CHAPTER 4

FRANCHISOR MANAGEMENT:
ORGANIZATION AND
ADMINISTRATIVE POLICY
Learning Outcomes
 Learn about the functions of franchisor
management in a franchise system.
 Understand franchisor management practices and
their importance to a franchisor.
 Learn the tends commandments of a successful
franchise organization
 Investigate leadership principles important to
franchising
 Understand importance of quality and quality
controls in franchises
 Learn about franchisee advisory councils and how
they operate.
Functions of franchisor management in
a franchise system
 Characteristics of a Successful Franchisor:
◦ Personal factors: Motivation; Abilities, and
Attitudes
◦ Environmental factors:
 Governmental Regulation
 Financial Accessibility
 Genuine Business Opportunity
◦ Organizational factors:
 Strategic Plans
 Policies to Franchisees
◦ Hard-working
Franchisor Development
 Strategic Development
◦ Vision
◦ Products and Services provided
 Administrative Development
◦ Organization
◦ Finances
◦ Human Resource
 Operations Development
◦ Advertising
◦ Accounting
◦ Management
◦ Production
◦ Training
◦ Distribution
◦ Operations
◦ Field Staff; Marketing Research
Six Major Organizational
Development Tasks
 1. Identify and define market Niche to create competitive
advantages for the franchise firm
 2.Design products and/or Services to meet wants, needs, and
expectations of the target customers;
 3. Develop policies and plans for controlling the Franchise system
 4. Acquire Financial and Human Resources; Recruitment and
Selection of franchisees, solicit and train franchisees
 5. Refine operational systems to accommodate franchisees units
and develop management systems to oversee, monitor, and guide
franchise system development.
 6. Develop an understandable and acceptable franchise
organization culture
◦ Affirm or re-identify and define Niche
◦ Start task 1 again.
 Strategic Management of a
Franchisor
Vision

Mission
External
Objectives Internal
-Customer
-Resource
-Government
Environmental Capability
-Competitors
Scanning -Location
-Suppliers
-Culture
-Financial
-Structure
Resources Situation Audit
-Technology
-Technology

SWOT analysis

Franchise System
Strategies
Set Priorities for Strategic Decisions
on Building a Franchise Business
 To establish and maintain high performance of the
franchisor and franchisees
 To be state of the art in products and services
 To gain and maintain market shares with quality
service to customers
 Continually improve efficiency, quality and strong
financial returns
 Develop competent and committed workforce
 Position the franchise system in long terms.
Franchisee Selection
 McDonald’s:
◦ Entrepreneurial Spirit and Strong desire to
Succeed
◦ Ability to motivate and train people
◦ Ability to manage finances
◦ Willingness to personally devote full-time and
best efforts to day-to-day operations on premises
franchisees
◦ Willingness to complete comprehensive training
and evaluation program
◦ Financial Qualifications
Leadership principles important to
franchising
 Directing
◦ Giving directives: oral forms; written directives; orders
given to franchisees
◦ Supervising
◦ Leading
◦ Motivating and Communicating
 Controlling
◦ Appraisal of performance of subordinate managers
◦ Appraisal of policies
◦ Appraisal of financial transactions
 Designing franchisor policies
 Motivating
 Innovating
Ten commandments of a successful
franchise organization
 1. Leadership
 2. Staying with the business one understands
 3. Developing and maintaining a unique niche
 4. Keeping firsthand touch with customers
 5. Relentless pursuits of management principles
and fundamentals
 6. Organization
 7. Freedom from government interventions
 8. Strong Fiscal Responsibilities
 9. Strategic Development
 10. Picking winners
Quality and quality controls in
franchises
 Quality of Sales services
 Quality of products
 Service Time: lead time between order
and receiving the goods.
 Regularly organizing survey to learn about
customer satisfaction.
Franchisee Advisory Councils
 How to establish the council?
◦ By the franchisor’s group of appointed and
elected members.
◦ By several franchisees’ group of appointed and
elected members
◦ The franchisor and franchisees jointly set up
the councils
Franchisee Advisory Councils
 Benefits of the FAC:
◦ Help develop mutual trust
◦ Improve communication in the franchise
system
◦ Handle policy changes, product introduction,
program development, feedback
◦ Improve sales, motivation, the entire franchise
system
◦ Strengthen the franchisor-franchisee
relationship.
Franchisee Advisory Councils
 Areas of advisory matters:
◦ Operations
◦ Marketing
◦ Products and services
◦ Finance
◦ Grievances
Topic Discussion (Homework)
 Read a Case Study on pages: 93-94
 Discuss and answer all the questions.
Class Discussion
 Read a Case on page 131.
 Answer the relevant questions