The franchisor permits the franchisee to use its trademark, name and advertising. Franchises have been popular forms of distribution for both hotels and restaurants. Some popular hotel franchisers include Holiday Inns, Sheraton Inns, Choice Hotels. Restaurant franchises includes KFC, Burger King, Pizza Hut, McDonald’s, etc. For the right to use the name, methods of operation, and other benefits that come with a franchise, the franchisee pays an initial fee, a royalty, and a marketing fee to the franchise organization. The initial fee and royalty depends upon the brand equity of the franchise.
The advantages of the franchise to the franchisee are: •Recognition of brand •Less chance of a business failure •National advertising, premade advertisements and marketing plans •Faster business growth •Help with site selection •Product development •Help with financing The disadvantages of purchasing a franchise are: •Fees and royalties are required •It limits the products sold and the recipes used. •The franchisee is often required to be open a minimum number of hours and offer certain products. Alliances are another form of contractual agreement.
Alliances are developed to allow two organisations to benefit from each other’s strengths. Restaurants are expanding their locations through alliances with hotel chains. This provides the restaurant with a good location and access to the hotel’s guests. The hotel gains the value of the brand name of the restaurant. Alliances by two or more noncompeting firms are a popular and effective way of expanding markets. For example, restaurants are developing alliances with convenience stores and hotel properties to distribute their products.
Airlines are developing alliances to access customers in other parts of the world and to provide their customers with new destination opportunities. For examples, SAS developed an alliance with Continental Airliners to give it access to the U. S markets. One of the most important aspects of distribution for hospitality organizations is location. For businesses whose customers come to them, the businesses must be conveniently located. There is no single formula for location. A good location for a Ritz-Carlton hotel will be different from that of a Motel 6 or a Burger King.
Restaurant sites have to be evaluated on the ability of the local area to provide business. Hotel sites are evaluated on the attractiveness of their location to persons coming to that destination. In both cases, location depends on the firm’s marketing strategy. Each firm will have its own set of location evaluation characteristics. In general, there are four steps in choosing a location. They are •Understanding the marketing strategy and the target market of the company. •Regional analysis, which involves the selection of geographic market areas. •Select an area within that geographical region. •Choose individual sites.