FRANCHISE IN HOSPITALITY

Franchise in Hospitality

Franchising in Hospitality Industry

Introduction

There is no single overriding factor that determines a company's strategy in hospitality industry. Rather, multiple internally and externally driven forces combine with a company's historic roots to determine its strategies today. There are as many ways to categorize strategies as there are corporate strategists in the industry. The two most famous modes are Non-Franchising and Franchising. Usually firms that wish to keep greater control over the quality, ownership, and management of their properties do not franchise. Often these firms are strong enough financially that franchising is not necessary. Examples of lodging chains that do not franchise are few (e.g., Four Seasons, Westin, and Ritz-Carlton). Franchising companies are more prevalent in the hospitality industry than are non-franchising companies. Holiday Inn, Radisson, and Choice Hotels International are examples of lodging firms that are large franchisors. Burger King, McDonald's, KFC, Dunkin' Donuts and Wendy's, are examples of leading franchisors in the fast-food area. Today it is possible to purchase a franchise for virtually everything from a travel agency to a destination resort. This paper analyses the main benefits and drawbacks of adopting a franchise mode of company ownership within the hospitality industry.

Discussion

Looking at all parts of the hospitality industry, it is evident that the primary business development option for growth in the larger parts such as foodservice and lodging has been franchising. Franchising has also played a key business development role in the car rental and travel-related services parts. Another major strategy to grow selected parts has been management contracts—managing the operations of someone else's asset for a fee. While the lodging sector is the primary venue for this, the concept also exists in other parts such as foodservice and travel-related services. We also see the big getting bigger through acquisitions and mergers in almost all parts of the industry. Acquisitions as a growth/business development strategy will likely continue in future years. Since the concepts of franchising and management contracts have played such a significant role in the development of the major parts of the hospitality industry, it is logical that we look more in depth at both concepts. (Michael2010, 29-36)

The following factors are propelling franchise growth:

Fresh markets: situated close to golf courses and other enticements

Location: near towns, roads, and airports

Growth in smaller cities all through the United Kingdom

Fresh looks (curb appeal)

Foreign expansion: a move to boost brand knowledge

Background of Franchising

Franchising and management contracts are the two main driving forces in the development and operation of the hospitality industry. Once the potential of franchising caught on, there was no stopping British and American ingenuity; in about a half century, the hospitality industry was changed forever, and here is how it happened. (Andrew 2004, 59)

Franchising started in the hospitality industry during the first decade of 20th century. Holiday Inns (now Holiday Corporation, the largest lodging enterprise in the world) also grew by the strategy of franchising. In 1952, Kemons Wilson, a developer, had a disappointing experience while on a family vacation when he ...