The paper "Benefits New Entrants Get from Hotel Franchising" is a perfect example of business coursework. Franchising refers to the relationship where a brand owner (franchisor) gives a franchisee the right to use his brand name. According to Chathoth and Olsen (2003), the main aim of a franchise is to offer a strategic partnership for the franchisor and the franchisee. There are great opportunities that are emerging in hotel franchises in the UK and around the world. Achrol and Kotler (1999) note that franchising allows the small businesses to retain their managers and to use the franchisor's brand name, which gives it more distribution points.
Hotel franchising dates back to 1950s when Hotel Inn came up with a hotel franchise business (Connell, 1999). Business format franchising is commonly used in the catering sector, for example, McDonald's, Holiday Inn located in the UK and Kentucky Fried-Chicken, which is located in the U. S (Frazer and Weaven, 2006). Franchising offers many benefits to franchisees who are entering the hotel industry they include access to well-established brands, access to capital from banks and the franchisor and it enables the franchisee to be his own boss while still benefiting from the services offered by the franchisor.
This paper analyzes the reasons why a franchise is the best option for a franchisee who is entering the hotel industry and it also highlights some of the problems that franchisee needs to assess before making any investment. Benefits that New Entrants get from Franchising in the Hotel Industry New entrants benefit from a franchise because they get a sense of ownership while still benefiting from the services offered by the franchisor. The franchisee enjoys economies of scale, continuous advice and support from the franchisor while still operating by as a business owner.
Hunt (1997) supports this idea by arguing that franchising offers the franchisees the advantage of large organisations while still operating as an independent business owner. Monroe and Alzola (2005) further argue that the franchisor gives the franchisee access to a proven business concept, constant support, and access to a prestigious brand, thus providing the franchisee with the incentive of becoming a business owner with the support of the franchisor. Newcomers in the hotel industry continuously get advice, support and guidance from the franchisors.
This is important because the franchisee is given advice on how to deal with various challenges that arise. The franchisor in some cases organises store visits where on-site mentoring, training and coaching is offered to the franchisee (Altinay, 2006). They benefit because these services are not offered comprehensively to the independent business owners. They also receive advice and support from other franchisees. When a new business owner joins a franchise, he becomes a member of exclusive groups of peers who operate similar businesses.
The newcomer shares the problems he is facing, and since the peers may have faced similar challenges, they share the solutions they used thus, helping the franchisee to solve his problems. Also, the franchisor advice the franchisee on the best site to locate his business. Most newcomers in the hotel industry do not know the locations that are strategic for the business. They benefit from the franchisors who have developed significant experience required in selecting a viable business location (Frazer and Weaven, 2006). Good business location increases the chance that the business will succeed.
By operating on a large scale, the business grows faster as it makes huge profits that help the franchisee to expand his capital and knowledge base. Shane (1996) argues that as the franchisees grow, their internal resources also grow and this will eventually make them less reliant on the franchisor. This, therefore, means that with increased resources, the franchisee can become self-reliant and when the contract period ends, he will be able to operate independently.
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