The owner of a fast-food franchise has exclusive rights to operate in a medium-size metropolitan area.

The owner of a fast-food franchise has exclusive rights to operate in a medium-size metropolitan area. The owner currently has a single outlet open, which has proven very popular, and there are often waiting lines of customers. The owner is therefore considering opening one or more outlets in the area. What are the key factors that the owner should investigate before making a final decision? What tradeoffs would there be in opening one additional site versus opening several additional sites?

Introduction

 Here in this case the fast food restaurant owner has a single outlet in a medium-size metropolitan area, which is proven very popular, even the customers have to wait in line due to the crowd. In this case, because of the small area and the mass customers the owner is considering opening the new single or more outlets in the area. In this case owner is wondering what might be the factors that have to be properly investigated before making the final decision, because sometimes franchising might be very much successful and sometimes times that could fail to establish in the market.

Analysis of Findings

            Franchising is a policy of marketing goods, services or technology, which is based upon a closed and ongoing partnership between legally, and financially separate and independent undertakings, the franchisor and the franchisees. In such cases the franchiser provides its individual franchisees the right, and imposes the obligations to conduct a business in accordance the franchisor’s concept.

             The right entitles and compels the individual franchisee, in exchange for a direct or indirect financial consideration, to use the franchisor's trade name, and/or trade mark and/or service mark, know-how(*), business and technical methods, procedural system, and other industrial and/or intellectual property rights.

            Along with getting the rights and being obligated to the concept of franchiser the franchisee have to go through many investigations regarding the acceptance of the brand and long term sustainability because opening a new outlet always carries huge investment, effort and the risk as well. Some of the very important factors to be investigated are:

·         Skills & capabilities of the owner: The owner’s capabilities and skills that is required for the extension of business is the very first factor to be considered.

·         Market Research: An extensive market research need to be conducted, which have to include the consumers buying behavior and the market of competition as well.

·         The Cost versus Revenue Analysis: It is needed because that would help if the investment is worthwhile or not. It has to be done because it is a waste of time to open a new outlet if there is no profit. The rent of outlet, compensation of employees, infrastructures, construction cost are some cost that has to be finalized and probable

·         Location: It is another very important aspect because location has the main role in success and failure of the business. The distance of one outlet with another has to be carefully analyzed so that the existing outlet may not collide with the new one. Movement of people around the new location is also important part.

·         Customers & service: The demand of customer also has to be analyzed because opening fast-food restaurant in a place where people desire to spend long hours or partying would not be the good idea. The outlet has to be able to provide the fast and fine service as the name is fast food. For this the team design and well trained employees are needed.

·         Test & Hygiene: Hygiene is the main concern of people having fast-food nowadays if the restaurant is not able to maintain hygiene then that won’t last long. And if new outlet is not able to serve the test as the old one then that may upset their customers that factor also need to be considered.

·         Team Building: There is no any argument that team can perform better than individual. The major objective of team building should be on achieving its goal. With the help of team, productivity can be increased whether it is in term of decision making, working condition or quality. Also members of the team are motivated when they work in team.

           

            While opening several additional sites we can capture the market and know them gradually. After studying and knowing the market we can stick with the profitable market and leave the rest. Presence of the company will be better, hence providing better opportunities. It will obviously be costly compared to opening one additional site but with the proper management and control system it can be turned into profitable business.

Conclusion

            While launching any business location planning is very important. Success and failure of any business or franchising depends on how effectively and smartly the location has planned. When opening new outlet in the new location many aspect should be taken into consideration. Outlet might be popular in one location but there is no guarantee that it will popular in another location also. Due to various aspects like consumer buying behavior, customer taste, income level, may be culture and others may affect the business and therefore they should be carefully analyzed before establishing new outlet. It should also be kept in mind that the new outlet should not cannibalize the old outlet or vice versa. Certain amount should be paid to the parent company which should be made clear in the beginning. The right franchise can give a head start whereas if wrong can lead to severe loss.