Tuesday, April 19, 2011

Is Strategy Implementation Possible in Franchises?

The "From Strategy to Implementation" article argued that more important than strategy is implementation (although ideally both will be executed well). While I can agree with the logic behind this I wonder if corporate strategy implementation is possible in businesses (for the purposes of my argument I will discuss restaurants) that grow through franchising.

Most chain restaurants in the US are grown through franchising, where an equal business partner opens a new restaurant by investing their own money. Through this investment the franchise (ex: McDonald's) and the franchisee (investor) become equal partners in the restaurant's opening and share in the profits. While the franchise benefits financially through the growth and sale of these new restaurants it has very little control on specifics of how that business is run in terms of the elements presented in "From Strategy to Implementation"

1. People and Incentives
While franchises can offer suggested practices for start up businesses they are not always followed. The article used the example of the cookie company that advertised "Be your own boss" to managers. Naturally this attracted entrepreneurial investors who did not stick to the proven method of operation. On the other hand, many times corporate strategies are not applicable to all franchisees. McDonald's forced all restaurants to invest over $100,000 on new equipment for the McCafe but owners in and around Boston protested knowing that local people had a strong loyalty to Dunkin Donuts coffee. The franchisees proved right in this case that the McCafe was largely unsuccessful in Boston.

2. Supportive Activities
Non-franchised firms find it very difficult to align supporting activities in business even when they receive strategy from a top-down hierarchy. Many times franchised restaurants have differing suppliers, lenders, and differing hiring practices that make alignment of supporting activities as a corporation nearly impossible, especially considering franchisees often consider themselves independent owners.

3. Organizational Structure
To create a lean business process, managers often institute a horizontal hierarchy focusing more on teams and coaches rather than managers and personnel. For this reason many franchised restaurants have customized operations unique to that store alone rather than an organizational structure as a corporation.

4. Culture and leadership
As an equal partner and investor in the business, franchisees often decide the culture among their employees although the restaurant experience to the customer is dictated by the corporation

I do not disagree with the author that these criteria are essential to successful strategy implementation I would only ask whether or not this is attainable in franchised restaurants. The menu and customer experience generally stay the same across the corporation but to be able to move strategically as a restaurant corporation seems nearly impossible. I believe a lack of ability to change or alter strategy is why there is such rapid growth and decline of restaurants chains. A successful restaurant with a unique strategy can expand quickly through franchising but when faced by superior competition it is rare that the corporation can act as a single unit to change its business strategy across its many franchised restaurants.

Question: After its growth for the sake of growth strategy, has Starbucks been able to successfully focus its goals and strategy on profits?




2 comments:

  1. Well,that was a very informative article and I enjoyed reading this. If you are considering franchising out your business model I would recommend that you first research and make yourself well aware of any potential threats.

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  2. Yeah, I agreed that franchise is very important and helpful part of any kind of business. By the way, there are very nicely shared about it by you, I have read and liked all these information's.

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