Abstract
M.Comm.
Franchising is growing in stature as one of the most powerful business
methods. Fifty percent of retail sales in the USA are generated through
franchised chains. Franchising happens when an entrepreneur seizes a
viable business opportunity. A system is developed to extract the
maximum value and the rights to use the business system are sold to a
franchisee to operate a business along the same principles and systems as
the original opportunity. The franchisee and franchisor work together as a
team or alliance to build and maintain the brand.
In order to exploit the business opportunity in a meaningful manner, it is
important for the franchisor and the franchisee to understand and to
analyse the different relationships in the franchising model. The franchise
relationship model developed by Spinelli et al is very useful and provides a
sensible approach in analysing and identifying the different relationships in
a franchised business. The most important aspect of the franchise
relationship model is the relationship with the customer. The service
delivery system is created by the franchisor and franchisee to provide the
best service or to deliver the product in the most effective way to the
customer. The service delivery system is the blue print of the franchise
operation and outlines the flow of tasks and transactions in the franchise
model.
In order for franchisors and franchisees to ensure that uniformity and
standards are maintained across the franchised business, it is important
for them to have a system through which franchisees can be monitored.
The main focus of the monitoring system is to prevent shirking, free riding
or to avoid that franchisees erode the brand of the business. An
important tool in the monitoring process is the franchise agreement. The
franchise agreement is a specialised agreement that outlines the
relationship between the franchisor and the franchisee. Other important
tools used in the monitoring function are field visits, external service
audits, peer review, analytical tools, customer feedback and mystery
shopping.
Transactional analysis is used to determine which tasks are to be carried
out by whom in the franchise relationship. The service delivery system
tasks are defined and different tasks awarded to either the franchisee or
the franchisor. As an example of this method, the real estate function is
analysed indicating what the essential tasks are when executing this
function and who is responsible for it.