TABLE OF CONTENTS
Acknowledgments
Introduction - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0001
[franchising, economy, franchisee, franchisor, King Cleaners, Sign Masters, Star Muffler]
Franchising has become one of the dominant methods for distributing goods and services in the Western economy. It is an effective solution to the organizational problem of control since there are economic incentives in place to bind franchisee and franchisor to the trademark. In line with this, this book's author participated in the frontline operations of franchisees in three companies, referred to by the pseudonyms of King Cleaners, Sign Masters, and Star Muffler. Then, preformed structured interviews and network analysis with franchisees and with the CEO and other senior executives of each company. It is noted that franchise companies have the problems of having to sell franchise units and provide services to franchisees. Furthermore, this book present a sociological understanding of franchising both to those familiar with the strategy as franchisees or franchisors as well as to those who are familiar with it only as consumers. (pages 1 - 15)
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Franchise Fundamentals - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0002
[royalties, trademarks, long-term contracts, King Cleaners, Sign Masters, Star Muffler, franchisees, franchisors, franchising]
This chapter examines three basic components that are features of all franchise systems: royalties, trademarks, and long-term contracts. It demonstrated how these components function and, in particular, how they impact franchisee survival rates at King Cleaners, Sign Masters, and Star Muffler. Competition among franchisees changes the value of the trademark. It is noted that the prices for services given by Star Muffler is a major source of contention among franchisees. Franchisees and franchisors agree that the royalty is a “right” of the company, the price for their expertise, and assumed to be an operating expense for franchisees. The long-term nature of contracts is one of the defining characteristics of franchising, and it is an aspect of the strategy that seems to serve franchisors and franchisees well. Furthermore, it is believed that the short-lived tenure of franchisees is surely due to something other than contracts, trademarks, and royalties. (pages 16 - 33)
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King Cleaners - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0003
[franchisees, King Cleaners, Larry, franchise, franchising, economy]
This chapter reports a detailed account of the nature of work franchisees perform at King Cleaners. It specifically addresses the sources of uncertainty they face. The example given is Larry, who had operated his franchise for five years. Although King Cleaners is one of the leading franchise companies in the world, he still struggled in his franchise unit which appears to be surprising. Larry even provided services at his own expense which was not part of his contract. However, Larry still lost his post. Franchising may offer people with the opportunity to run their own business, but at King Cleaners they often do so on the fringes of the economy. In this precarious position, franchisee operations act as shock absorbers for the corporation. (pages 34 - 48)
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Sign Masters - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0004
[Sign Masters, Stu Beyer, franchise system, marketing strategy, franchisee selection, custom products, franchising]
This chapter provides a discussion on the nature of work franchisees perform at Sign Masters. In particular, it considers the roots of uncertainty they face. The troubles of Sign Masters are often pinned on Stu Beyer, the founder. Beyer's mistakes in running franchise units are addressed. It is noted that he sold the company store because of a financial crisis, but in doing so, he lost far more than a revenue stream. Sign Masters became a weaker company as a result of the scoured trust that franchisees once held in Stu Beyer. Thus, Beyer added to the financial sufferings of many franchisees by designing a franchise system with a limited range of services, and he continued their troubles with a poor marketing strategy, poor technical and franchisee support, and weak criteria for franchisee selection. It can also be stated that custom products and franchising are strange bedfellows. (pages 49 - 65)
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Star Muffler - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0005
[franchisees, Star Muffler, Walter, Mark Spinelli, warranty system, maintenance program, customer satisfaction]
This chapter presents a description on the nature of work franchisees perform at Star Muffler. Mark Spinelli, Star Muffler's chief executive officer, faced the monumental task of transforming “car guys” into managers. Star Muffler has a lack of differentiation among service providers and a poor industry image. To improve the image and consistency of the shops, Spinelli started a new program to rate shops on cleanliness and other factors. The profitability of each franchise unit and the relationship between franchisees has been changed by Spinelli's new customer oriented strategy. In general, the warranty system, the image and maintenance program, and the focus on customer satisfaction has made some effect in altering the old practices of Star Muffler, and the increased market share and customer loyalty can be attributed to them. (pages 66 - 81)
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Social Profile of Franchisees - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0006
[neo-franchisees, disillusioned franchisees, sideliners, King Cleaners, Sign Masters, Star Muffler]
This chapter introduces a typology of franchisees that cuts across King Cleaners, Sign Masters, and Star Muffler. The three types of franchisee include neo-franchisees, disillusioned franchisees, and sideliners. Neo-franchisees are outspoken critics of the franchisor and with good reason: most neo-franchisees are successful in the business. They also have full confidence in their abilities and have no doubts that they would be successful as franchisees. Disillusioned franchisees largely believe that buying a franchise was the worst decision they ever made. Sideliners are in some respects the stable backbone of the system. Sideliners are not difficult to manage compared to neo-franchisees and disillusioned franchisees. There are common experiences and uncertainties that led these franchisees to be more alike than dissimilar. Regardless of their profile, franchisees work long hours, operate six or seven days a week, and rarely take vacations. (pages 82 - 115)
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Networks, Alliances, and Survival - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0007
[franchisee success, social capital, franchisor–franchisee, peer-to-peer, kinship network, franchisee–customer, franchisee–supplier, franchising, family enterprise]
This chapter deals with the causes for differential franchisee success. It also specifically covers the critical role that social capital plays in franchisee performance. The social capital within franchise systems extends to five basic relationships—franchisor–franchisee, franchisee–franchisee (peer-to-peer), kinship network, franchisee–customer, and franchisee–supplier. The first three relationships affect the franchisee survival and profits. Relationships among franchisees are difficult to develop and sustain. The factors that limit the development of social capital within franchisee networks are then explained. The profile of a successful franchisee requires high degrees of social capital. The dense and extensive kinship networks that characterize franchising can result to severe management problems for franchisors. Franchise companies have retained the family enterprise, which is one of the oldest organizational forms in existence. (pages 116 - 137)
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Franchisor Uncertainties - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0008
[franchising, franchisees, franchisors, franchisor uncertainties, recruiting, monitoring, management problems, career paths]
This chapter examines more fully franchising from the franchisor's perspective. It specifically addresses some of the uncertainties they face in recruiting, monitoring, and managing franchisees. Franchisor uncertainties were the result of elements completely out of their control, such as the motives and wants of franchisees. There are three basic routes into franchising—vertical, horizontal, and random—and each impacts franchisors in significant ways. Vertical, horizontal, and random patterns of entry present management problems for franchisors. Franchisees and franchisors have different end goals. Franchisees wish to maximize profits, and franchisors maximize sales volume. Career paths affected the expectations of franchisees, impacted the actions they performed, and contributed to misalignment between franchisees and franchisors. The problem of control is the single greatest uncertainty facing the franchisor. (pages 138 - 156)
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Control - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0009
[control, franchisees, income statement, monetary incentive, interactions, threats, training systems, trust, trademarks, franchisor]
This chapter discusses how to control people who are geographically distant from corporate headquarters and thus cannot be supervised on-site. Monitoring franchisees by being in the shop and requiring income statement are efficient tools for controlling the system. Additionally, the monetary incentive is another type of control mechanism. Moreover, subtle interactions between franchisors and franchisees can control the franchisee units. Incentives, threats, training systems, and trust were all under the impact of franchisors, and they were elements that franchisors directly managed. Trademarks help the franchisor control the delivery and scope of services franchisees provide. Franchisees enter a system governed by a long-term, ironclad contract in the franchisor's favor, operate on the periphery of the economy providing services that are largely generic and subject to price competition, and shroud themselves under a trademark that makes their unit a perfect substitute. (pages 157 - 175)
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Epilogue - Peter M. Birkeland
DOI: 10.7208/chicago/9780226051925.003.0010
[franchisees, franchise systems, control, organizational alignment, trademark, franchisors]
This chapter presents an account of the experiences working with franchisees in three franchise systems. Franchise systems are aimed to repress the creativity and uniqueness of regional businesses so that small towns as well as urban areas are much the same. The diversity among franchisees in background, aspirations, expectations, and values does not cause the problem of control but can contribute to it through the equally pressing problem of organizational alignment. The fundamental features and dispersion offer the motive and opportunity, respectively, for franchisees to operate their unit outside of the trademark. Franchisors employ every tool in their power to bring franchisees in line. But despite an exhaustive agreement in their favor, it is not enough precisely because profiles of franchisees are not absolutes, interests of franchisors and franchisees are not as tightly aligned as they could be, and the direct supervision of franchisees is not obtainable. (pages 176 - 182)
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Index
