Chapter 6 A chain operation is a business under one management or ownership Business owned by the same company Found in different geographic location 6 similar operations or more is generally considered a chain Example international hospitality chain operation includes McDonald s Burger King Holiday Inn Hotels and the Marriott Hotels A brand is a specific identity of business that is intentionally created through a careful combination of the design of is products and services and other forms of business identity such as name logo slogans and signs To build an image of what a business stands for in the eye of a consumer Simple form is a chain that has a single owner investor who has full equity stake in all units owned by a company in such a chain the parent company fully owns and operates all the units in its chain accounting purposes the parent company may consolidate the sales and cost of all the unit operations to determine the total profit or loss for the company Any marketing campaign would be at expense of parent company This type of structure is found in local or regional operations Fees involved franchise application is a flat fee and of gross sales Incentive fees based on level of profitability of unit operation Mixed franchise form is a mix of ownership some units are owned operated by the parents company franchisor and the rest are owned operated by other investors franchisees Royalty fee for using the name logo and standard operating system Marking fee for marketing the entire chain in diff campaigns Other fees fees for employee training inventory All these fees are revenue for the franchisor Benefits of franchisor knowing the business works marking is done by parenst company Management Franchise form is when a parent company Franchisor also offers professional management service for its non company owned franchised units In this form the parent company has an additional stream of revenue called management fees fees that is charges the non company owned units for managing their operations Helps fund the investment projects Example renovating a unit Brand Management form is when a mega corporation owns multiple chain operations under a parent umbrella structure it refers to each chain operation as the brand None of the units are franchised in the Ritz Carlton they are managed in full ownership that ensures full control of the quality of the brand Cendant corp hotel has the most franchise 6 396 Choice hotel international 2nd most franchise 4 977 Companies that manage the most hotels Marriott 889 out of 2 632 Extended stay 654 out of 654 Market Reach Economies of Scale Reaching many markets to increase sales and thereby increase profits Cost advantages a company can derive because of its large size greater power to negotiate better lower rates for products and services needed from vendors chain operations will be able to derive cost savings through synergy operations allows for standardized operating procedures SOP s too Standardizing products and services simplifies Streamlined Operations Easy to compare unit performance across the chain and assign accountability to individual Enhanced Marketing Power market reach chain operations alike such as Additional services for both customers and unit Increased visibility gained through greater Value Added Service Options o Customer loyalty programs o Architectural and construction design services o Consulting services o Employee training programs Access to Finances Company may have multiple options for raising money for growth Cheapest way to fund growth may be through operational cash flow The chain may be able to barrow money from banks saving loans or Professional Management insurance companies or by issuing bonds operations has companies hiring professionals with a better understanding of a company s operating needs such as students graduating from hospitality management programs Enhanced legal requirements and complexity of Disadvantages of chain operations Operational Constraints Standardized operations can put restrictions on franchisees may disallow independent marketing in local areas Surprise inspection of their unit to ensure compliance of company rules Financial Strain Franchisees pay the parent company through royalties incentives franchise fees marketing fees and other fees Franchisees also must comply if a new requirement is initiated across the chain which often means a new capital investment May incur additional expenses if parent company requires additional expenses Legal Forces operator contracts and partnerships may create legal challenges Complex structure of chain operations along with owner Globalization big change Commonplace today for major hospitality corporations to consider the entire global market as their potential domain Increasing globalization of hospitality industry is reflected in the geographic profiles of large hospitality corporations Especially in the hotel industry Chapter 8 Industry Association is professional organization that provides opportunities for networking education training recognition and support within a given industry Associations are formed t keep members informed about Legislative issues that may affect their industry or business The America gaming Association filled a need as a liaison between the federal government and the casino industry casino needed a voice in DC to protect their interests against lobbyists supported by antigambling groups The National Indian Gaming Association protected the native American casinos from legislation that would chip away their rights as sovereign nation National Restaurant Association Periodicals trends and more Largest restaurant trade show Held each May in Chicago American Hotel Lodging Association Training opportunities in depth research and more Largest hotel trade show Held usually in November in New York City Members benefit from product and service discounts training Opportunities in depth research and information and a voice in Washington Other smaller association Hospitality sales and marketing association international Organizes marketers while professional convention managements assoc informs the convention segment of industry National society of minorities in hospitality Segments by diversity and multiculturalism international hotel restaurant assoc combines counties into global network Encyclopedia of associations an be found in library s every assoc is listed in it by name address purpose contact info number of member s
View Full Document
Unlocking...