Franchising in the Hospitality Industry - Term Paper Example

Franchising in the hospitality industry BY YOU YOUR SCHOOL INFO HERE HERE Franchising in the hospitality industry Introduction The hospitality industry, especially related to hotels that service many different demographics, is a difficult industry to manage. Local cultures often differ from foreign cultures and hospitality industries need service-minded individuals who can manage talent and also meet the demands of many different types of customers. This is why many hospitality industries develop franchise opportunities so that corporate headquarters does not have to be concerned with local customs and cultures while still maintaining a manageable operating budget. Why Franchising A franchise provides opportunities for international growth that are cost-effective (Solomon, 2009). Hotels’ operating budgets need to select the right markets for growth, the best partners with experience and the ability to handle different clients effectively while also developing partnerships with the franchisee and the local cultures. “In order to work effectively with local people, we need to examine their values, norms, beliefs, relationships, and many other cultural characteristics” (Shakerin, 2006, p.1). When large hotels desire to expand their businesses overseas to foreign markets, it makes sense to select local investors to operate their establishments so that better connections can be made with foreign clients. If these customer service elements were to be managed by corporate offices, expatriate costs and training costs could be quite large. Franchising allows opportunities to reduce these high costs by inviting investment from overseas and allowing like cultural leaders to run the business units. “Leaders expecting to be effective in multi-cultural environments have to develop awareness of different cultural dimensions most central to their customers” (Shriberg & Kumari, 2008, p.20). If Marriott Hotels, as one example, decided to expand their presence into India, it would make the most sense to inspire an Indian investor to take on the responsibility of managing a Marriott franchise. This type of local investor maintains the cultural awareness and social skills necessary to satisfy local customers more than an expatriate manager sent overseas to govern the hotel. Geert Hofstede described the elements of culture that drive local tastes and preferences. In individualistic societies, people are self-expressive and put their personal goals and interests ahead of others (Blodgett, Bakir & Rose, 2008). In collectivist countries, such as India, people are more family-oriented and tend to believe in the rights and needs of the group. These are important factors to remember for corporate hospitality brands looking to expand. By having local franchise investors that fit these individualistic or collectivist values, they can better relate to customers and build long-term relationships with loyal customers through cultural values and social relationships. The many advantages of franchising due to cultural similarities with the local market are important to the corporate brand for issues of service delivery and customer satisfaction. The Minority Advantages Franchising also has advantages by recruiting minority individuals, such as African Americans, Asians or Hispanics, to manage business growth for the franchisor. Many hospitality industries have dedicated teams that are devoted to creating long-term relationships with minority hotel owners (Joyce, 2011). What are the advantages to minority ownership and hospitality diversity? Minority market buying power is increasing rapidly. As one example, Hispanic markets represent nearly a trillion dollars in new spending power ($978 billion). By establishing franchise agreements with minority investors, it provides a higher amount of capital to expand a brand name even further in minority markets. This, again, prevents the corporate offices of the main hotel brand from having to incur these costs of investment, operations, and employment relations related to payroll and training. Franchising agreements with minority groups who continue to grow in influence and business skills develop is an excellent idea for brand building. Further, with the lesbian and gay lifestyle gaining more acceptance across the world, franchising allows for this particular minority market to gain notability. Lodging companies are aware of the lesbian and gay influence related to finance and business know-how. Other Reasons to Franchise “Franchises tend to be less likely to fail than independent businesses because of the name-brand recognition of a franchise” (Hubbard, 2011, p.1). Franchises provide investors with proven business models that have been successful over time and in many markets, therefore there is no experimentation and less cost of marketing and advertising for the franchisee (Hubbard). When a large hospitality industry, such as Hilton Hotels, provides franchisees with advertising materials, they are usually successful advertising content that meets with customer needs and attitudes. In this case, the benefits of franchising in hospitality are for the investor. Franchising hospitality industries also provides franchisees with a “built-in support mechanism” and a wide network of knowledge and experience resources (Hughes, 2004, p.50). Investors that wish to work as franchisees in hospitality can turn to the corporate offices of the main brand for advice, discuss networking with current franchisees in the brand to gain innovations, and also attend a variety of seminars hosted by the corporate brand to build experience. Rather than attempting to open a new brand of hotels which can take years to build simple brand recognition with many markets, the franchisee jumps right into the game with a full package of support, marketing knowledge, and minimal investments for start-up. Many franchisees in the hotel industry also hire their family members as a means reduce payroll costs and maintain more control over operations. According to Sandoff (2005, p.529), “human beings in the role of service employees are essential to service production. Human beings are sensitive and reflect upon what they experience”. There is usually a great deal of training required in the hospitality industry in order to provide effective customer service. The training includes human resources, sociology lessons, psychology of customer values, and also team-working. When the corporate brand decides to franchise and recruit family-minded investors, team-working becomes less of a cost issue and certain controls over operations exist immediately when family members who are loyal have been recruited to help run the business. The hospitality industry, in some markets, has a very high employee turnover rate due to dissatisfaction or perceptions of lack of control over decision-making. By hiring family-minded investors to act as brand representatives and franchisees, these issues are reduced and the relationships with employees can be extended to build better human capital for service delivery. Having a loyal staff is a major concern with hotels and other hospitality industries and this will benefit the corporate brand by improving its competitive advantage. This is especially true in collectivist countries where group membership and family values are closely linked to loyalty and service. Conclusion It has been identified that franchising is a quality idea for the hospitality industry. It provides less costs to the franchisor and allows for local investors with similar cultural attitudes in foreign markets to be representatives of the brand. It was also identified that franchising provides a trusted and proven business model to work with that also reduces costs associated with marketing and advertising. The resource networks also provide assistance so that good decision-making occurs. With growth in minority markets representing much opportunity for financial investment, it gives the franchisor a more secure feeling that their hospitality brand is being represented properly with service and customer loyalty in mind. It is clear that there are far more advantages to hospitality franchising than potential disadvantages. In a difficult economy, having high dollar investor interest and the ability to secure long-term loyalty with foreign and local customers is necessary for brand development and service delivery. References Blodgett, J.G., Bakir, A. & Rose, G. (2008). A Test of the Validity of Hofstede’s Cultural Framework, The Journal of Consumer Marketing, 25(6), p.339. Hubbard, Saul. (2011). Making a Go of it with a Franchise, McClatchy Tribune Business News, July 24. Hughes, Alan. (2004). Franchise Financing, Black Enterprise, 35(2), p.50. Joyce, Stephen P. (2011). Diversity in Hospitality Franchising: Why it Matters, Franchising World, 43(6), pp.9-10. Sandoff, Mette. (2005). Customization and Standardization in Hotels – A Paradox or Not?, International Journal of Contemporary Hospitality Management, 17(6/7), pp.529-535. Shakerin, M.S. (2006). Integration of Local Culture and Perception in Promotion and Marketing of Solar Cookers, San Joaquin Delta College. Retrieved October 15, 2011 from http://images3.wikia.nocookie.net/solarcooking/images/b/b6/Granada06_Mahnaz_Saremi.pdf Shriberg, A. & Kumari, R. (2008). Why Culture Matters: Leveraging Cultural Differences to Create a Business Advantage, The Business Review, 10(1), pp.19-25. Solomon, David. (2009). International Marketing: Identifying Allies, Competitors, Franchising World, 41(1), pp.11-13. Bibliography Eisemann, Joel. (2011). Diversity in Hospitality Franchising: Providing Support for Minority Candidates, Franchising World, 43(6), pp.13-14. Read More