A STUDY OF RELATIONSHIP OF FRANCHISOR AND FRANCHISEE
ABSTRACT
In the relationship of franchisor and franchisee, the franchisor relies heavily on the financial information and information of the consumers of the franchisees to access local markets, and the franchisees are dependent on the trademarks and know-how and other support of the franchisors. Franchises always have a desire for autonomy to run their business, but franchisor don’t want to give the franchisee more autonomy because he thinks that if he give more autonomy to the franchisee then franchisee can compromise on the quality to save the cost and this can damage the reputation of the entire franchise system of franchisor but on the other hand if franchisor give less autonomy to
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In fact, “the Autonomy is an essential component of the organizational design of franchise chains, Excessive restraints on franchisee autonomy may lessen motivation of franchisees” (Dant and Gundlach, 1999). ‘In addition, excessive centralization may prevent leverage of franchisee outlet related knowledge” (Windsperger, 2004). However if we give more autonomy to the franchisee it can result in rise of the agency problems of free-riding in franchise networks. For the proper management of a franchisee relationship, having a balance between control and autonomy within franchising, become a major activity for creating the long-run viability of the franchise systems. In this paper, we empirically tested effect of brand name, competition, success and relational governance on franchisee autonomy as well as control. The objectives of studying this paper is first to study the relationship between franchiser and franchisee in terms of need for autonomy and control. Second objective is to find out the factors affecting the need for balancing control and autonomy in relationship of franchiser and franchisee. And third objective is to understand the implications of having sustainable long terms relationship between franchisor and
Under corporate governance, the Board of Directors has majority power. After shareholders elect the Board, said Board selects the CEO who is responsible for managing the business. The key problem with Chipotle’s central and formal governance is that their strategy does not encourage innovation or employee moral. Instead, the Board of Directors decides what they feel Chipotle’s franchisees should implement, and tells managers to relay their decisions to in-store employees. Therefore, corporate representatives strive to improve in-store quality through strict supervision of each franchisee. They make decisions regarding all processes from the preparation of the product, customer service, and marketing strategies, which are enforced at each location. This system is slow and decreases efficiency. Since store employees are kept out of the immediate circle, it is difficult for them to have confidence in Chipotle’s operations, resulting in low employee empowerment. Two solutions to consider include bridging gaps between hierarchical levels and making the company more decentralized. Chipotle can implement a few liaisons (brokers and structural holes) to make sure that all professional networks within corporate and store levels are communicating effectively and working as a
Ray Kroc was a shrewd entrepreneur who was all business. When buying out the McDonald’s brothers from their partnership the brothers had refused to sell Kroc their first store “The Big M”, Kroc then opened up a McDonald’s right across the street and drove them out of business. Not only do franchisees operate under the McDonald’s name but they also own the land they operate on which puts McDonald’s into the real estate business as well as the fast food business. This quote from Kroc puts into perspective how shrewd of a businessman he truly was, “If any of my competitors were drowning, I’d stick a hose in their mouth and turn on the water,” he said. “It is ridiculous to call this an industry. This is not. Th...
The purpose of the following paper is to be able to inform the reader(s) of the paper about the business goals of the ownership and operations of a Sports Bar Franchise. The topics of discussion will include the description of the goal of the business and subtopics of the types of goods and services that are provided by any Sports Bar Franchise, what types of customers will this business attract, and lastly, how and where the specified services are made available. The paper will also include dialogue about the strengths and weaknesses of an assorted of business organizations and which one would be most appropriate for the author’s business venture.
"Studying McDonald's ABroad: Overseas Branches Merge Regional Preferences, Corporate Directives." Editorial. Nations Restaurant News 11 Nov. 2005: n. pag. MasterFILE Premier. Web. 5 Mar. 2013.
• The franchisees could leverage the ICEDELIGHTS brand, product, training capabilities, and real estate experience once ICEDELIGHTS could provide the support
KFC is one of the most popular fast-food restaurant chains by the Yum! Brands and fried chicken is what the company specializes. KFC was founded by Harland Sanders, which was later known as Colonel Sanders. Moreover, KFC was one of the first fast-food restaurant chains to expand internationally, including the opening outlets in Beijing, China, in November 1987 (KFC Website, 2013). The fact that KFC was the first Western fast food company in China makes it very challenging to satisfy the Chinese market. Trying to sell the same products or services is a typical approach to most foreign expansion for franchise businesses (Bell, 2011). However, one-size fits all approach is not what KFC chooses to apply for their company. According to Shelman, the writer of the case study regarding KFC’s Explosive Growth in China, key success for KFC China is to change the menu to suit Chinese tastes and style of eating (Starvish, 2011). “One of the lessons I take away from this case is that to ...
Senior Management of PepsiCo is evaluating the potential acquisition of two companies – Carts of Colorado and California Pizza Kitchen – in order to expand the company’s restaurant business. If indeed PepsiCo decides to pursue the acquisition of one or both, they must decide how to align each of these business units in its historically decentralized management approach and how to forge relationships between the acquired business units and existing business units. In their evaluation, Senior Management is faced with the question of whether the necessary capital investment in order to purchase one or both of the businesses can be profitable for each of the acquired business units, but must also take into consideration that the additional business units will not hinder the profitability of the existing business units.
Another strength is Burger King’s franchise development having 90% of its restaurants franchised. The franchise concept allowed the company to grow with minimal capital expenditure and receive royalties and fees. Burger King went above and beyond and created a new model of its restaurant to attract mo...
The employee of McDonald’s is a part of the service and so is the customer. The two together both influence the service that is being offered. In a restaurant, all customers are present while an individual customer is getting the service and the behaviour of the other customers can determine the satisfaction of the service delivered to the individual customer. This is the reason why the management of McDonald’s should make sure that the customers involved in the service do not interfere with each other’s
Not having to answer to a corporate boss is the dream of many and the flexibility that owning a business franchise creates provides this option. Success is not reached by simply creating a business, however. The level of success is measured by the size and efficiency of the business. Business growth is the driving force of the economy. The additional jobs and revenues created when a business expands allow the economy to grow at exponential rates. One of the fastest and most popular ways to increase the size of a business is to turn it into a franchise, which can then be purchased by individuals. Franchising provides opportunities that are beneficial to both the parent company and the purchaser. The company that owns the business can expand without having to pay such a large initial cost to open a new store since the franchise purchaser pays a cost to open the business. As well, the company can regulate many of the business activities so that there is a sense of consistency throughout all of the locations. The purchaser is allowed to use the trademarks and goods of the franchise which already have a large market presence. As well, they are provided with training and work standards by the company to help their business run smoothly (Kalnins & Lafontaine, 2004, p.761). Looking at the business model of the world’s largest food retailer, McDonald’s, provides great insight into franchising and business growth in general as well a better understanding of a global business that utilizes the franchising technique.
A franchise sometimes involves signing two agreements, a purchase agreement and the franchise agreement itself. The purchase agreement is a short document simply stating that, subject to a suitable site being found, the franchisee will enter into the contract set out in the franchise agreement provided, of course, that the franchisee has read and approved the franchise agreement within a reasonable time. Having accepted this condition the franchisee pays the franchisor a deposit which forms part of the initial fee. The search for a suitable site as well as associated research into planning, permitting, viability of the site, etc. can begin. If no suitable site is found, the deposit is usually returned. However, if the franchisee rejects the site or changes his/her mind about the franchise, the deposit is usually forfeited.
A franchise is simply investing money in a location or store, and then having the store become your own business after learning how to manage the entire business. You earn the majority of the profits, and you also don't have to worry about operations. You'll be taught by the company on how it run the entire business, and this is the reason why this is a huge and very easy way to become rich. Franchises require quite a hefty investment depending on the business you plan to buy. However, if the business is in high demand, there is profits to be made. Take for exMple the Cold Stone Creamery business. Countless people purchase one of their many franchises. The money is very good, the opportunities are endless, and the fact that there is no more need for advertising is what makes this more worth the investment in the long
The first step in any business is to think of or create a business idea. Without an idea, one cannot launch their business off the ground. A right direction is needed to create a business with a unique idea. However, other options include franchising or buying an existing business (1). Franchising allows an individual to run stores such as Burger King or McDonalds under the corporate name. It involves taking training classes and a heap of money in order to start a franchise. A Franchisee will have to buy products and services from the corporate entity they are franchising from, which is often required. Buying a franchise is like taking a piece of the pie from the company that is franchising and sharing that pie with everybody else. In addition having a franchise allows one to communicate and in essence become a big part of an added business opportunity (4). Franchising is far from easy to start and maintain for that matter. Starting a franchise involves a l...
Burger King’s core competency is fast food restaurant franchises specializing in made to order, flame-broiled hamburger sandwiches, particularly the “Whopper”. Using the strategy of industrial organization to capture market share Burger King offers a similar product (hamburgers) in a different way (flame-broiled). This strategy of product differentiation is part of the firm conduct category that Burger King uses to set itself apart from its competitors. In order to compete with its fast food competitors Burger King accentuates its core competencies in its marketing and product strategies, thereby leveraging market share.
A supply chain provides the means by which a company brings its products or services to the market. For a supply chain to be effective, all of the involved parties must be aligned to common goals and the company’s supply chain strategy. For the value of the supply chain to be maximized and cost savings realized, a company supply chain strategy must be executed efficiently. Many parts of the supply chain contribute to help the franchise system achieve quality goals. It can be achieved by offering uniform, high quality products and services to its customers.