LICEO DE CAGAYAN UNIVERSITY

Rodolfo N. Pelaez Boulevard, Kauswagan

Cagayan de Oro City, Misamis Oriental

MIDTERM -ASSIGNMENT 2
LEARNING INSIGHT
Submitted By:

Charrysah T. Tabaosares

BSBA – FM4

Submitted To:

Mario E. Temporada

Date Submitted:

September 28, 2020

FRANCHISOR MANAGEMENT: ORGANIZATION AND ADMINISTRATIVE POLICY

A franchisor, like any other business owner, must determine goals and objectives to
achieve results in order for the franchise system to survive. A franchise system will not last
long unless the franchisor plays the central role in guiding the organization and evaluating
performance. Gone are the days when the franchisor could “rule from the top” or when the
franchisor-franchisee relationship was a vertical relationship.

Being a successful franchisor, entrepreneurs typically tend to work harder and work
greater risks than the person working as an employee in someone else’s company. They
tend to high motivation to achieve, versatility, self-confidence, and sense of adventure. The
entrepreneur must have a genuine business opportunity. A business opportunity is genuine
when new businesses open up or when existing providers are ineffective in providing a
product or service that meets consumer wants and needs.

Franchisor Development Process

 Strategic. The strategic development is focused around the vision of the franchisor,
plus the products and services that franchisor will provide.
 Administrative. Development is centered around the organization of the business,
necessary finances, and required human resources.
 Operations. Now the franchisor needs to turn to the functions and operations of the
headquarters organization.

Franchising is a two-way street. The most important ingredient for success of franchise
system is the independence between franchisor and franchisee. The franchisor develops
the profitable way to produce, sell, or distribute a product, or must monitor or oversee
every unit within the franchise system. The franchisor is responsible for each unit in
franchisee system. The system itself is no stronger than its weakest link. Making the
transition from an entrepreneurial single-unit firm to a multi-unit professionally managed
franchise system requires the franchisor to make several transition in the development of
the organization. The franchisor of rapidly growing franchise system has to cope with the
day-to-day problems of being in business while keeping a constant eye on new
developments and the intended growth plan for the system.

Franchise entrepreneur as manager. Each franchisors in some way an entrepreneur, and

each entrepreneur is to some degree an innovator. A franchisor, as innovator, is seeking to
find newer or better ways to meet the customer’s needs. The ultimate test is customer’s
satisfaction. If the customers is not satisfied, the business will ultimate fail. The franchisor
must develop an efficient method of identifying and assembling necessary supplies and
materials, provide an operational method for efficiently producing or assembling the
product and service, and determine the effective methods of selling or delivering the
products and service to the customer. The typical reasons stated for business failure are
lock of business know-how and under capitalization.

Organizational development. The first step is scanning/ assessing the environment from
each of two perspective: external and internal. External influences on the firm, such as
customers, lenders, stock holders, competitors, suppliers, and government regulatory
agencies, can help the firm clearly identify the competitive issues it confronts. The second
step is development of the strategic plans for the franchised business. The firm’s mission
and analysis of past results should be carefully assessed and refined if necessary. The firm’s
objectives can then be updated and a particular course of action determined to exploit
potential opportunities while remedying existing or anticipated problems. The third step,
implementation of the strategic plans, can be categories as long, medium, or short range,
depending on the time frame in which is it to take place. The overall purpose of this step is
to allocate the firm’s resources to achieve the best possible market response given the
market conditions and the resource capabilities of the firm.
Set priorities for strategic decisions. The franchise system entrepreneur must concentrate
on multiple perspectives to avoid myopic thinking through a single-lens trap and thus
maintain a strategic view across and within the franchise network. The strategic priorities
are as follow:

 Build a franchise system and its infrastructure to establish and maintain high
performance at the home office as well as corporate and franchisee locations.

 Be state of the art in products and services; look for continual product and service
development.

 Seek to gain and maintain market share with equal service and customers.

 Continually improve processes and procedures to ensure efficiency, standards of

high quality, and strong financial return.

 Develop a competent and committed workforce within the corporation and build
supportive environment and identify for franchisees.

 Position the franchise system for the long term by identifying issues and trends that
may provide opportunities or produce threats to the franchise.

Planning should be organized. Planning helps the franchisor keep a proper perspective on
individual whims and personal aspiration. Consistent growth and development usually
requires an approach other than the proverbial shooting from the hip. Formal planning is
the initial process, the completion of which enables the remaining elements of the process
of management to be utilized.

 The process of management. The franchisor provide direction that can be described
through the management function.
  Planning is the primary responsibility of the owner manager. Planning concerns the
following:

 Determining the overall goal, mission, and objectives of the franchise

 Formulating policies, plans of action, and procedures (when appropriate) for
attaining the objective of the franchise organization.
 Developing standards for costs, sales targets, and performance for
incorporation into a budget and sales forecast, which can be used as an
operating control.
 Developing the franchise’s line of products, services, and processes in the
long run to ensure continuity for the organization as well as adoptability to
the ever changing needs of the marketplace.

 Organizing is the coordination of human, financial, and physical resources deemed

necessary to reach the objectives of set forth in the planning phase.

 Organization chart
 Multiunit franchising
 Area developer
 Master franchisee
 Area representative
 Franchise broker

Franchisee selection. Generally, the importance of financial net worth in franchisee

selection is considered as most important by 34 percent of franchisor. Over 60 percent of
respondents rated the personal interview as being the factor of highest importance.

 Directing. Direction is used to achieve organization’s objectives while building an

organizational climate conducive to encouraging superior performance.
  Giving directives. Directives can be given in either written or oral form.

 Supervising. It is about the training—and disciplining if required—of personnel

employed in the franchise organization.

 Leading. Leadership behavior is meant to influence others to willingly provide effort

and cooperation in order to achieve the objectives of the organization.
 Motivating an communicating. A natural by-product of effective leadership is a good
work environment.

Controlling involves the determination of standards and the method of evaluating

performance against those standards to appraise operating results.

 Determining performance standards.

 Comparing performance to standards.

Franchisor policies. A franchise often starts out small and because of its size is usually a
highly centralized operation. Enhance communication between central offices and
franchisees in the field can have merit. For example, if the resident or director of sales was
to make two or three telephone calls per week to the franchisees of the chain, it is likely
that within a manageable period of time all franchisees would receive a personal call from
the central office. Franchisor advertising, if exaggerated or deceptive, can result in criticism
and complaint by franchises, as well as by the general public. It can also draw criticism
from other franchisors who are reasonably meeting the needs of their respective
franchisees and the consuming public.
 Pick winners. One of the greatest needs of a successful franchise is good, honest,
hard-working people. There is no need for individual stars, but tremendous need for
good people who are willing to work hard to develop the right franchising concept
and develop and in courage an image of integrity and honesty within the
organization.
 Motivation. Jim Peterson also reports five steps on motivating and developing
employees. These steps are as follows:

 Improvement-oriented attitude
 Measuring everyone’s performance
 Evaluation
 Feedback
 Recognition

 Quality. It is important for management of the franchise to know how customers

honestly perceive the quality of the product or service. Quality is the customer’s
perception of the product, and the customer’s perception is greatly influenced by
the employee or server.

 Franchisee advisory council (Joint council). There is a great need for strong
communication lines between franchisor and franchisee. Coupled with the
franchisor—franchisee relationship is the need for the development of a franchisee
advisory council or joint council between the two parties.

 Council membership and officers. Membership in a franchise council generally

occurs in one of two way. Members are either elected by franchise peers or
appointed by the franchisor.

Council functions.

 Operations
 Marketing
  Product and services
 Finance
 Grievances

 Innovation in franchising. To innovate or not to innovate is not the question. All

successful franchise system innovate. Franchise system must continually examine
and modify their core products and service offering to maintain competitive
advantage in their industry, continue their current customer base, and attract new
customers to their product and services line.