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HospitalityChapter 6Chain Operation- A business under one management or ownership that offers similar services throughout all of their chain operations. Usually has to have at least 6 similar type operations to be considered a chain operation.Brand- A specific identity of a business that is intentionally created through a combination of it’s similar products, services, and name. Created to form a “personality” for the business. Simple Form- A chain that consists of a single owner/investor that has full equity inall the units in its chain. a) All profits from chains belong to the parent companyb) All marketing campaigns are at the expense of the parent companyc) Frequently seen with smaller chainsMixed Franchise Form- Mixed ownership with some units being owned by the parent company and the rest owned by others/investors. a) Not uncommon for franchisees to own more units than the parent company.b) Franchisor makes a profit through many different ways: Franchise Fees, Incentive Fees (an additional fee based on the profitability of the unit operation), Royalty Fees (a fee for using the specific name of a parent company), and Marketing Fees (and additional fee for marketing expenses).Management/Franchise Form- When a parent company engages in offering professional management services for its non-company owned units. a) In this type of franchise the parent company has an additional stream of revenue called “Management Fees”. *A franchisee may hire any other professional operations management company rather than the parent company. 1) It will still be operated in the same manner as the parent company Brand Management Form- When a megacorporation owns multiple chain operations under the same parent umbrella structure.*It prefers to refer to each chain operation as a brand, rather than a chain,to emphasize the importance of each brand. *A company uses different brand strategies for each chainAdvantages of Chain Operations1) Market Reach- Replicating a successful product so people in different geographic regions can enjoy it too2) Economies of Scale- Companies with a lot of chain operations will get better rates on their products that will reduce costs. Larger companies can also have people in their management department manage multiple units across the world. 3) Streamlined Operations- Chain operations usually standardize their productsand services. They have a specific process of making their goods so it is easy to evaluate the efficiency and performance across their chains. 4) Enhanced Marketing Power- The more chain operations there are the more people will hear about the company5) Value-Added Service Options- Internal programs such as: Loyalty points, Customer Relationship Management Program, Satisfaction Survey Service etc. 6) Access to Finances- Easy to take out loans from banks and issue bonds. Since business is so large it is easier to raise money. 7) Professional Management- Every operation needs managers to run business smoothly so there is a demand for hospitality majors. Disadvantages of Chain Operations1) Operational Constraints- There are standardized operations throughout chains that are designed for things to run smoothly and to keep the “image” of the company. However, sometimes those standardized operations restrict certain franchisees from running their business the most effective way. 2) Financial Strain- Chain operations are required to contribute to their parent company through royalties, incentives, franchise fees, marketing, and investments. Example- If a parent hotel company decides to upgrade the lighting in the bathrooms of all their hotel chains, each unit operation will be required to pay a certain amount for the new lights. 3) Legal Forces- If unit managers do not believe the costs handed down to them are just; they will have to fight the case in court. Unions are a result of this issue. *World’s largest hotel company- InterContinental Hotel (based in United Kingdom) operates in 100 countries*Starwood Hotel- Operates in 100 countries (based in New York)*Food service chains are dominated by American fast food restaurants1) McDonalds= 1st in sales2) Subway= 1st in number of unitsChapter 8Industry Associations- Professional organizations that assist members by providing opportunities for networking, education and training, recognition, and support within a given industry. i.e. AAA and The American Gaming Association (AGA)1) Associations are crucial as they keep their members informed on pendinglegislation that may impact their industry2) Association promote businessLarge Associations- 1. National Restaurant Association (NRA) 2. American Hotel & Lodging AssociationHow do you find the right association for you? The Encyclopedia of AssociationsMission Statement- A guide for the activities developed by the members By-Laws- Rules the association must followed that are developed by the governing members Vision Statement- A statement that talks about the company’s future goals. It is much broader than the mission statement.Why join an industry association? Networking!Networking1) Very important in your career2) Gives you a competitive advantage in your field3) Builds relationshipsRating Systems1) Done by professionally trained inspectors2) Based on a system of standards and guidelines3) Help consumers make decisionsAmerican Automobile Association1) Five-diamond award is the highest2) Less than ½ of 1 percent gets the five-diamond rating each year3) Restaurants get the five-diamond award more often than hotels each yearHow do associations meet the needs of their members? By their bylaws which are created internally by their governing members or board of directorsWhy are associations created?To assist its members by providing opportunities for networking, education and training, recognition, and to promote a certain industry. They are also created to inform its members about legislative issues that may affect their industry or business.Why would we use the Encyclopedia of Associations?To find an association that fits ones interest. Why do associations have bylaws?Associations have bylaws to ensure that they operate in accordance with its original purpose and focus. Why do associations have a mission statement?To state why the association was formed and for what purposeWhy would a student join an association? To gain valuable experience in their field and to become a leader. There are also reduced rates for students and possible

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