Jiun-Lan Hsu
Department of Restaurant Management of Taipei College of Maritime Technology, Taiwan R.O.C
Abstract
Based on Key Success Factors in catering franchises, this study tends to discuss the hierar-chical levels of Key Success Factors and the relative importance with Analytic Hierarchy Process. After integrating the opinions in the questionnaire survey, Service Quality of Fran-chise presents the most importance among Key Success Factors in catering franFran-chises, fol-lowed by Location of Franchise and Characteristics of Product and Service. Among the fac-tors in Service Quality of Franchise, Meeting Customer Requirements is regarded the most critical, followed by Service Standard. In regards to Location of Franchise, Tide of People at the Store shows the most importance, followed by Local Consuming Capacity. Regarding Characteristics of Product and Service, Product Characteristics is considered as the key, fol-lowed by Product Diversity. The proposed hierarchical levels could provide domestic ing franchises with Key Success Factors analyses as well as the benchmarking among cater-ing businesses. Accordcater-ing to such hierarchical levels, domestic franchiscater-ing businesses could have the major manufacturers with better performance be the benchmarking subjects. More-over, the hierarchical levels could be the references of yearly self-evaluation. It is suggested that franchising businesses could utilize such a structure for self-evaluation, establishing the objective with more specific improvement strategies.
Key words: Franchises, Key Success Factors, Catering Industry
Introduction
The recent economic depression has resulted in high unemployment that a lot of unemployed people or the ones worrying about permanent unemployment have in-vested in catering franchises, as franchises present lower investment capitals and re-strictions, owners appear higher autonomy and are not required of high educational background, and trainings in establishing one’s own business are provided for the
is considered as the most successful route to own a business in Europe, the USA, and Japan, as it is a duplication of successful business model. Statistics show the suc-cess rate of franchising up to 90%. A lot of people therefore would like to have their own businesses that franchising has boomed. Catering franchises in Taiwan are rapidly expanded the brands by both the franchisors and franchisees to create bene-fits for both parties. Franchisors rapidly expand the chain stores by franchising to
time. Franchisees, on the other hand, select a good franchising business for the dream of owning a successful business. In this case, the key factors in selecting franchi-sors and the relative importance become primary and valuable.
Literature Review Franchising Management
Franchising management is com-monly utilized for expanding businesses.
Theoretical and practical definitions and classification of franchises are slightly different domestically and internationally.
In order to understand the essence and the major management model of franchising, exploring the definition is the priority. The relationship between franchisor and fran-chisee is a contract, not employment, with which both parties precede specific com-mercial behaviors. Franchising therefore is regarded as a contracted business man-agement system.
Wang (2009) argued that franchises were not cooperatively operated by fran-chisors and the chain stores, but a collabo-rative business. After all, franchisors and the chain stores were independent busi-nesses, which shared the roles and func-tions to enlarge the network and expand the economic scale. Association of Chain and Franchise Promotion, Taiwan (2009) pointed out the contract between a franchi-sor and the franchisees (or an authorizee who is an independent legal person, a store, or an individual) that the franchisor authorized the franchisees of the trade-mark, products, and management model (management technique), and the franchi-sees paid the franchisor for the above rights and received instructional trainings and professional job assignment from the franchisor. Li (2010) considered a real franchising as the standardization and con-sistency of management concept, CIS, product service, and management system.
The following management systems should be taken into account for catering franchises (Su, 2011).
1. Establishment of Operation and Man-agement Center. It aims to establish a set of franchising operation system and plan the responsibilities of each de-partment so as to smoothly precede the business.
2. Establishment of CIS (Corporate Iden-tity System). Corporate IdenIden-tity Sys-tem is the key in present chain stores.
The primary contents of CIS cover to have consumers generate new image and perception and to combine CIS and the management concept of chain stores in order to attract consumers and franchisees.
3. Selection of Store Location. The selec-tion of locaselec-tions is regarded as the key success factor in franchising that the evaluation of trade area and location environment is the prior considerations in the decision-making process.
4. Product Management. The major prof-its of chain stores are the products that an accurate and effective product strat-egy and management for product ori-entation and structure, pricing, promo-tion, and distribution should be estab-lished.
5. Personnel Management. It aims at the problems of human resource, recruit-ment, trainings, and employee reten-tion.
6. Financial Management. Cash income appears in convenience stores every-day that bad management or reinvest-ment is likely to cause managereinvest-ment risks. Retail industry, on the other hand, is a “location industry” that the capitals are normally sufficient, unless management difficulties resulted from bad locations. Aiming at cash man-agement, a management system should be established. (1) The enterprise capi-tal should not be privately embezzled.
(2) Data and report management should be well applied. (3) Investment strategies should be evaluated in
ad-vance. (4) Cash management in chain stores should be controlled.
7. Store automation. Based on a standard-ized, systematic, and highly structural commercial environment, the tools of (1) Value Added Network (VAN), (2) Electronic Ordering System (EOS), (3) Point of Sale (POS), and (4) Electronic Data Interchange (EDI) are necessary.
8. Consultation of instructors. A success-ful franchising system aims to trans-form the power of franchisors into the chain stores as the executive and pleasure motivation, which relies on a favorable medium supervisor. A su-pervisor mainly (1) assists the chain stores in promoting businesses and coping with competitors, (2) improves and reinforces the product structure, (3) inspects and improves the store management, (4) promotes the policies of the franchisor, and (5) builds up the relationship with the franchisees.
9. Contract planning. The contract plan-ning in developing chain stores closely relates to the relationship between the franchisor and the chain stores. For this reason, the contract should be (1) clear and easy to understand, (2) deliberate and definite, (3) suitable for a long pe-riod of time, (4) fair and legal, and (5) appropriately restricted, but not over-restricting the operation activities of the chain stores or violating Fair Trade Act.
10. Joining conditions. The selection items contain (1) understanding personal background of the franchisee, (2) the setting of capital, self-fund, franchising fee, and real estate, and (3) the store, ownership, area, trade area condition, and number of competitors
Summing up the above management keys, the best benefit is created by master-ing the standardization and systemization and maintaining the good cooperation with the franchisees.
Key Success Factors
Lin (2010) indicated that an enter-prise could master the factors in industrial fluctuations with Industry Analysis and develop the limit resources into uniquely competitive advantages for acquiring ef-fective competitive advantages in the in-dustry. Chin (2009) proposed that com-petitive technologies or assets were the key in successful competition in specific industry. Chen (2011) regarded Key Suc-cess Factors as a primary tool in manage-ment, an essence of competitiveness, and an important consideration in planning and decision-making. Huang (2009) argued that a manufacturer should master the Key Success Factors, the most important com-petitiveness or assets, in the industry so as to establish sustainably competitive advan-tages. Yang (2010) considered Key Suc-cess Factors as the major elements in In-dustry Analysis and the references of in-ternal resource allocation and technology integration in an enterprise so that the en-terprise could acquire the strength for suc-cess by mastering such key factors. Chen (2009) indicated that a manufacturer could present more successful management than the competitors by completing certain critical tasks in different phases.
Chin (2009) pointed out the sources of competitive advantages for catering franchising industry as (1) low cost, (2) unique production line, (3) scale economy created by a larger scale franchising sys-tem, (4) complete personnel system and rich human resource, (5) complete logistic system, (6) high popularity and favorable image, (7) highly standardized products, (8) advantages created by highly vertical integration, including cost reduction, sta-ble material supply, and economic opera-tion, (9) highly differential management, such as all-year-round and 24 hour-day, (10) high-quality service, (11) complete management techniques, (12) high cus-tomer satisfaction, (13) advantages of fo-cusing on specific market, (14) advantages from computerization, and (15) warm at-mosphere for dining.
Yang (2010) mentioned the following conditions to develop the management for catering franchises. (1) A complete and powerful franchisor with good personnel trainings to control the quality of employ-ees. (2) Sensitive business information system for rapidly delivering consumer responses to the product service in chain stores to the franchisor in order to adjust product strategies and modify business management system according to the con-sumer and market demands. (3) Good fi-nancial system with deliberate fifi-nancial planning, accounting system, and auditing system for smooth management. With complete operation policies, a franchisor could effectively control the operation of each chain store. Yen (2010) concluded the premises and conditions for a success-ful franchising system. (1) Correct under-standing. The introduction of a franchising system was a management concept, rather than a tool for illegally collecting wealth.
(2) Presenting specific quality and respon-sibility to actively operate with strong be-lief. (3) Forming enterprise culture and styles, rather than the expression of indi-vidualism. (4) Presenting unique character-istics on the product development and ser-vices. (5) Being able to develop unique sales. (6) An enterprise with certain awareness and favorable image. (7) Show-ing enormous capitals and financShow-ing abil-ity. (8) With perfect organization and suit-able talents for promoting the franchises.
In regard to the industrial characteristics, Lo (2012) pointed out the importance of the above problems for catering industry.
A sustainable franchising system should reinforce and update the written-rule and standardization of know-how with written documents or files and well manage the knowledge.
Yang (2010) summarized seven Key Success Factors in operating a coffee shop, as Service Quality, Product Quality and Characteristics, Marketing, Store Style and Characteristics, Customer Relationship and Personal Capability of Shop Manager,
Selection of Trade Area and Location, and Fitness of Business Meetings, in which Customer Relationship and Personal Ca-pability of Shop Manager, Service Quality, and Product Quality and Characteristics were ranked the top three in the perception and mastering, presenting that coffee shops not only emphasized such factors, but also devoted to the implementation.
Chin (2009) proposed the KSFs for coffee chain stores as (1) selection of location and trade area, (2) complete educational train-ing system, (3) ability to research and de-velop new products, (4) advertisement and promotion, and (5) profitability of prod-ucts.
Research Method Research Framework
Based on the literature review, vari-ables with high significance were organ-ized for the Analytic Hierarchy Process framework to discuss the Key Success Factors in catering franchises.
Distribution and Retrieval of Questionnaire
Total 300 questionnaires were dis-tributed to 10 chain stores of My Home Steak in Tainan and Kaohsiung. With the owner’s insistence on offering the custom-ers with the best steak, My Home Steak has led the trend. The clean and hygienic kitchens are commonly praised. In 1990, it enhanced the economic steak with high-quality services. Following the economic growth, customers expect to have multiple choices. My Home Steak is aware of offer-ing warmer and more comfortable experi-ences for the public. Nevertheless, the in-sistence on healthy flavor with the best ingredients has never been changed. Din-ing in My Home Steak, people enjoy the visual space with special steak, coffee, refreshment, and salad as well as the ser-vices. Having organized the collected questionnaires, 18 invalid ones were
Figure 1. Research Framework
Key Success Factors in Catering Franchises
Management Ex-perience of Fran-chisor
Marketing Capabil-ity of Franchisor
Logistical Support of Franchisor
Characteristics of Product and Service
Management Com-petence of Franchi-sor
Service Quality of Franchise
Location of Fran-chise
1.Perfect Management 2.Complete Operation Manual 3.Inpsection and Counseling System 4.Educational training and instruction 5.Unique Core Capability
1.Local Advertisement
2.Flexible Adjustment of Management in Trade Areas
3.Market Expansion 4.Market Trend Capability
1.Product Conformity
2.Capability of Developing New Product 3.Quality Certification
4.Price of Supply 5.Logistic System
1.Product Diversity 2.Product Characteristics 3.Right Guarantee 4.Degree of E-Business
1.Management Experience 2.Professional Knowledge
1.Service Standard
2.Meeting Customer Requirements 3.Standard Operation
1.Tide of People at the Store 2.Local Consuming Capacity 3.Business Competitors
deducted for total 214 valid copies, with the retrieval rate 71%.
Empirical Analysis
Since AHP (Analytic Hierarchy Process) is applied to discussing the Key Success Fac-tors in catering franchises, the establishment of hierarchy and the relative weights are de-scribed in this chapter.
With Excel to calculate the weight of each measurement index for analyses, the second level of measurement index was first analyzed to understand the sequence of Key Success Factors. The consistency ratio of the second level C.R.H.= 0.028< 0.1 showed the consistency among the research subjects. The third level was further proceeded Content Analysis to measure the weight of the factors being C.R.H.= 0.016<0.1, presenting the ac-ceptable consistency of the level. The priori-ties of the indices in each level were further sequenced, Fig. 2.
Fig. 2 shows the integrated opinions from the questionnaire survey.
1. Within the Key Success Factors in Cater-ing Franchises, Service Quality of Fran-chise appeared the highest importance (0.22), followed by Location of Franchise (0.19), Marketing Capability of Franchi-sor (0.17), Characteristics of Product and Service (0.15), Management Competence of Franchisor (0.12), Logistical Support of Franchisor (0.10), and Management Experience of Franchisor (0.05). Key Success Factors in franchises presented 0.22 (Service Quality of Franchise) + 0.19 (Location of Franchise) + 0.17 (Charac-teristics of Product and Service) + 0.15 (Marketing Capability of Franchisor) + 0.12 (Characteristics of Product and Ser-vice) + 0.10 (Logistical Support of Fran-chisor) + 0.05 (Management Experience of Franchisor).
2. Among the factors in Service Quality of
Franchise, Meeting Customer Require-ments (0.082) showed the highest impor-tance, followed by Service Standard (0.048), and Standard Operation (0.022) the least.
3. Among the factors in Location of Fran-chise, Tide of People at the Store (0.068) revealed the highest importance, followed by Local Consuming Capacity (0.046), and Business Competitors (0.017) the least.
4. Among the factors in Characteristics of Product and Service, Product Characteris-tics (0.067) appeared the highest impor-tance, followed by Product Diversity (0.047) and Right Guarantee (0.021), and Degree of E-business (0.018) the least.
5. Among the factors in Marketing Capabil-ity of Franchisor, Molding Brand Image (0.061) presented the highest importance, followed by Flexible Adjustment of Man-agement in Trade Areas (0.038), Market Trend Capability (0.037), Market Expan-sion (0.025), and Local Advertisement (0.021) the least.
6. Among the factors in Management Com-petence of Franchisor, Management Ex-perience (0.050) appeared the highest im-portance and Professional Knowledge (0.022) the least.
7. Among the factors in Logistical Support of Franchisor, Product Conformity (0.045) showed the highest importance, followed by Capability of Developing New Product (0.042), Price of Supply (0.039), Logistic System (0.023), and Quality Certification (0.019) the least.
8. Among the factors in Management Ex-perience of Franchisor, Unique Core Ca-pability (0.043) revealed the highest im-portance, followed by Inspection and Counseling System (0.036), Educational training and instruction (0.024), Complete
Fig. 2: Weights of Key Success Factors in Catering Franchises
Key Success Factors in Catering Franchises
Management Ex-perience of Franchi-sor
Marketing Capabil-ity of Franchisor
Logistical Support of Franchisor
Characteristics of Product and Service
Management Com-petence of Franchi-sor
Service Quality of Franchise
Location of Fran-chise
1.Unique Core Capability(0.043)
2.Inpsection and Counseling System(0.036) 3.Educational training and instruction(0.024) 4.Complete Operation Manual(0.020) 5.Perfect Management(0.019)
1.Molding Brand Image(0.061) 2.Flexible Adjustment of Management in Trade Areas(0.038)
3.Market Trend Capability(0.037) 4.Market Expansion(0.025)
1.Product Conformity(0.045) 2.Capability of Developing New Prod-uct(0.042)
3.Price of Supply(0.039) 4.Logistic System(0.023)
1.Product Characteristics(0.067) 2.Product Diversity(0.047) 3.Right Guarantee(0.021) 4.Degree OF E-Business(0.018)
1.Management Experience(0.050) 2.Professional Knowledge(0.022)
1.Meeting Customer Requirements(0.082) 2.Service Standard(0.048)
3.Standard Operation(0.022)
1.Tide of People at the Store(0.068) 2.Local Consuming Capacity(0.046) 3.Business Competitors(0.017)
0.05
0.15
0.10
0.17
0.12
0.22
0.19
Operation Manual (0.020), and Perfect Man-agement (0.019) the least.
Conclusion and Suggestions
According to the data analyses and re-search conclusions, suggestions for practical applications with Key Success Factors in ca-tering franchises are proposed. The research outcomes show the top three factors of Ser-vice Quality of Franchise, Location of Fran-chise, and Characteristics of Product and Ser-vice with the following suggestions.
1. Among the Key Success Factors in cater-ing franchises, Service Quality of Fran-chise is regarded as the priority. Appar-ently, consumers present higher flavor and demands on products and services from franchises, which therefore continu-ous innovate to enhance Capability of Developing New Product and promote the quality so as to meet the increasing de-mands of consumers.
2. Location of Franchise is ranked the sec-ond of Key Success Factors in catering franchises that sufficient target customers in the area should be taken into account.
Most catering franchises are located in noisy areas with a large tide of people.
However, such people are mobile, not for specific purposes, in the areas that they tend to select stores with famous brand, as they perceive better security. Catering businesses therefore should devote to Molding Brand Image and provide favor-able logistic support to enhance consum-ers’ confidence, increase the success of chain stores, and attract the investment of franchisees.
3. Characteristics of Product and Service is the third factor. As the restrictions for ca-tering industry is relatively low, differen-tial products or services should be offered for discriminating the market to attract consumers and enhance the purchase in-tention.
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