Jul 062012
 

Many franchise systems tend to be retail-based. While franchises typically have a greater success rate than new independent businesses, there are some types of retailers that seem to be more suited to franchising than others. In this activity, you need to determine whether a fast-food store/restaurant or a convenience store would be a more appropriate vehicle for franchising?

 

ACTIVITY/TASK

Retail Factor Potential Benefit

Value to a

Fast food restaurant franchise

Value to a Convenience store franchise

Brand A strong brand may create the ability to win a greater number of customers, depending upon how consumers choose between competing stores

High

Some

Low

High

Some

Low

 Training Some businesses are complex to operate. Therefore, providing training is an advantage in more complex businesses

High

Some

Low

High

Some

Low

 Efficient operations Some businesses can generate a competitive advantage from efficient (stream-lined) operations – usually depending upon the number of steps in the business process

High

Some

Low

High

Some

Low

 Borrowing access Some businesses are quite expensive to set up and may require the owner to borrow. Typically, it is easier to obtain a bank loan for an established franchise system

High

Some

Low

High

Some

Low

 Efficient buying Buying at a good price, with consistent quality, from reliable suppliers is usually quite important to retailers

High

Some

Low

High

Some

Low

 Product development Some businesses require new products to help them grow. In a franchise system, the franchisor will often take on the responsibility for researching and developing new products.

High

Some

Low

High

Some

Low

OVERALL From the above information, how suitable is each of these types of stores to be franchised? 

 

Very suitable

Somewhat

Not suitable

Very suitable

Somewhat

Not suitable

 

QUESTIONS

  1. Start by reviewing both retail formats against the criteria in the above table.
  2. Based on your responses in Q1, which of the two store types would be more suited to being franchised?
  3. Other than in the retailing sector, what other business types do you think would be suitable for franchising?
  4. Can you add to the above criteria, in order to help firms assess whether franchising is suitable for them?

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