Assignment
[subject or course title]
[submitted to]
Part 1: Literature Review 3
Introduction 3
Franchise management strategies 4
Success factors 4
Importance of franchising 5
Main pillars of franchising success 6
Business model 6
Standardization of processes and operation 6
Potential expansion of business 6
Profile of the franchisee 7
Defining the role of the parties 7
Part 2: KMC franchise in UK 7
The selected company 7
Background of KMC 7
Success factors 8
Franchising In UK 8
A background on franchising 8
Growth and future of franchising 9
Why KMC should open a franchise in UK? 9
Success routes for franchise in UK 10
Market attractiveness 10
References 12
Part 1: Literature Review
Introduction
Some studies have looked at franchising from a non-theoretical perspective. Entrepreneurs were likely to franchise because of a known brand name and the ability to start a business more easily. In addition, franchising provides access to managerial help, a ‘proven’ business plan and name, and greater probability of survival. From the franchisor perspective, franchising was used to reduce the risk. A firm could expand via franchising in order to test the potential of a new market; a franchisor could determine market potential without using company-owned assets, thereby reducing overall firm risk (Mansfield, & Killick, 2012, pp.545-567).
In a franchise system, one firm (the franchisor) sells the right to a second firm (the franchisee) to market goods or services under the franchisor's brand name and use business practices developed by the franchisor (Perryman, & Combs, 2012, pp.368-386). Put differently, it is the rental of an intangible proprietary asset and operation of a decentralized production or distribution process. Typically, the franchisee acquires rights from the franchisor to conduct business in a geographically specified market (Nijmeijer, Fabbricotti, & Huijsman, 2013).
The essence of a successful franchise
In recent years, much has been talked about franchises and its impressive growth, more than double digits annually, taking a picture for the market that franchise is a guarantee of success for both the franchisor (owner of the brand and the method of production / service) and for the franchisee (independent third party that invests in the acquisition of franchised business and will operate it on a daily basis) (Mansfield, & Killick, 2012, pp.545-567). This guaranteed success should not be taken forward because, although the success rate of business franchises are largely above those of independent businesses, whose mortality rate in Brazil is high (despite the decline in recent years), there is mortality also franchises. The franchise has some pillars of success that need to be understood and respected, in general, regardless of the type of business formatted, and they bring in their definition, concepts relevant to any entrepreneur who wishes to join the system (Perryman, & Combs, 2012, pp.368-386).
Franchise management strategies
The main goal of any marketing effort is to increase sales as one of the most profitable for an organization looking to satisfy the desires of consumers. The sale is a crucial aspect of a firm's promotional strategy (Fladmoe-Lindquist, 2013). When used and applied correctly, is an important factor to generate sales volumes, and is the part of the promotion that links the human element in marketing operations. The sale is the transfer of property from one person to another, in exchange for a payment in value and represents an important income for the company. Unifying the criteria of the authors is to sum the sale is a situation of personal service, by which one can determine the outcome of an immediate investment and real. Moreover, in recent years, there have been some very different patterns in managing franchise business, a phenomenon which in turn has made the retail to specialize increasingly in the market (Dant, Grünhagen, Kaufmann, Brown, Cliquet, & Robicheaux, 2012, pp.525-538).
In that sense, franchise management strategies have to be channeled to meet specific needs, and be incorporated into the overall marketing plan in an orderly fashion. In this case, these strategies indicate the areas of greatest importance in the organization (Fladmoe-Lindquist, 2013), and later in the overall marketing plan. To that end companies need to specify where they are headed retail strategies, therefore, they must have well-defined market segment where they are going to address these strategies (Nijmeijer, Fabbricotti, & Huijsman, 2013). Whereas, in the field of marketing, selling is personal or impersonal process of persuading a potential customer to buy a commodity or service, or to act favorably on an idea that has commercial importance for the seller and the same way for organizations. In that vein, franchise management strategies are a personal communication of information to convince someone to buy something (Mansfield, & Killick, 2012, pp.545-567).
Success factors
- Adjust the ratio of owned and franchised stores as two premises: use the features of franchisees to take advantage of growth opportunities, and then improve aspects of coordination and control of all stores. This ability to attract franchisees and grow with it also serves as a sample of the feasibility of a network.
- Provide the greatest possible support to franchisees. The relationship between franchisor and franchisees becomes narrower (Mansfield, & Killick, 2012, pp.545-567). The franchisee focuses on routine operations, and divides the franchisor of the administrative function of the unit. The franchisor end up having more control over the franchise.
- Keep the franchise fees at a high level. It seems illogical, but most reputable networks are able to grow even when they increase their franchise fees (Gonzalez-Diaz, & Solis-Rodriguez, 2012, pp.325-341). They convert their good name and brand value in demand, so that many franchisees are attracted by its value proposition, convincing them that the profit will be right, offsetting investment (Dobbs, Boggs, Grünhagen, Palacios, & Flight, 2012, pp.1-15).
- Identify if its industry is now positive. While every sector is growing, particularly in some areas are booming and this, though not rule may serve as indicative. There is a growing presence, for example, aesthetic clinics, dental clinics, home services and services for corporate.
- Knowing how to use the good economic times to attract franchisees and grow with it. Obviously? But know that not all identify the good air of the economy the ideal time to expand your business, call new franchisees (Gonzalez-Diaz, & Solis-Rodriguez, 2012, pp.325-341).
Importance of franchising
Research has shown that of all businesses starting today, only 20% will still be trading in 5 years time. With franchising these figures are reversed. The reason for this represents the other benefits of franchising. With franchising, as explained earlier in the report, it involves buying into a business that is already operating. The Franchisor would have made mistakes along the way and would have learnt from them. This knowledge is passed on as part of the franchise system. It enables the franchisee to start their business at a much higher point on the learning curve (Dobbs, Boggs, Grünhagen, Palacios, & Flight, 2012, pp.1-15).
Within a franchise there is a great deal of help and support available. The support that the franchisee will need will change as their business grows. From day one the franchisee receives training and is reliant on the Franchisor (Consultants, 2012). As the franchisees become established, they benefit from different types of support such as staff training and National account business. Franchisor should also be able to provide the franchisee with the necessary technical support. However it is invaluable to be able to talk things through with other franchisees, or the support team who may well have dealt with the same problem recently.
According Goldman (2009) franchisor can benefit from rapid low cost market expansion. In the early stages of an organization, capital is typically scarce and growth needs to be rapid to achieve brand recognition and economies of scale. Therefore franchising gives them opportunity from low cost market expansion. Franchisor also benefits by receiving income from franchise fees and royalties. Organizations with multiple units, franchisees work harder than salaried managers, which is an example of agency theory. Franchisors also have access to ideas and suggestions and perceive franchisees as a source of intellectual capital. Franchisor also receives the opportunity to reduce cost because most franchisees share many of the costs such as regional and national advertising (Consultants, 2012).
Main pillars of franchising success
Business model
Clear definition of what is being franchised and expectations financial feasibility model of revenue and expenses for both parties, the long-term vision of the company with regard to the format and appropriateness to the principles of the legal system franchises (Acuff, & Reiher, 2008).
Standardization of processes and operation
If the franchise has the "replicability" as your base, business processes need to be properly structured by the franchisor to allow greater access to content by franchisees. There has been much discussion on the standardization and constant business changes required by the market and also on the need to transfer this know-how rather than only its structure.
Potential expansion of business
Is the definition of calculations and estimates on how many units and that fit local franchises, its power of attraction of investors and market potential (capillary).
Profile of the franchisee
It is important that there is clarity about what is the best profile and requirements, so that candidates may be more aligned, and also for the search to be more selective and effective, providing greater chances of business success.
Defining the role of the parties
There is still much confusion about who does what in a relationship franchises and this stage is important to clarify that develop business and thinking in the medium and long term responsibilities of the franchisor.
Part 2: KMC franchise in UK
The selected company
The market segment of age range of birth to 19 years accounts for a total of 20% of the Ukrainian population. Kids Marketing Consulting, firm started by Natalia Berezovskaya in 2002, focused on this market segment penetrating this segment by conducting several research strategies.. Natalia Berezovskaya started this firm in collaboration with Vitaly Ocheretanyi potentially identified the kids, tweens and teens market as an underserved market of the country. Kids Marketing Consulting started its operation under the flag of Dynamic Development of Innovation Group (DDI). Kids Marketing Consulting accounted of a total of 40% of the total revenues of DDI in 2004. KMC extracted the maximum benefits being a part of DDI and the conditions were favorable for the firm for success.
Background of KMC
Natalia Berezovskaya in partnership with Vitaly Ocheretanyi, in 2002, started Kids Marketing Consulting as a part of Dynamic Development of Innovation Group (DDI). Kids Marketing Consulting focused on the market segment which was underserved and this market segment was highlighted by the kids marketing Consulting. This market segment consists of kids, tweens and teens ranging from birth to 19 years of age. The market research firms which are already operating in Ukraine have never focused on this area of market as a potential target market and this remained as an underserved section of market until the emergence of Kids Marketing Consulting. The journey of success of Kids Marketing Consulting starts from right here. This niche market segment accounts of 20 percent of the whole Ukrainian population. The purchasing power of kids, tweens and teens was completely ignored by other market research companies of Ukraine. KMC conducted many comprehensive research studies on the buying behaviors of the kids, tweens and teens, their consumer psychology and potential in the local markets. The methods adapted for these research studies included face to f ace in depth interviews with both parents and children, which helped in the collection of relevant data.
Success factors
KMC got many benefits from being a part of DDI, because of the availability of the important resources to the organization. The market experience of the owner of the firm was there along with other competencies which combined to prove health factors for Kids Marketing Consulting. The contacts of KMC with international market research firms to judge the buying behaviors of kids and teens all around the world helped them in developing a framework which they followed in their region (Havrylyshyn, Miller, Perraudin, Aven, & von Hagen, 1994pp.354-401). Strategies like monitoring of media sources including social forums and magazines and analysis of the business publications helped Natalia in determining the potential of this niche market segment.
The lack of information to the Ukrainian population regarding this niche market segment helped KMC in attracting the people towards it and the contacts of Natalia with the advertising community of UK helped in ensuring the success of Kids Marketing Consulting. The large customer pool which DDI already possessed proved to be plus point for KMC. Cost efficiency of sharing the office space with DDI was another plus point which helped Natalia in cost cutting and this helped in ensuring that the business promotion expenses of KMC were only 5 percent of the overall expenses.
Franchising In UK
A background on franchising
Franchising is not a new phenomenon with examples of franchising that can be traced back to the 1850s. An early model is the relationship of breweries and hotels in New South Wales. The prominence of franchising today had its beginnings back in the 1930's, with an explosion of the concept occurring in the 1950's as the development of fast food chains took off across the world -as experienced by McDonalds. In UK there are more than 20 current franchisors that have been operating since before the 1960's; with some having been established in the 1930's (Gillis, McEwan, Crook and Michael 2011, p. 427).
Growth and future of franchising
Franchising is reaching a level of dominance to a point that an independently run operation is becoming an exception rather than the rule. Franchising is the fastest growing method of delivering business services in the global economic system and currently accounts for more than one-third of all retail sales in the USA and UK. By the 2012, worldwide franchising is expected to have evolved into the leading form of retail sales. The phenomenon is more recent in UK with currently 25% of retail sales occurring through a franchised operation. With an annual growth rate of franchised operated outlets in the order of 14% per annum, franchising now account for over 650,000 employees working for in excess of 50,000 franchisees. Retail sales through franchising are expected to soon reach 50%, compared with about 5% in 1980..
Why KMC should open a franchise in UK?
The market research industry of UK has developed significantly over the past few years and the journey of its growth dates back to the journey of UK as an independent state. The development of the market research industry of UK has been blessed with many factors which include solid demands from the market; squat inflation rate and inclusive amount of investors along with availability of the valid resources. All of these factors have contributed significantly to the substantial growth of the market research industry of UK. The market research industry of UK has expanded in the sectors of fast moving consumer goods, medical products, alcohol and tobacco. The contribution of research industry has been observed to be 2.8% of Copyright Industry and it moved up to 8% in 2007 (Acuff, & Reiher, 2008). The last seven years have been very good for this industry since the growth rates have increased exponentially. The size of the industry is expressed as varying by the analysts (Mühlbacher, Leihs, & Dahringer, 2006). The example of Kids marketing Consulting can be quoted her for the support of this argument KMC experienced substantial growth because of the target market selection was of the underserved market.
Success routes for franchise in UK
The market research industry of UK was estimated to range from $ 5 million o $10 million in 2004. The complications were there for this market and the factors including poor taxpaying rate of the population has been the one which has harmed it the most. The effects of globalization were also evident in hi context and the businesses started to opt for advertising strategies for gaining control over the market, rather than going for market research companies. The legislative changes in the state urged the grey and black companies to merge with the white ones.
The organizations started to spend more on the advertising strategies and this proved to be matter of concern for the market research industry of UK. Apart from these factors, the market research industry of UK has gained significant success and the creation of self regulating organization can be quoted as a clear proof of this success (Acuff, & Reiher, 2008). The pricing policies were stabilized for the market research by the development of an ethical code. This also diminished the possible chances of any sorts of unfair competition in the local markets and helped in the promotion of legal and fair companies. This caused the white markets to focus more carefully on the delivery and the standards of quality (Churchill, & Iacobucci, 2009).
Market attractiveness
More than 30 market research companies are operating all over UK. In 2003, the profit ratios of these companies were substantial and they were rapidly progressing towards growth and success (De Mooij, 2009). The advertising techniques are being adapted but the reliability of the data collected through questionnaire surveys, interview sessions and other authentic methods adapted by market research companied for conducting comprehensive research have been acknowledged by all organizations of UK (Akimova, 1997pp.237-58).
It is a fact that advertising techniques are valid but the affirmation about any research is not there. The reason is that advertising helps in capturing the target market without identification, whereas the research of the market helps is gaining complete control on the target market. The Market Attractiveness factors include all of the factors mentioned above and these factors have proven to be very beneficial for the significant growth and success of market research industry of UK. It is a factor that the competition is significantly growing in this industry of UK but the fact is that this fact will prove to be beneficial for market research industry as the increasing competition will result in increasing competitiveness of the market research companies (De Mooij, 2009).
References
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