hotel at Business Franchise

Karl Marx is dead. The inventor of communism is lying in a grave at London Highgate cemetery. But the ideas he has presented to the society are still alive and prosperous. Moreover they are taking their place today. We are turning to them today. If it is hard to you to believe me you have to read Funky Business by Kjel A. Nordstrem and Jonas Ridderstrale. You will know a lot about modern economic trends and Karl Marx. They are speaking about the value of workers and especially about the value of their brains and ideas.
They were clever guys – Karl Marx, Friedrich Engels, Vladimir Lenin, Mao, Che Gevara and all other communist leaders. They were nations’ leaders. And they knew the clue idea that people not the capital are the most important production resource.
And they knew the power of unions. It seems to me that even today we are not realizing the importance and power of united people. But those guys knew.
El pueblo unido jamas sera vencido! That is the Spanish expression that means “United people will never be defeated”. It became famous during the Cuba revolution. It’s the beginning of revolution hymn. And it had become very popular in sixties. Comandante Che was definitely right. Synergetic effect is the key.
2 + 2 = 7.
The system is much more than the sum of its elements.
And united people can reach unbelievable achievements. That is the thing that brings success to revolutions.
And that is the thing that brings success to franchises. That is an American way to unite people.
Do you need examples? I have them.
Let’s examine Holiday Inn. Good franchise system I think. Holiday Inn was recognized in 2001 by Franchise Times as a Top 100 Franchise Chain. So the system is good enough.
This chain of hotels was organized in 1952 by homebuilder Kemmons Wilson to provide inexpensive family accommodation for travelers within the USA. Its franchise system allowed Holiday Inn to grow up dramatically. By 1958 there were 50 Inns across the USA, 100 by 1959, 500 by 1964, and the 1000th Holiday Inn opened in San Antonio, Texas in 1968. The chain dominated the motel market, leveraged its innovative Holidex reservation system, put considerable financial pressure on traditional hotels, and set the standard for its competitors like Ramada Inns, Travelodge, Howard Johnson’s, and Days Inn. By 1972, when Wilson was featured on the cover of Time Magazine, there were over 1,400 Holiday Inn hotels worldwide.
Many think that the main reason of that irrepressible raise of Holiday Inn is its original creed that the properties should be standardized, clean, predictable, family-friendly, and readily accessible to road travelers. But I know one more important reason. It is the unity of the chain.
In 1955 just in three year from setting up that business Kemmons Wilson created an organization of Holiday Inn franchisees, which were charged with reviewing issues important to the Holiday Inn Hotel system. One year later it had been transformed into National Association of Holiday Inns. In 1959, it changed its name to the International Association of Holiday Inns to reflect the geographic expansion of our membership. Today, it is known as International Association of Holiday Inns Owners’ Association (IAHI).
The creation of that organization has driven Holiday Inn to its tremendous spurt.
Today the IAHI represents the interests of nearly 3,000 owners and operators of InterContinental Hotels Group (IHG) hotel brands, including:

• Crowne Plaza Hotels and Resorts
  
• Holiday Inn Hotels and Resorts
  
• Holiday Inn Express
• Staybridge Suites
• Candlewood Suites

The mission of the IAHI, as it stated on their site, is to operate an association of hotel owners and operators that create a multi-level forum for exchange of information, ideas and best practices between franchisees and IHG company executives. As a result of this process owners and operators will enhance the value of their license agreement and IHG executives will gain insight to better achieve company goals. 
The International Association of Holiday Inns Owners’ Association is focused on 3 main objectives to help promote members’ long-term interests:

• Increasing hotel revenues and market share growth.
  
• Achieving earnings before interests and taxes, operating profit, and return on investment that surpasses the competitive set for each brand.
  
• Creating long-term brand and hotel asset value through excellent brands, quality operations, superior marketing, and team member development.
  

The International Association of Holiday Inns Owners’ Association also effectively represents members’ interests to the broader hotel industry on legislative issues, along with vendors and other resources, helping to achieve the objectives outlined above.
 The organization that shares the experience, promotes franchisees, teaches them is the key factor of Holiday Inn’s success. It makes entrepreneurs feel comfortable within the franchise system. It provides a kind of support to franchisees even if it has to lobby their interests through franchisor. As a result people are willing to invest large amounts of money (Holiday Inn franchisee’s total investment differs from 1 to 10 million dollars) in this business providing it by an extremely quick development.

Today’s franchises are much alike to set a code of conduct. Whereas ages ago there were knights’ code, chevaliers’ code, mason code or just gentlemen code it has transformed for today.
It’s the franchisor who dictates the franchisee all the way he should perform the business.
Is it good or bad? Does he have the rights to do so or is it humans’ rights violation.
I think neither. Just the same as knights from Middle Ages you have the right to choose the franchise you like most. You could start your business with your confederates – the guy thinking just the same way you do. And nobody forces you to do the things you don’t like. You just have to choose properly…

By the way I wanted to write a message concerning smoking. I’ve found the information that last month Marriott International Inc., the large U.S. franchise hotel chain, is banning smoking in all its U.S. and Canadian facilities. The new policy includes all guest rooms, restaurants, lounges, meeting rooms, public space and employee work areas. Currently more than 90 percent of Marriott guest rooms are non-smoking. The information seemed interesting to me and I decided to make a little research of franchises that are prohibiting smoking.

I’ve found a lot of companies (mostly hotels and restaurants) that are struggling against smoking.

McDonalds has adopted a non-smoking policy for all modern restaurants in 1993. This existing non-smoking policy was adopted by most of its franchises.

The Spudulike Group has had a no smoking policy in all its managed stand alone restaurant units.  This policy is directly linked to the fresh and healthy nature of the core baked potato products.

The Hard Rock Café in the US has a no smoking policy as it’s the law. Whatever the law is for that particular country Hard Rock goes with that.

The Wagamama chain is smoke free throughout its 21 UK restaurants.

Kentucky Fried Chicken and Pizza Hut, has announced that all of their restaurants will be smoke-free by the 17th of August. The company operates 1,200 KFC and 1,675 Pizza Hut restaurants across the country. They are also encouraging their franchise owners to adopt the same policy for the nearly 4,200 franchised restaurants.

Hmm… I wonder if they are doing so just because they really think that way… Or they are moved to that by franchisors.

Anyway as I’m no-smoking-supporter I like they way the franchise system changes the world.

Starting your business while singing a franchise agreement has many advantages over starting a company yourself. It is easier, it takes less time and you can get help and support from more experienced partner (the main company). But not so many people decide to buy a franchise license. I think that one of the main reasons for this is initial fee that a potential franchisee needs to pay to franchisor.
Today I want to say a few words expressing my opinion regarding why the franchise fee is so high. My observations are based on the following statistics given by the leaders of some franchises:
“Ron Eriksen, the vice president of market development for the Baby’s Room USA Inc., Elmhurst, Ill., provides the following facts: last year the company sends out 775 four-color brochures by Priority Mail costs $14. Only 6 percent of those recipients sent back a preliminary application form; 1.8 percent of the 775 became new Baby’s Room franchisees”.
My calculations and comments:
It means that the company spent $10,850 only for colorful brochures and received only 14 new franchisees (775 requests multiplied by 1.8 percent). So only to get the money back the Baby’s Room USA Inc. has to increase the franchise fee by $775. Is it fair? Maybe franchisee will say no because nobody wants to pay for the others who decided not to become franchisees of that company. But it’s absolutely fair from franchisors point of view.

“Steven Romaniello, president and chief operating officer of US Franchise Systems Inc., in Atlanta, says that his hotel company spends $50,000 on promotion and recruitment efforts for each franchisee who eventually buys a Days Inn, Microtel or Hawthorn Suites franchise”.
No comments needed. Even if franchisor decides to cover a part of this sum himself (let’s say 50 percent) the other part has to be included into the initial fee. The other part will be received by franchisor later in the form of royalty payments. By the way this can explain why sometimes royalty is greater than the cost of current support provided to franchisee: franchisor tries to cover some earlier expenditures.
Greg Longe, president of the Molly Maid and Mr. Handyman franchise systems in Ann Arbor, Mich., says, “Our Internet leads are way up this year, but all that means is that we have to do a lot more work to generate a solid candidate. Most of the people we’re hearing from aren’t qualified to run our concept.”
My comments:
When he says “a lot more work to generate a solid candidate” he speaks about people who will do this work. Company needs to hire qualified manager (or even managers) to deal to convert at least some of the leads to new franchisees. Company bears the costs of salary, Internet and phone communications, and many others dedicated to manager’s work. And as every cost it will increase the final price. In our case it will increase the initial fee in the start-up period or royalty during the operational period.

And initial fee includes not only advertising and recruitment costs. In most cases the main company provides training for the chief manager or key personnel of new franchisee. To do this they need to pay to trainers, to buy some stuff (like materials, paper and so on)…
Thinking about all that things I came to the conclusion that low initial franchise fee can be a bad sign (not “is” but “can be”). Certainly it depends on business sphere and region or country. But at least it’s a point to think over one more time whether to sing a franchise agreement with a company that sells its idea for the price that doesn’t cover the costs. It may seem strange…

Usually a prospective businessman thinking about buying a franchise knows the business sphere to work in. In this case to choose the exact franchisor to sign the agreement he needs to check as many as possible different franchise listings. It can be very useful because new franchise opportunities appear almost every week. Every franchisor tries to offer something different, some advantages. Some provide everything for lower initial fee; the others agree to train not only you but your key stuff. The royalty payments also differ as well as franchisees’ compulsory contribution to an advertising fund.

So if you decide to save your time and to choose the first franchisor you came across in the business sphere you wanted to work in, you may miss the better opportunity. Time is money. Here it’s exactly so.

Where to find such listings? There are a lot of them in the Internet and you can also get an access to printed directories. They provide a good list of franchise business opportunities for different spheres: food franchise and retail business, business in Internet and different types of services from consulting to tourism and hotel business.

Rob Bond, publisher of Source Books, asserts that there are currently about 2,300 open franchise business opportunities in North America operating in more than 50 industries, from automotive products and services to travel. More than 25 different Internet sites provide directories of franchise companies. At least six publishers sell print directories. “Bond’s Franchise Guide 2001″ (Source Book Publications, 2001) provides in-depth profiles of the 1,200 or so companies that returned his questionnaire; and “Franchise Opportunities Guide” (International Franchise Association, 2000) cites the 800 franchisers that are members of the trade group International Franchise Association.

It’s necessary to remember that no single directory covers everything. It’s a good idea to read at least one on-line and one off-line listing.

***If you read my blog for the first time I need to notify that it’s the second part of my comments for the Franchise Recruiters Ltd. survey. If you are interested in the beginning check the post before the previous.
 

So the next tendency in franchise business pointed by respondents (top 100 franchise leaders) is that franchise chains will have to increase the range of their goods and services. Some will even decide to combine goods and services from different franchise systems. They will fuse the channels and attract new buyers saving their time. They will operate under the slogan: “You can get everything in one place”. As an example they mentioned stores that sell ice cream and fresh flowers, coffee and offer top selling music CD’s, and video rental brands, cell phones and accessories.
 

As for me I like that idea from both points of view. As a consumer I prefer to park my car once and to do all the shopping, hairstyle, and so on at once. If to speak about business benefits the main advantage is that they can choose the best goods, services, technologies and practices from every franchise idea and decrease costs. Economists call this economy of scale (the situation when a company’s average costs decrease while company grows).
 

The next feature of modern franchise business according to the concerned survey is so-called “self-service” opportunity. The central place is given to kiosk technology which becomes ubiquitous for retailing products, packaged food, hotel reservations, and franchisor branded gift cash cards. It’s rather convenient for both sides. Consumers can get their favorite branded chocolate or order a ticket near parking lots, outside and inside big stores, gas stations, and malls. And certainly through the Internet… Franchisor can send his/her product to any part of the country. This strategy also saves salary costs as kiosk  doesn’t need to be trained, to get social security, and can work 24 hours 7 days and will never be late because “of terrible headache on Monday”… The only disadvantage of kiosk technology as I think is its inability to operate as a human. The artificial intelligence is too expensive today. But I will not be surprised to see a chocolate and drinks kiosk that will have its own opinion and advice me what to buy and how to get to the point of destination better.

OK… too much of a good thing is good for nothing. More tendencies you will see in the next post.

This page is generated by Wpkeys plugin