, even
though students were told that the jackets would not be delivered before the end of
term and that they would be shipped COD, probably in May or June, with students
paying the cost of postage.
By the end of the first day, Joe had recovered his out of pocket costs. At this point, Joe
realized that he should be looking at this as a business venture. He made preliminary
inquiries with a Professor in the Department of Business Administration about the
logistics of forming a business.
The 36 jacket order was picked up by Joe in May and subsequently shipped COD from
Belleville, Ontario, where he had returned for summer vacation. All but one jacket was
delivered. COD orders cannot be shipped to the United States so Joe kept the US
destined jacket until September.
In September, Joe realized that, with the volume of travelling required in his position as
High School Liaison Officer, he would need a business partner. His girlfriend, Erin
Deyell, a second year Honours BA student from Calgary, seemed the obvious choice.
Erin was not sure if she wanted to join the business; however, she agreed to
accompany Joe to Halifax for a scheduled meeting with Juergen.
Erin and Joe met with Juergen to discuss future supply and pricing arrangements. Joe
had some concerns that Maritime Campus might sell Xavier jackets or "knock-offs"
(similarly styled but inferior copies) when they were on campus in the fall. Instead, to
their surprise, Juergen offered them a franchise to market Maritime's current line of
sweaters and jackets on campus on a commission per item basis. At this stage, Joe
and Erin realized "they were being treated like a business, not just a customer with a
big order."
The time had come for many decisions. Despite her original reluctance, Erin too was
hooked! On September 9th, Joe and Erin formed a partnership.
They decided to refuse the offer of a franchise since they didn't want Juergen
controlling them or their profits. Joe agreed verbally to continue purchasing the jackets
from Maritime Campus in exchange for Maritime Campus' not selling them on campus.
His fears of direct competition and undercutting seemed put to rest. Juergen intended
to sell Xavier jackets in his commercial outlet in Halifax but would keep the price high.
The issue now became agreement on a price. Juergen's initial offer of $90 was too
high for Joe and Erin's liking. A few well placed words about the possibility of other
suppliers resulted in a price range of $80-85, depending on volume, being agreed upon.
Joe and Erin anticipated a final price of $82-83.
The time also had come to set up the venture as a proper business. W ith the
assistance of the Business Administration Professor, Joe and Erin entered into an
equal partnership and signed a Partnership Agreement setting out areas of
responsibility and authority, financial arrangements and how the business could either
be disbanded or sold. (Exhibit 3) The business was named Edford Enterprises - "Ed"
for Erin Deyell and "ford" for Joe Bradford - and was officially registered with the
Registry of Joint Stock Companies in Halifax. They also opened a business bank
account. Upon investigation, it was discovered that no license was required to operate
as a retail vendor in the Town of Antigonish.
Joe and Erin knew that Maritime Campus would be making their fall visit to campus the
last week in September to take orders for their leather jackets. In an attempt to beat
them, Joe and Erin placed hand lettered posters all over campus (extensively in the
residences) and took orders at the Blue and W hite Centre during the third week in
September. Because of the buoyant demand, they felt they could raise the price to
$140, this time including the 10% Nova Scotia sales tax required on clothing over $100.
They also adjusted the deposit required to $70. Joe realized that he had not remitted
provincial sales tax for the previous orders and decided to deal with the tax man later!
W hen the order was placed for 90 jackets, Joe and Erin were dismayed to discover that
Juergen wanted $84.59 per jacket! He argued that a higher unit cost was required due
to the number of oversize/tall orders. Joe and Erin realized that they had not
considered this nor had they built that variable into their pricing structure. The partners
felt, though, that Juergen was not acting in good faith. They had discussed a range of
$80-85 but had anticipated a price between $82 and $83. They finally agreed on a unit
price of $84. W hile this was higher than they wanted, Joe and Erin felt that their next
order would be for a smaller number; historically, students run out of money near yearend. They felt that they could insist on the $84 as a guaranteed price.
Expenses were kept to a minimum, essentially travel to Halifax (Joe estimated $65 per
trip), postage ($25), poster and office supplies ($30), a small amount for telephone calls
($25) and rental of the Blue and W hite Centre ($50 per day).
In December, 1989, the first order of their partnership arrived and was distributed
through the Blue and W hite Centre. As in the past, new orders appeared, but, as they
had anticipated, the number was low (eight). They weren't overly concerned as they did
not intend to place orders until the end of January 1990. At that time, they intended to
change the price to $130 plus tax, with a $65 deposit required.
Joe and Erin wondered, over their December cup of coffee, what the impact would be
of the sudden wash of navy Xavier jackets over campus - they were everywhere!
W ould this have an impact on future sales, and if so, how much? W ould there be an
adverse reaction to the new price? W as the jacket a fad or was it on its way to
becoming the "official" St. Francis Xavier University jacket? An ad for the jacket was
set to appear at no charge in the W inter edition of the Alumni News. W ould alumni
prove a viable market? Should they look at another type of promotion besides posters?
There was the campus newspaper to consider. (Exhibit 4).
As the calendar and their business year drew to a close, they looked to the future.
Analysis of past orders revealed that most of their customers were females. (Exhibit 5).
W as this to become a "girl's" coat? How could they appeal specifically to males? They
talked about trying to get either the football or hockey teams or other male dominated
groups interested in bulk ordering the jacket, but how and when they were not sure.
They also knew that they would have to reduce the price, but by how much?
They talked about having a "Back to School" special - $99.99 - but realized they would
have to get Juergen to reduce the unit cost to maintain a reasonable margin. Joe also
wanted to approach Juergen regarding the franchise idea, but only for leather jackets
and only of Joe's design. The Xavier jacket, because of its light satin lining, had been
marketed as spring/fall apparel. Now Joe wanted to produce a high quality all-season
leather jacket. Erin joked that it wasn't only women who changed their minds! The
leather jacket would have the university crest and the person's residence crest on each
sleevevi and the name of the faculty/program on the back, much like those Joe had
seen at Queen's University in Kingston, Ontario. Erin questioned whether there was a
market for the all season design and if it would cut into sales of Xavier jackets.
They wondered if they should look at diversifying into other university student-oriented
products? W ould it be possible to set up franchises on other campuses to market
similar jackets? A disturbing event had come to their attention. A student in residence
had arranged through his father, a crest manufacturer, to have 7 or 8 Xavier jackets
copied and had sold them to his friends for $90! W hile Joe agreed that the jackets
were "passable" copies, he also knew that the father must have sold them at cost. Joe
and Erin wondered how they could solidify the position of their jacket as the "official
Xavier" jacket? Ideas such as including instructions for care, a guarantee and a short
history of the jacket were discussed. So far, they'd only arranged repairs for two jackets
and knew that Juergen stood behind his goods.
So many decisions. So many options to investigate if they were going to GROW !! The
question was where to start?
THE XAVIER JACKET
EXHIBIT 1
ALUMNI NEWS - WINTER 1989
One of these jackets has been passed down from one generation to another. Can you
guess which one?
The original version
is worn by Katie
McIntyre '92, Lanark,
ON, who inherited it
from her dad Edward
McIntyre '61.
Joe
Bradford '88, high
school liaison officer,
has
initiated
th e
reproduction of the
nostalgic
style
Xaverian jacket.
Source: Alumni News - Fall and W inter 1988-89, St. Francis Xavier University,
Antigonish, Nova Scotia.
EXHIBIT 2
STUDENT DATA - ST. FRANCIS XAVIER UNIVERSITY 1
1
Due to classroom and residence limitations, minimal enrolment increases are
expected in the foreseeable future. Approximately 1500 - 1600 students live in
residence on campus.
2 Includes Full-Time students only.
3
Includes students enroled in the Department of Education (B.Ed. degree), Masters
and Diplomas in Adult Education, the Coady Institute (a one year Economic
Development program for International students on sponsorship or scholarships) and
"others", enroled in more than one program or year.
REGISTRATION STATISTICS - FULL TIME STUDENTS
4
Nutrition and Consumer Studies.
5 Coady International Institute.
6 Includes students enroled in more than one year or program.
Source: St. Francis Xavier University.
EXHIBIT 3
PARTNERSHIP AGREEMENT - EDFORD ENTERPRISES
The purpose of this document is to formalize and define the terms of operation for the
partnership of EDFORD ENTERPRISES, established September 9, 1989. The
partners of the enterprise, Erin K. Deyell and Joseph A. Bradford both agree to abide by
and operate this business according to the terms of this agreement.
SECTION ONE: INCOME ALLOCATION
The division of the Edford Enterprises profits will be 50% of net profits to each partner.
However, at the discretion of both partners, this may be adjusted.
SECTION TWO: LIABILITIES
All partners agree to share equally in any liabilities incurred by the partnership. Both
partners must sign any contract the business enters, however, any partner may
individually sign certain documents pertaining to banking, such as deposit and
withdrawal slips.
SECTION THREE: DECISION MAKING AND AREAS OF AUTHORITY
The purpose of this section is to delineate the areas of responsibility and authority (final
decision) that the partners will hold individually or partners will hold equally. If an area
is not covered in this section, it is assumed to fall under the area of equal authority.
A) NEW PARTNERS: The present partners must all be in full agreement to permit
entrance of a new partner into the business relationship.
B) EXPANSION (INTRODUCTION OF NEW PRODUCTS): All partners must be in full
agreement concerning any expansion of the business or the introduction of new
products.
C) AREAS OF INDIVIDUAL AND FINAL AUTHORITY:
1) Joseph Bradford will have final authority concerning communications and
negotiations with suppliers.
2) Erin Deyell will have final authority concerning all advertising and marketing
procedures.
D) DIVISION OF AUTHORITY IN PRICE SETTING: Jointly, the partners must agree
upon a "BRACKET" price for both the "BUYING" and "SELLING" price of any product.
The "bracket price" is a set price that can be increased or decreased within the below
outlined boundaries. Before the launch of any sales campaign, the partners will set the
bracket prices and record them in the enterprise reports. The record of this will be a
dated and signed document, applicable and binding to the sales campaign in question.
1) Buying Price: Jointly, the partners will agree on a price in the above
mentioned document and allow the negotiator with the suppliers, Joseph Bradford, a
bracket of $1.00 either side of the agreed price to bargain with.
2) Selling Price: Jointly, the partners will agree on a price in the above
mentioned document and allow the advertising and marketing officer, Erin Deyell, a
Bracket of $10.00 either side of the price agreed to finally set the selling price.
Any amounts that are in excess or fall short of the above defined Brackets will disallow
any unilateral action by one of the partners.
E) MONETARY EXPENDITURES AND BOOKKEEPING: All monetary expenditures
must be recorded in the enterprise's books and announced as soon as possible to all
partners. However, partners may conduct normal monetary procedures in the absence
of other partners. Normal monetary procedures involve the depositing of funds,
withdrawals to pay for orders and withdrawals for office expenses. In regards to
bookkeeping procedures, the original entries will be recorded by Joseph Bradford,
subsequently to be audited by Erin Deyell.
SECTION FOUR: CONFLICT RESOLUTION-DISPUTE MECHANISM
The purpose of this section is to outline an agreed method to address any
disagreement that, through normal business discussions, cannot be resolved.
A) FINAL AREAS OF AUTHORITY: If the dispute falls clearly in any of the above
mentioned areas of "final" or "individual" authority, then that designated person's
decision shall prevail. If there is a question as to the nature of the area, a third party will
be asked to clarify.
B) JOINT AREAS OF AUTHORITY: If the dispute falls in any of the above mentioned
"Joint" areas of authority, then the partners will agree to disagree or will take no action
on the dispute. (i.e., expansion, partners).
C) PRICE SETTING: If the dispute falls in the area of price setting, the agreed upon
Bracket price for the particular campaign will be considered binding as will the above
outlined authority in section three.
The partners agree that if a dispute is locked, they will negotiate at least seven
business days and seek out the advice of a third party before taking any further action.
SECTION FIVE: DISSOLUTION OF THE PARTNERSHIP
The purpose of this section is to outline the methods of exit for an individual partner or
the total closure of the business.
A) TIMING OF DISSOLUTION OR EXIT FROM THE BUSINESS: Once an order has
been made for any number of items, such that a monetary commitment has been made
by the customer, all partners will remain in the working relationship until such time that
the order has been completely finished and the campaign or order is closed on the
accounts. At that time, profits will be split equally among all the partners. If a partner
abandons the business before the completion of an order, they will not be compensated
and will forfeit any right to the final profits of the order in question or the business in
general. Additionally, the abandoning partner is also bound by the non-competition
clause stated in section five, sub-section B.
B) EXITING THE PARTNERSHIP: If a partner wishes to leave the enterprise after
individual duties concerning the order (and the order itself) have been completed, the
partner will receive their appropriate division of the profits as stated in section one of
this contract and will cease to be a partner of the business nor will they have any right
to use or represent the name Edford Enterprises. An Exiting partner must inform the
other partners of their intention to exit in writing. Furthermore, the exiting partner
agrees to refrain from selling any similar (or competing) products on the campus of St
FXU for a period of two years following their exit.
C) TOTAL DISSOLUTION OF THE PARTNERSHIP: In the case of a mutually agreed
closure of the business or a hostile break up at the fulfilment of an order, all the books
of the business will be closed, licences withdrawn and the partnership of Edford
Enterprises will cease to exist. No one partner may continue the business under the
original name of Edford Enterprises.
D) BUY OUT: If one of the partners wishes to buy out the interests of any or all other
partners, a separate negotiation or contract will be struck at that time.
DATED October 14, 1989
AT Antigonish, Nova Scotia
W ITNESSED
ERIN K. DEYELL
JOSEPH A. BRADFORD
EXHIBIT 4
XAVERIAN WEEKLY1
ADVERTISING RATES 1989 - 1990
Column Inch
1/8 page
1/4 page
1/2 page
Full page
1
$ 3 .5 0
$ 4 0 .0 0
$ 6 5 .0 0
$ 1 2 0 .0 0
$ 1 7 5 .0 0
a student newspaper published weekly, distributed free on campus. 10% discount
offered if ad run consecutively for 4 weeks, 20% discount if run consecutively for more
than 4 weeks.
Source: Xaverian W eekly.
EXHIBIT 5
SALES
Source: Company files.
i
A
A smooth, heavy woollen cloth suitable for coats and jackets.
ii
St.
St. Francis Xavier University had no policy concerning clothing, no proprietary rights and took no royalties on
items bearing its name. The only requirement was that the name be spelled St. not Saint.
iii
All
All financial data pertaining to Edford Enterprises has been disguised.
iv
Distributed
Distributed free to 18,500 alumni; 11,000 in Atlantic Canada, mainly Nova Scotia.
v
Subsequently
Subsequently 2 Alumni placed orders.
vi
On-campus
On-campus students would have the university crest on one sleeve and their residence heraldic crest on the other.
Off-campus students would have the Town of Antigonish crest instead of the residence crest.