FRANCHISING IN HOSPITALITY INDUSTRY

Franchising in Hospitality Industry

Table of Contents

Overview3

History5

Suitable Businesses for franchising6

Advantages For franchisors11

Disadvantages For franchisors14

Legal aspects16

Franchising in China18

Current Situation22

Future Trend23

Franchising in Hospitality Industry

Overview

Franchising in the Hospitality Industry' provides an overview of the issues, debates and challenges associated with business franchising. Franchising is a generic term that describes a way of doing business. In essence a model of business structure that relies on a relationship in which an owner (franchisor) of a business has licensed others (franchisees) to use a business system and trade name to market and sell products/services. (Khan, 2001)Thus it is a marketing concept of delivering products and services that can be applied across a diverse range of businesses. The International Franchising Association has developed 75 different categories describing the businesses of its members. Franchising involves two parties:

Franchisor - The franchisor is the initial owner of a business system which has been developed and proven to be a successful method of operating a particular business. As owner, the franchisor has the legal capacity to provide licences to others (franchisees). Typically the owner seeks to expand the business through a relationship with others who have similar objectives.

Franchisee - The franchisee is the party that has entered into an agreement with the franchisor to use the trade mark / business name and business system in a defined outlet or territory.

Management of restaurant franchise business includes several tasks such as daily decision making, for example, staff rosters. Management of restaurant franchise also includes planning, such as forecasting food inventory levels, staffing, direction and controlling quality (Khan, 1991). When discussing managing restaurant franchise business it is important to review a successful restaurant franchise business.

McDonalds is one of the 'hardest' franchise brands with non-negotiable systems of operation for franchisees (Baron & Shane, 2005). Operating manuals and procedures specify everything down opening hours and service turnaround times. McDonald's has strict system in place to monitor franchisees and service quality. Each restaurant is required to conduct a certain amount of crew training each month and they are audited on this by the franchisor. Staff turnover rates must be within a certain range to comply with management standards (Baron & Shane, 2005).

Fair franchising is one of the main goals that they have had in the market in regards to the franchisees and also the customers that use these hotels. This has shown in the stellar brand image that they have and also the reviews that they get from countless of people that have enjoyed the time in each of these hotels. Among the many hotels and the countless franchises that are in the market, a Choice Hotel is truly fair franchising with no pitfalls.

Although not new, franchised retailing outlets can be increasingly seen on high streets around the world, not least in hotels, restaurants and pubs. While brands are at the centre of the marketing of effective product and service offering, the trend towards more franchised outlets seems set to continue. Lashley and Morrison recognise the growing significance of this business format and, in the preface ...