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Chapter 14 Franchising Referral Associations & More

Chapter 14 Franchising Referral Associations & More...

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Unformatted text preview: Franchising, Franchising, Referral Organizations and rd 3 Party Distribution Systems Chapter 14 3 Similar Structures 3 Similar Structures Each business model offers a system or method of marketing a product or service under a trademark or brand name 1. 2. 3. Franchising Referral Organizations 3rd Party Distribution Systems Trade mark or brand name marketing can increase the amount of exposure a business would receive Franchising in Hospitality Franchising in Hospitality Business method of franchising: the licensing of trademarks and methods of doing business Network of business relationships Method of distributing goods and services that allows a franchisee the right to establish and operate a unit or units, and to use the franchisor’s name and/or business system Benefits for Franchisee Benefits for Franchisee Proven way of doing business Identifiable for customers Shorter learning curve in new business Marketing and operations are already in place Growth of a Business Growth of a Business In 2004, almost 4 billion dollars in sales were generated by the top 200 franchise companies in the U.S. Franchising has become a major U.S. export Creating business ownership in developing regions of the world Helps U.S. balance their trade deficit Owner Satisfaction Owner Satisfaction Gallop organization survey indicated that 90% of franchise owners considered their franchise to be successful Made an average of over $91,000 per year Considered that owning the franchise was key to their success Types of Franchises Types of Franchises Product Distribution Business Format Product Distribution Product Distribution Franchisee sells products or services manufactured by the franchisor Examples are cars, soft drinks, gasoline, insurance, travel agencies Franchisee may represent several different franchisors Franchisor usually provides logo and trademark, but not the operating system Business Format Franchising Business Format Franchising Provides logo and trademark Provides complete operating system Examples are restaurants, hotels, real estate services, tax preparation services Consistency from franchise to franchise Franchise Agreements Franchise Agreements Single­unit or multi­units Area development agreements – grant franchisee exclusive rights to geographic area Master Franchise – addition of the ability to sell single­unit franchises (franchisee becomes a franchisor) Franchising Fast Facts Franchising Fast Facts Over 1,500 franchise companies operating in the United States with more than 767,484 retail units 80 industries use franchising to distribute goods and services to consumers Average investment is less than $250,000 More Fast Facts More Fast Facts Royalty or maintenance fees range from 3% to 6% of gross sales Franchisors average slightly less than 100 units Average length of contract is 10 years When a property changes franchise affiliation it is referred to as re­flagging Top 10 Franchise Companies Top 10 Franchise Companies (by # of units) 1. McDonald’s 2. 7­Eleven 3. Subway 4. H&R Block 5. Burger King 6. Jani King International 7. Taco Bell 8. Radio Shack 9. Pizza Hut 10. Dominos Top 10 Fastest Growing Top 10 Fastest Growing 1. Subway 2. Jan­Pro Franchising 3. Dunkin’ Donuts 4. Coverall Cleaning Concepts 5. Jazzercise 6. Jackson Hewitt Tax Service 7. Re/Max International 8. CleanNet USA 9. Bonus Building Care 10. Jani­King Franchisor’s Role Franchisor’s Role Public or private Small start­up or large conglomerate Licenses the franchisee to conduct business under their brand name Provides operating methods, procedures and support Controls product and service development Thoughts for the Franchisor Thoughts for the Franchisor Ability to grow business with minimum capital Do not have to manage each location, becomes responsibility of franchisee Franchisees are motivated to be profitable and in turn a portion is paid to franchisor Royalty or maintenance fees are less that what the franchisor could make if they operated the business Franchisees are independent operators and may have a different perspective on how the business should be operated or compliance with contract Franchisee may not have the skills to profitable operate the business Franchisee’s Role Franchisee’s Role Franchisee agrees to – operate using franchisor’s trademark or brand name – Use franchisor’s operating methods – Provide only franchisor­approved products and services Franchisee Role Continued Franchisee Role Continued Franchisee is usually responsible for – Securing capital for acquiring assets – Owning the land and building – Operating the business – Hiring, training and compensating their employees Thoughts for the Franchisee Thoughts for the Franchisee Brand name recognition makes it easier to compete with established independent operators Access to training and operations manuals, site selection tools, and store design Quantity purchasing power when negotiating for equipment and supplies Research and development of new product and service offerings Loss of independence – must follow franchisors policies and procedures Judged by management of other franchisees in system (reputation) Income expectations balanced with cost of franchising Referral Organizations Referral Organizations Similar to franchise organizations, but is usually a non­profit affiliation owned by members of independently­owned lodging operations Referral Organizations Referral Organizations Typically: Administrative expenses are covered by fees paid by the members Rules, regulations, policies and governance are determined by voting members Comprised of member properties linked for marketing purposes Provide similar products or services, but with different names Referral Organizations Referral Organizations Examples are Best Western International and Kampgrounds of America Maintain their property uniqueness while meeting global quality standards Third Party Distribution Third Party Distribution Middleman between buyer and supplier Serves as a representative to the hospitality provider Examples are Travelocity.com, Expedia.com and other Internet–based companies May provide reservation services ...
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