CHAPTER 11

INFORMATION SYSTEMS IN
FRANCHISING
 Introduction
• Franchising is “a business opportunity by which the owner
(producer or distributor) of a service or a trade-marked
product grants exclusive rights to an individual for the
local distribution and/or sale of the service or product,
and in return receives a payment or royalty and
conformance to quality standards.
• The individual or business granting the business rights is
called the franchisor, and the individual or business
granted the right to operate in accordance with the
chosen method to produce or sell the product or service is
called the franchisee.” (Justis & Judd, 2002)
• Franchising is based on a marketing concept
which can be adopted by an organization as a
strategy for business expansion. Where
implemented, a franchisor licenses its know-
how, procedures, intellectual property, use of
its business model, brand, and rights to sell its
branded products and services to a franchisee.
 Why Information Systems are Important
• 1) Operational Excellence – businesses can constantly improve their efficiency of
their operations in order to achieve higher profitability. They can do this by
constantly having the correct amount of stock in store so consumers can always
get want they want.
• 2) New product services and business models – I.S systems play a major role for
businesses in creating new products and services. New business models can be
created and these can describe how a company produce, create and sell there
products. 
• 3) Customer and Supplier intimacy – the better services a company provides its
consumers with more likely they are too come back to them and as result the
more they will buy off the supplier therefore creating a good relationship with
both parties. 
• 4) Improved decision making – I.S systems make it possibly for managers to use
real time data when making a decision to therefore make better decisions and not
have to waste time looking for  information.
• 5) Competitive advantage – if companies achieve any of these 6 reasons to use I.S
they will generally create a competitive advantage over their rivals.
• 6) Day to day survival – business invest in these systems to make their jobs as easy
as possibly.
Headquarters of McDonalds in Oak
Brook, Illinois
Headquarters of Dominos Pizza in Ann
Arbor Charter Township, Michigan
• The activities of the franchisor can be
described using Figure 1 with five categories,
having many sub-activities (represented by
rectangles) in each of them:
 A. Information Systems for the Franchisor
Headquarters
Figure 1 Business Environment at the Franchisor Headquarters
 Information Systems for a Start-Up
Franchise
1. Information Systems for the Franchisor Headquarters

Business environment at franchisor’s headquarters involves 4 major

activities:-

a) Helping and supporting business units;

b) Marketing and advertising to prospective franchisee for franchise
development;
c) Managing people who perform franchise support
and franchise development; and
d) Dealing with financial issues such accounting and
finances
 Information Systems for the Franchisor
Headquarters

3 categories of business units are:

Start-up Franchisee the ones that franchisor headquarters should support at

its best.

Established franchisee the ones that franchisor headquarters need to provide

incentives and further encourage.

Company units the ones the company owns and wants to use as the role
models for the franchisees.
 Among these the franchisor should do the best to support startup
franchisees.
•  Prospective franchisees, contacted through
several ways: (1) leads from marketing channels; (2)
referrals from, for example, happy customers; (3)
customers who love the products/services so much
and would like to own the business themselves; (4)
community and media relationships, helping deal
with issues such as children’s education; (5) public
services like recruiting veterans; and (6)
international contacts generated from master
franchisees.
• Franchisor Headquarters, including: (1)
Support, helping business units; (2) Marketing,
selling to prospective franchisees; (3) People,
performing support and development; and (4)
Money, dealing with financial/accounting
issues. It also supports the following four
different categories of activities.
• Suppliers, including products and goods distributors and
business service providers such as real estate agents, human
resources providers, uniform vendors, marketing and
advertising agents, trade shows/expos organizers,
accountants, information systems vendors, insurance
providers, attorneys, language translators, and many others.
• Government, including (1) federal, state, and international
taxes; (2) local, region, and global laws; (3) insurances such
as worker compensation; (4) possibilities of litigations from
government, customers, and franchisees; and (5) supports
for international expansions.
 Information Systems for the Franchisor
Headquarters
Franchisor headquarter operates into 5 major categories:-

1) Franchise support system supporting business units

utilising software application such help desk,
performance tracking marketing and auditing

2) Franchise development system contacting and building

relationship with prospective franchisees using software
applications for marketing, contact management and
real estate management
 Information Systems for the Franchisor
Headquarters
Franchisor headquarter operates into 5 major categories:-

3) Franchisor headquarters office management system

helping franchisor deal with office issues using application
software for tasks such human resource management,
accounting and financing

4) suppliers/ government contact management system

contacting and building relationship with suppliers/
government using software application such scheduling
and reminders
 Information Systems for the Franchisor
Headquarters
Franchisor headquarter operates into 5 major categories:-

5) Communication system helping the franchisor

communicate efficiently and effectively with business
units, prospective franchisees, suppliers and
government
B. Information Systems for the Franchisee
Unit
Figure 2 Business Environment at the Franchisee Unit
Information Systems for the Franchisee Unit

Customers can be classified into 3 categories:-

Frequent customers, the ones that store should do its best to

keep

Infrequent customers, the ones that store needs to provide

incentives to encourage more buying

Potential customers, the ones a store wants to start buying

Information Systems for the Franchisee Unit

Franchisor headquarters provide support to franchisees

store operations in various forms:-

a) Help desk services on issues happening during store

operations
b) Personal demonstrations from visiting field
representatives
c) Training and continuous learning from management
group of the franchisor
 IKEA

We are a values-driven company with

a passion for life at home. Every
product we create is our idea for
making home a better place. At the
IKEA Group, we have 315 stores in 27
countries*.
* As of August 31, 2014
 E-business
• Online Business or e-business is any kind of business or
commercial transaction that includes sharing information
across the internet.
• Commerce constitutes the exchange of products and services
between businesses, groups and individuals and can be seen
as one of the essential activities of any business.
• Typically a management franchise system will operate in
business to business (B2B) environments.
• Electronic business (e-business) refers to the use of the
Web, Internet, intranets, extranets or some combination
thereof to conduct business.
• E-business is similar to e-commerce, but it goes beyond
the simple buying and selling of products and services
online.
• E-business includes a much wider range of businesses
processes, such as supply chain management, electronic
order processing and customer relationship management.
E-business processes, therefore, can help companies to
operate more effectively and efficiently.
C. E-Business Strategy in Franchising
Figure 3 Typical E-Business Deployment in Franchising
 Intranet, Extranet and Internet
• An intranet is a private network accessible only to an organization's staff.
•  A wide range of information and services from an organization's internal
IT systems are unavailable to the public, unlike the Internet.
• A company-wide intranet can constitute an important focal point of
internal communication and collaboration, and provide a single starting
point to access internal and external resources.
• In its simplest form, an intranet is established with the technologies for 
local area networks (LANs) and wide area networks (WANs).
• An extranet is a controlled private network that allows access to partners,
vendors and suppliers or an authorized set of customers – normally to a
subset of the information accessible from an organization's intranet. 
• The Internet is the global system of interconnected computer networks
 that use the Internet protocol suite (TCP/IP) to link devices worldwide. It
is a network of networks that consists of private, public, academic,
business, and government networks of local to global scope, linked by a
broad array of electronic, wireless, and optical networking technologies.
Such as the World Wide Web(WWW), electronic mail.
 E-Business Strategy in Franchising

Figure 3 is adapted from McKenna’s virtual

community in electric commerce.

These community of franchise companies,

consumers and suppliers can be virtually
connected through Web technologies for
relationship management.
 E-Business Strategy in Franchising

Intra-enterprise connection through intranet which enables the

franchisor to build relationships with Board of Directors,
franchisees, prospective franchisees, franchisor management and
employees.
 E-Business Strategy in Franchising

Collaboration with consumers through Internet which enables the

franchisor and franchisees to build relationships with customers,
investors, competitors, media and government
 E-Business Strategy in Franchising

Collaboration with suppliers through extranet. This enables franchisor

and franchisees to build relationships with law firms, co-branding
partners, goods distributors, real estate agents or accounting firms.
 Videos of the day
• MIS issue on food supply chain management
McDonald.
• SUBWAY Story: Supply Chain, Farming & Logistics.
https://www.youtube.com/watch?v=SRq-U1m2dwg