Exam 3 Study Guide Chapter 13 Chain Operations Chain Operation A business under one management or ownership o Could be regional national or international o Examples McDonalds and Marriott Hotels Simple Form Single owner with full equity stake in all units o Parent Company full owns and operates all units o Profit belongs to parent company but is responsible for all expenses o Usually local or regional Mixed Franchise Form Mix of ownership of units o Some owned and operated by parent company franchisor Franchisor derives revenue through Franchising fees incentive fees royalty fees and marketing fees o Some owned and operated by other investors franchisee Franchisee Receives gross sales of the unit but marketing is assisted through the brand name Management Franchise Form Parent company professionally manages non company owned units o Employees are employees of the parent company Brand Management Form Mega corporations that own multiple chain operations o Each chain operation is referred to as a brand o Each chain functions similar to the Management Franchise form Top Ten Franchising Companies Cendant Corp Choice Hotels International InterContinental Hotels Group Hilton Hotels Corp and Marriott International Advantages of Chain Operations o One concept reaches out to many markets o Cost advantages due to large size and cost saving through synergy o Streamlined operations and Marketing power Disadvantages of Chain Operations o From the Franchisee Perspective Operational constraints Financial strain Complexity can lead to legal issues Foodservice Chains o Dominated by American fast food restaurants o Many are international o Some franchise all of their units Chapter 14 Franchising Referral Organizations and 3rd Party Distribution Systems Franchising in Hospitality o The licensing of trademarks and methods of doing business o Network of business relationships o Allows franchisee the right to establish and operate the unit but use the franchisor s name system Benefits for Franchisee o Proven way of doing business o Identifiable for consumers o Marketing and operations already in place Growth o Franchising has become a major U S export o Helps U S balance their trade deficit Owner satisfaction o 90 of franchise owners consider it to be successful o Make an average of over 91 00 a year Types of Franchises o Product Distribution o Business Format the franchisor Product Distribution Franchisee sells products or services manufactured by o Examples cars soft drinks gasoline insurance and travel agencies o Franchisee may represent several different franchisors o Franchisor usually provides logo and trademark but not the operating system Business Format Franchising o Provides logo trademark and complete operating system o Examples are restaurants hotels real estate service tax preparation services o Consistency from franchise to franchise Franchise Agreements o Single unit or multi units o Area development agreements grant franchisee exclusive rights to geographic area o Master Franchise addition of the ability to sell single unit franchises franchisee becomes a franchisor o Top 10 Franchise Companies McDonald s 7 Eleven Subway H R Block Burger King o Top 10 Fastest Growing Subway Jan Pro Franchising Dunkin Donuts Coverall Cleaning Jazzercise Franchisor s Role o Can be public or private o Licenses the franchisee to conduct business under their brand name o Controls product and service development Franchisee Agrees To o Operate using franchisor s trademark or brand name o Use franchisor s operating methods o Provide only franchisor approved products and services Franchisee Is Usually Responsible For o Securing capital for acquiring assets o Owning the land and building o Operating the business o Hiring training and compensating their employees Referral Organizations Similar to franchise organizations but is usually a non profit affiliation owned by members of independently owned lodging operations o Administrative expenses are covered by fees paid by members o Rules regulations policies and governance are determined by voting o Provide similar products but with different names o Examples are Best Western International and Kampgrounds of o Maintain their property uniqueness while meeting global quality members America standards Third Party Distribution Middleman between buyer and supplier o Serves as a representative to the hospitality provider o Examples Travelocity expedia and other internet based companies o May provide reservation services Chapter 18 Bed and Breakfast Limited Service and Long Term Stay Lodging Facilities Bed and Breakfast Lodging Pre date hotels Historically one nice room would be available for rent Usually in minister s home it allowed clergy to earn extra income 1970 s B Bs started by owners of mansions to generate a little extra income Today o B B s in all 50 states o Served 40 million guests o Occupancy averaged 43 20 lower than lodging industry Bed and Breakfast Characteristics o Usually independently owned and operated o Smaller than regular hotels o Not very profitable o Typically provide extraordinary personalized service Description of B Bs o No universal description o 2 12 rooms average has 9 rooms o Three different Categories for B B facilities Bed and Breakfast 1 7 guest rooms Bed and Breakfast Inn 8 15 rooms Bed and Breakfast Hotel 16 30 rooms Services of B Bs o Guestrooms vary o Intimate and relaxing Challenges for B Bs o No creditable agency that screens B Bs or maintains a list of acceptable quality houses o B B s success is largely dependent on local market o They depend on word of mouth advertising o Only 7 internet bookings Some possible extras of B B s other than breakfast o Afternoon tea o Dinner option o Snacks o Wine tastings o Desserts o Full scale gourmet or specialty restaurants o Cooking classes Target Market of B Bs o Cater to leisure market Older affluent travelers o Popular destinations are East Coast and California o Wedding groups Limited Service Hotels o Began in 1960s as an alternative to fullsize hotels o Building costs low no restaurants limited lobby no meeting spaces o Profitable at lower occupancy levels Characteristics of Limited Service Hotels o Provide limited services clean room at a low price in secure environment o Usually between 50 150 rooms with Average length of stay 1 2 nights o Today it is the fasted growing segment and largest number of rooms in the lodging industry Services Change Over Time o 1970 s Only amenities were
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