Restaurant Franchising, 3rd Edition

213

CHAPTER 7

STANDARD FRANCHISOR SERVICES

“In working with our franchisees, we aim high to mai ntain our brand

awareness but balance that with innovative marketing, advertising

and products that keep us on the top of our game while bringing

customers back time and again. The way we look at it, you’re in

business for yourself, but you’re never by yourself.”

—Pizza Hut

INTRODUCTION

F

ranchisors provide a variety of services to franchisees as a part of the

franchise agreement. These services are the basic components of fran-

chising and therefore need careful assessment by any interested franchisee.

An examination of the franchise disclosure document reveals that a listing

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214 Restaurant Franchising

of services constitutes a substantial part of it. Franchisees pay on an ongoing

basis for these types of services in the form of franchise, royalty, and adver-

tising fees.

Not all restaurant franchisors provide all the services discussed in this

chapter. Most restaurant franchises are either freestanding business-format

franchises or located in malls. Depending on the type of franchise, a variable

array of services is offered by the franchisors. The manner in which the ser-

vices are provided and performed delineates the effi ciency of the franchise

system. Providing services per the franchise agreement helps build strong

franchisee-franchisor relationships. Conversely, if services are not effi ciently

provided, it leads to friction between the franchisor and the franchisees. The

profi tability of a franchise system depends on both the franchisees and the

franchisor, and so these services assume considerable importance.

Franchisor services cover nearly the entire gamut of the restaurant

business, including one-time services such as site and building

development, and ongoing services such as training, purchasing,

marketing, and product development.

SERVICES PROVIDED BY FRANCHISORS

Franchisor services cover nearly the entire gamut of the restaurant busi-

ness, including one-time services such as site and building development

and ongoing services such as training, purchasing, marketing, and prod-

uct development. To facilitate these services, many franchisors maintain

regional offi ces in territories where their restaurants are located. Field staff

personnel are employed to provide various functions of the services. Stan-

dard services provided by a franchisor are listed below and described in the

following paragraphs.

n Site selection counseling and assistance

n Assistance in building and equipment

n Training at different levels for franchisees

n Preopening and restaurant opening assistance

n Continuing counseling in the operation of restaurant

n Providing operational manuals

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Sandard Franchisor Services 215

n Know-how pertaining to the menu, ingredients/formula, and method of

preparation.

n Communication link between franchisor and franchisee

n Assistance in marketing, advertising, and promotion

n Permission to use trademark, service marks, and signage

n Franchise development and support

n Product development

n Purchasing and specifi cations

n Materials development

n Maintenance and inspection of standards and controls

n Operational support of fi eld services

n Counseling on legal matters

n Financial assistance in maintaining and reporting transactions, account-

ing, and cost analysis

n Research and development

n Facilitating community activities and special events.

SITE SELECTION AND RESTAURANT DESIGN

The fi rst step in building a restaurant is its location. Site selection is

important because the success or failure of a restaurant depends to a great

extent on its location. A careful assessment of restaurant sites by an expe-

rienced professional is necessary. Established franchisors have expert real

estate and property development staff and provide their assistance to franchi-

sees. A complete market feasibility study is undertaken that includes data on

overall market, population demographics, traffi c patterns, site size and cost,

break even sales, and competition.

After the site selection, the design of the restaurant is the next important

matter. Design services are provided by franchisors, as described in the fran-

chise package and information brochures given to potential franchisees. For

example, McDonald’s Corporation, in its brochure, states that “The Company

applies the same analytic approach used in selecting its sites to designing its

buildings. An experienced staff of architectural, construction, and engineer-

ing personnel ensures that the McDonald’s restaurant facilities are among

the most technologically advanced and effi cient in the foodservice industry,

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