1.1 Research Background and Problems
Franchise system is an easy and common way to join a business nowadays, we can see many franchise business around our daily life now, such as 7-11 convenient store, Family-mart, and 85°C café. Based on the reasons of sharing resources and reducing competition, companies have developed many cooperative ways and the franchise chain is one of very popular ways (Ting, Chen & Wu, 2004). According to Association of Chain and Franchise Promotion (2012), Taiwan has the highest density of franchisors over the world, and more than 50% are catering service corporations. Also, Taiwan retail and catering business has turnover of NT$ 3.6 trillion and the number includes franchise system of NT$ 1.75 trillion, accounting for about 48% of total turnover in retail and catering industry. This shows franchise industry plays an important role in Taiwan’s economic activities. “Franchising today is one of the most innovative, dynamic and effective systems for distribution of good and services the world has ever known.” (Friedlander & Gurney, 1990)
Franchise chain is a vertical marketing system (VMS), very differ from the traditional marketing. Expanding store to increase the turnover is the target of every franchise brand. To expand stores but without tasting or feeling differently, the common way is to establish an Standard Operating Procedure (SOP), so every stores will be alike, taste alike and also looks alike, it follows that the marketing plan should be the same
too.
Franchisor and franchisee are coexistent in relationship of the organization, and also the trading relationship: the franchisee helps the franchisor to sell the products.
The more recognition towards franchisor, the more opportunities to re-contract and will also lead more contribution to franchisor. But also, franchisee must follow the rules that franchisor formulate, from the chocolate for decoration to the marketing launching activities.
Franchising companies face strong pressure due to competition (Velissariou &
Chadou, 2013). Marketing skills is how a brand expands their notability and promotes their products. To achieve the sales goal, the company will use different strategies to attract people to buy from them, for example: 85°C café launched the “Thank God Its Friday Coffee Day”, (a.k.a. TGIF Coffee Day). This event gives customer a discount on the second one of coffee they purchased, which is 50% off, and only on Friday. Other example: Taiwan FamilyMart and 7-11 launched the point collecting activity, people can use the point to exchange limited gift. The marketing strategy seems a big success:
people buy more on Friday for the coffee at 85°C café and people is desperately to collect whole set of limited gift from convenient stores. This condition repeats again and again, and people are used to having little discount when shopping. The good intention of stimulating buying power seems to become more priceless.
When something goes from special to normal, it becomes priceless, because it is not scarce anymore. Taiwan has the common failing that merchandise never learned the
customer is fleeting interest people. Some marketing event went viral because it is a new launched event that customer never seen before, but when every shop follows up the similar event, the sales drop tremendously. Organizing activities, selling in special prize, using media for exposure…all of these can be called “promotion tactics”, but this is not “marketing strategy”. Tactics are short-term activity, used to enhance the achievement of a one-time task. Strategy is a long-term activity, talking about how the company achieves the goal (Lin, 2012). Lin (2012) also mentioned that promotion is just how to attract new customer, but marketing is a system that how to give value to the customer and receive reasonable profit from the customer. The company cannot rely on promotional event forever to attract customers; they should form a cycle to control the money costs and activity lasts time, in order to keep the customers and produce a positive return investment. Most franchisor in Taiwan uses promotional “tactics” too much and spoiled the customers, so the sales become steadily ineffective every time.
Franchisee is not happy to see this situation because customers do not shop on the days that without discount. This is the reason why and how the marketing thinking is different between franchisors and franchisees.
Not only the marketing thinking is different, other ideas or aspects are also different, sometimes is because feeling “unfair”. The relationship in the franchising should be based on mutual trust and cooperation between the two parties to ensure the successful operation of the business venture (Velissariou & Chadou, 2013), feeling unfair and led to conflict can be seen frequently and even cause the termination of franchise relationship. The failure is because both sides could not reach a consensus of
marketing mindset, or thinking, but seldom of thesis discuss from franchisees’ side. So this gave me an idea of making a research of standing in franchisees’ shoes instead of franchisor’s to see what has been missing between both sides.
I believe the problems have occurred in every franchise business. In my experience of working part-time in 85°C café, it becomes an example that I observed. 85°C café is a good example of franchise chain brand in Taiwan started from 2005. Ten years has gone by, the brand did not washed away by the currents of the time, but I believe has been through many tough time and is a good example to be discussed. There are lots of thesis discussed franchise businesses in the past; many of them mainly give credit to the company itself (franchisor), some of them discuss from franchisees’ point of view, but more likely from conceptual angle, or an abstract aspect. Hence, this thesis will based on franchisees’ point of view, discussing the essentially way of communication with the franchisor, especially in marketing area.
1.2 Research Objective and Purpose
Trust and reliability is a variable in relationship marketing. To enhance the relationship between both sides is homework for every franchise chain brand. The mindset of 85°C café (franchisor) can be reveal from the periodical every month they sent to the store, so the mindset I would like to discovered is the franchisees’ mindset.
This thesis purpose is to:
1. Distinguish the different mindset between franchisor and franchisee.
2. How to maintain, or cope with the relationship within the gap between.