Introduction and Background
Franchising is a business format in which the franchisor lends its name of activities and systems to a franchisee for a fee (Alon, Ni & Wang, 2011). The motivation for franchising is embedded on the perceived benefits as a result of the competitive advantage that is accorded to both partners. The strategy has gained popularity among businesses that desire to enter the international market (Lafontaine & Blair, 2009). Through franchising, businesses achieve significant scale growth with minimal capital and reduced risks.
Franchising is regarded to be an old business strategy for players in the hotel industry. The number of franchises in the hotel industry has been on an upward trend making the hotel industry among the highly franchised industries globally (Verbieren, Cools & Van den Abbeele, 2008). Franchising offers the hotel industry numerous benefits. A franchisor accords independent hotel owner instant identity, image and recognition over and above easing out the process of opening a new hotel (Burkle & Posselt, 2008). The franchisee also benefits from business growth technologies including operating systems, service reservation systems as well as marketing programs and critical finances. Franchising offers hotel business a sense of belonging and enhanced cooperation when dealing with operational issues. According to Burkle and Posselt (2008), franchising in the hotel industry, as with most other service industries, requires good navigation and appropriate corporate leadership.
Franchising presents a unique set of challenges which require corporate leadership. A complete franchise has several players given that franchises adopt a plural business model of operations (Lafontaine & Blair, 2009). The players include the multi-unit franchisees with corresponding managers, master franchisees with sub-franchisees as well as the managers of the original outlets retained by the parent company (Lee, Jarvis, Kundra, Mihoubi & Grueneberg, 2012). Businesses with such a detailed model have numerous relationship issues, and hence they require corporate leadership if they are to be successful. Franchises also present other challenges such as unique legal requirements. Given that the business is in the hotel sector which is primarily service based, there is need to ensure quality. The franchisor must therefore find qualified franchisees so as to maintain the hotel image and value (Burkle & Posselt, 2008). The immediate growth that is presented by franchising can also be catastrophic if not well managed.
The study aims to establish the role that corporate leadership can play to ensure the success of hotel franchise. The speed of change, as well as complexity of the current business environment in the hotel industry, requires enhanced business leadership (Burkle & Posselt, 2008). The situation is magnified in the hotel franchise business due to the interplay of different factors that are inherent to the hotel industry and those of the franchise business (Lee et al., 2012). The use of corporate leadership to steer growth in a hotel franchise varies with the franchise business model that the hotel uses. Each franchise model presents a unique set of challenges. As such, despite the primary aim of the study being to establish the successful use of corporate leadership to control hotel franchise, it is paramount that the related issues in the particular model of franchise are set (Lafontaine & Blair, 2009). Once the unique challenges to the franchise model in the hotel challenges are identified, the study will determine the role of corporate leadership in the hotel franchise (Alon et al., 2011).
Purpose of the study
The study will evaluate the role that corporate leadership can play in the successful management of hotel franchises. An evaluation of literature shows that other areas of hotel franchise are well addressed such as the initiation of franchises as well franchisee performance. The success of a hotel franchise depends heavily on the establishing appropriate controls for the inter-organizational relationship (Mazero & Trigg, 2011). The study will determine the control issues that arise within the hotel franchise business model. The study aims to provide a satisfactory resolution to the control of hotel franchise through corporate leadership.
Rationale of the Study
Franchising offers an opening for hotels to scale their businesses while avoiding major capital requirements and related risks (Emerson, 2013). However, franchising presents a set of challenges which require effective corporate leadership for the hotel franchise to be successful. According to Ramirez-Pineda and Berbel-Hurtado (2012), the existing trends show that the trend in the adoption of franchising in hotel is on a growth trajectory given the opening up of the international market as well as increased competition. As such, this study will seek to resolve issues related to emerging trends in the hotel industry. The results of the study will be instrumental in enabling new hotels aiming at venturing in franchising understand the control issues related to the franchise business model.
From the existing literature, there are existing gaps on the role of corporate leadership in controlling the hotel franchise. This study will help to outline the type of a franchise model that is prevalent in the hotel industry. From the information obtained, the study will establish the role of corporate leadership in the hotel franchise and how corporate leadership can contribute to the success of the hotel franchise. The study prepares the management of hotel franchise to understand their integral role in offering leadership in the hotel franchise which is being adopted by many hotels.
Research Questions
The study seeks to answer the several questions. The first question is to find out the model of franchise business that is commonly applied in the hotel industry. From the literature, there are different sets of franchise models (Rahatullah & Raeside, 2008). Evaluating the nature of the franchise model commonly in the hotel industry is pivotal to establishing the role of corporate leadership in the hotel franchise. To answer the questions, the study will seek to evaluate established hotel franchises that have been existence for a duration of above ten years, as well as comprehensive reports on hotel franchising.
The second question that the study seeks to answer is about the challenges existing in the franchise model. Despite there being similarities in the issues related to the control of hotel franchise, the issues vary with the franchise model (Ni & Alon, 2010). Building an understanding of the nature of challenges in the hotel franchise is important in establishing how corporate leadership can be effective in the hotel franchise. To find the answer to this question, the study will review the literature on the particular franchise model commonly applied in the hotel industry.
The study seeks to respond to the question as to the control issues associated with the franchise model commonly used in the hotel industry. One of the major challenges that plague franchises are the issue of control. Control issues vary with the type of franchising that is applied (Xiao, O’Neill & Wang, 2008). Understanding the control problems in the hotel franchise model is fundamental to identifying how corporate leadership can be effective in the hotel franchise. A thorough review of the literature as well as obtaining primary data in this area is essential to ensuring that the author has the right information.
The study will help answer the question as to what role corporate leadership can play to make sure that a hotel franchise is run successfully. To consider this area, the author will review adequate literature that has been published regarding the issue. Appropriate data collection is also fundamental to ensuring that this field is adequately covered.
Literature Review
Brookes and Roper (2011) argue that franchising is an opportunity for entrepreneurs with nor prior business experience as well as those without the technical knowhow to enter a business. The franchiser provides the required training in all areas related to the business in question (Xiao et al., 2008). Experienced operators also enter franchises as an incentive to more growth. Franchising offers entrepreneurs a sense of security as they belong to the parent chain which guarantees them the benefits of association. In all franchises, power is of utmost importance in ensuring that all parties are oriented towards achieving the identified goals. Both the franchisor and the franchisee possess resources for control which are integral to their operations (deRoos, 2011). The benefits as well as control issues vary with the model of business franchising.
Different Models of Franchising in the Hotel Industry
One of the oldest forms of franchising in the hotel industry is the direct franchising model. Under this model, the franchiser has a direct link with the franchisee (Mazero & Trigg, 2011). The model operates efficiently in regions where there are established franchise regulations to govern the relationship (Xiao et al., 2008). Based on the rules some areas require full disclosure during the establishment of the relationship. This model of franchise grants the franchisor more control over the franchisee selection. The model’s disadvantage results since it hampers franchise growth given that the franchisor signs agreements with each unit in the hotel franchise (Verbieren et al., 2008). Managing the relationship is especially difficult when cultural difference interplay with distance.
Another traditional franchise model is the exclusive master license (Dant, Perrigot, & Cliquet, 2008). The master franchisee continues to pay royalties and franchise fee for the number of franchises that are operated as well as appoint others. Most hotel franchisors are adopting this model opt to regulate the enrollment of the franchisee by the master franchisee due to the need to protect the brand image (O’Neill & Mattila 2010). The master franchiser acts as the franchisor in that it has to provide continued monitoring, as well as training for the franchise units. The franchisor in this model has the advantages of reduced risks.
Some hotel franchise may operate a hybrid franchises. Some of the common combinations include the establishment of a master franchise and an area of the development agreement (Dant et al., 2008). Under the model, the franchisee is supposed to develop a given number of units in a specified area before getting the right to sub-franchise (deRoos, 2011). Other franchise models under the hybrid agreement allow a master franchise to service and develop different franchises on behalf of the franchisor. The hybrid is advantageous to the both the franchisor and the franchisee since it is tailored to the particular needs of the franchisor and the franchisee. The design also ensures that the hotel franchise is not held at ransom by the rigidity of other franchise models.
Control Issues in Hotel Franchise
Control issues are an inherent part of all the franchise models in the hotel franchise. The contracting and formalization of the relationship between the franchisor and the franchisee is one of the fundamentally inherent control issues in the hotel franchise type of business (Mazero, & Trigg, 2011). Despite there being legal guidance as to how contracting should be done in a hotel franchise, the demands placed by either party on each other makes the process an uphill task (Verbieren et al., 2008). Other aspects of the business stipulated in the contract such as royalty fees, advertising fees as well as incentive mechanisms require control. The contractual agreement requires appropriate control given that the franchisor has to ensure that the franchisee both human and physical capital requirements are met by the franchisee (O’Neill & Mattila, 2010). The definition of the contract duration is also one of the areas that require adequate controls to be established.
One of the greatest balancing acts that are required in a hotel franchise is ensuring standardization and adaptation. The region of operation also determines the amount of control that a franchisor grants to the franchisee. International franchisees are allowed more autonomy as compared to the domestic hotel franchisee. The franchisees are constantly seeking to ensure that the franchisor does not add their independent units near the existing franchisee. When the franchiser can add the new independent units, an encroachment issue emerges thus demanding that unique leadership is provided to control the problem (O’Neill & Mattila, 2010).
Franchises also face the control problem related to market mixes. The issue of market combinations arises due to the need to ensure standardization of prices in the hotel chain. According to O’Neill and Mattila (2010), there is also need to ensure a certain level of advertising is achieved by all the hotel franchises under the franchisor. Organizational culture of the franchise is also one of the control avenues for a hotel franchise. Franchisors who have a bigger brand establish tighter measures to ensure that there is more control over the franchisees so as to exert more controls. Other franchise arrangements have informal control arrangements with the government and its agencies playing an integral part in the control. Franchisors are always in a continued effort to persuade the franchisees to agree to more measure that will allow the franchisor more control.
The franchisor controls the entire franchisee system, the marketing strategies that will be applied as well as the intellectual property rights. On The other hand, the franchisee has a control on the hands-on application as well as other business preparation. Both parties value each other areas of control given that they are fundamental to the success of the franchise (Mazero, & Trigg, 2011). The amount of control power that is available for each party is dependent to the degree of dependency that exists between the two. In the beginning of the franchising arrangement, the franchisor wields more power given the degree of dependency created by the learning curve.
Corporate Leadership in Hotel Franchise
According to the literature, the corporate leadership plays an integral part in the operations of any business. Given the turbulent nature and need for control in the hotel franchise, there is need to evaluate how effective corporate leadership perform (Rahatullah & Raeside, 2008). Corporate leadership has a lot to offer in the running of businesses. One of the fundamental roles of corporate leadership is to establish organizational values that are geared towards growth and development of businesses. The identification of hotel franchises during expansion requires appropriate controls. Corporate leadership is ideal for the creation and implementation of business metrics as such clear guidelines for all involved parties on what is required. The leadership is ideal for the establishing communication, establishing the mission and vision of the franchise, fostering growth. Corporate leadership plays the fundamental role in creating a business environment which thrives on respect and mutual agreements (Rahatullah & Raeside, 2008). Through good corporate leaderships, existing bureaucracy are eliminated as such ensuring that issues are resolved in a faster manner.
Methodology
Research Philosophy
The study will employ a mixed method technique comprising quantitative and qualitative methods (Kothari, 2009). The underpinning of applying quantitative method is based on the fact that it allows for the verification of existing theories on the effectiveness of corporate leadership. By using the quantitative method, the study will adequately evaluate the effectiveness of organizational leadership in controlling the hotel franchise. The study will also use qualitative techniques so as to describe ways in which corporate leadership can or cannot guarantee control of hotel franchises. By using the qualitative methods, the study will establish the nature of issues that exists in hotel franchise and evaluate the ability of the corporate leadership to resolve the issues.
Research approach
The study will apply an inductive approach. The focus of the study is to generate new theory from the data obtained during the research process. The study has research questions which aim to narrow down the scope of the study. The approach of the study qualifies as indicative given that it seeks to explore news of applying the already studied phenomenon of corporate leadership.
Strategy
The strategy of the study is to employ a mixed approach. To adequately answer the question on the conventional model of franchising adopted in the hotel industry, the research will involve conducting case studies. The case studies will be on different hotel franchises that have been in existence for a period of ten years or more. The data will be merged during the discussion section of the research (Kothari, 2009). The integration of the data sets will employ the use of tables and figures so as to display the results of both quantitative and qualitative data.
Data
The study will only use primary data which will be collected by the researcher. Concurrent collection of data will allow the researcher to maximize the time spent in the field when doing the study. Given that the study will collect two types of data, there will be both resource and time limitations. The study will also have the restriction of acquiring an adequate sample size for analysis. The study could be limited in terms of the measures applied in data collection which could lead to the omission of crucial data (Kothari, 2009). The responses to the semi-structured interview question could result in telescoping as well as attribution errors. The study could have other errors arising from exaggeration of the particular events when conducting the reviews on the identified hotel franchises.
Methods and Techniques
The study will use simple random sampling technique to select the study participants. Kothari (2009) argues that the methods are appropriate for choosing the study sample. In simple random, all population items have equal chances of being selected. The technology will also help minimize the anticipated limitations and research error in that it gives an equal probability to each sample combination to be chosen.
The data collection techniques will involve the use of self-administered questionnaires, containing both open ended and closed. The study will use semi-structured interviews with the managers of hotel franchises that have been earmarked for cases studies. Participants in far regions, as well as those outside the country, will be interviewed over the phone. The researcher will also conduct group interviews with the middle management of the hotel franchises.
The methods and techniques applied in the research are expected to yield the best data for analysis. However, there are some anticipated limitations to the particular methods and techniques that have been chosen. The use of the telephone interview to collected data may be limited in that the researcher cannot see the respondent. As such the nonverbal communication will not be available to the investigator (Kothari, 2009). It may be difficult to assemble all the junior level managers of the franchise to conduct a group interview.
Action Plan
References
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