Discovery Zone

Discovery Zone is a retail chain of child play centers that was founded in 1990 by Jim Jorgensen, a serial entrepreneur, and partners. The case gives background on Jim and his partners as well as the founding of the company. After their first retail store was a tremendous success, the management team began to implement an aggressive growth strategy through franchising. The company grew rapidly, establishing 15 new centers in 18 months, and began to experience serious strains, especially to the management team. In addition, they faced a new, powerful competitive threat in the fall of 1991 when McDonalds announced that they were going to enter this business in an aggressive way. In response, the management team wanted to grow even faster, but were stymied in various fashions by their franchisees. The case discusses two specific problems: existing franchisees reluctance to increase their growth plans and their skepticism about advertising on TV, which corporate had found to be very effective. Finally, the case discusses problems with the management team, which, in places, was not equipped to deal with the rate of growth the company was trying to maintain. Teaching Note available.