Peak Garage Doors Inc.

Peak Garage Doors Inc. is a privately owned firm and has had 2003 sales of $9.2 million and
net profits before taxes of 460,000. The income statement of 2003 states that cost of goods
sold was $6.9 million. With the sales and cost of goods sold numbers we can figure out that
the contribution margin for Peaks garage doors is $0.25 for every dollar sold. The company
has 2 distribution centres and employs 8 sales representatives for independent dealers and 2
sales reps for the exclusive dealers, each rep with a salary of $80,000. Below is the summary
of employee composition.
The residential garage door industry sales for 2003 were $2 billion; 90% ($1.8 billion) of
these sales were steel doors, the type of door the Peak specializes in. Projected industry sales
for 2004 were $2.05 billion, representing 2.4% increase. The industry consists of large
national manufacturers and smaller regional ones such as Peak. There has been a demand for
steel doors from new homes, and from homes looking to replace older wooded doors. Richard
Hawly, Peaks Director of Sales and Marketing, conducted a survey to prospective garage
buyers; he also commissioned a study to identify number of dealers that are in the same
markets as Peak. The results of the survey found that brand awareness was very low showing
that only 10% surveyed were able to provide a brand name. The survey also found that
independent dealers did not sell all brands at an equal rate.
The company currently has 50 exclusive dealers and 300 non-exclusive dealers. Management
has three proposals in front of them. The first suggestion is to increase the number dealers in
their existing markets. The second recommendation is to develop an exclusive franchise
agreement with existing non-exclusive dealers. The third recommendation is to decrease the
number of dealers and focus companys resources on increasing support for the existing
dealers. Of course there is an option for them to leave everything as it is.
First proposal is to increase the number of dealers in markets that are currently served by the
company. The main reasons this was proposed is due to the fact that the large increase in
sales expected by management would be practically impossible with the current number of
dealers. Peak currently serves 150 markets that are equivalent in terms of population size.
The second proposal would be an exclusive franchise agreement with some existing
independent owners. 27 independent dealers have inquired to Peak about becoming exclusive
dealers for their areas. This would involve Peak providing more marketing support for these
areas as well as a franchise fee paid for by the dealer. This would require Peak to drop all
other independent dealers in these markets since they do not want them to be in the direct
competition with one another. The remaining 73 markets would not be affected. Either party
can cancel the contract with 90 days advanced notification. The third proposal suggests
eliminating a number of the independent dealers. It is stated in this proposal that 70% of the
sales for Peak are made through their exclusive dealers. The argument made by this proposal
is that there has not been an exclusive dealership program in place before, and the company
might not need one. The franchise program could also make Peak less flexible to future

changes. This plan would have the number of non-exclusive dealers in the 150 markets
decreased by 100 to a total of 200 while the 50 exclusive dealers would remain as they
currently are. Ultimately, company can choose to stay as it is. However, this would mean that
their chances of reaching their sales goal are slim.
It will be impossible for the company to reach the sales goal of 12.5 million regardless of
which option they choose. However the best outcome is with the option number two which is
to develop an exclusive franchise agreement with existing non-exclusive dealers.