Franchisers and franchisees (to be continued)

In France there were 5600 retailers specialised in photography distribution in 2005, the so called “photospecialistes”( SIPEC). These firms are mainly micro-societies counting an average between three and four employees. Activities of the shops are usually organised around two major areas:

- The selling of small electronic items such as cameras, MP3 players, printers and camcorders.

- The photo finishing : the laboratory process to transfer the image on paper.

A third activity exists consisting in the reportage shootings such as portraits, weddings or industrial; it should be developed apart, as it is more related to art or work of art activities and implicates different stakes.

Concerning the first activity shops are usually very similar, regardless of their size; yet, there are two major trends concerning the second one:

- 57% of the shops internalise their photo finishing activity, basing their production on the use of minilab machines. Almost 100% of the work is done in house, enabling better margins. The use of minilab is also very linked with the positioning of the stores, as it is synonymous to high quality (work done by professional), personalised and fast service. Prices are therefore usually higher in these shops in which it is possible for the client to talk with the lab operators. Nevertheless, running a minilab implies high investment in both the equipment and personnel who are usually highly skilled photographers trained in specific schools.

- 43% externalise there production to industrial laboratory. This usually means longer times of processing and relative lower quality than in house processing. Prices and margins are usually lower than in the previous quoted stores but initial investments are lower as well. This choice also enables the retail point to be owned or managed by one single person focussing on the relationship with the client. Nevertheless, these shops are very independent to their suppliers that can be counted on two fingers: Kodak and Fujilab. (there used to be actually more but they either closed or been absorbed).

In the year 2005,750 shops closed due to retirement of economic reasons. This only impacted the externalised shop as the number of minilabs owners remained the same (SIPEC).

A survey of “observatoire de la franchise” (2002) shows that between 1991and 2002 the number of franchisers including all areas has increased from 600 to 719 while the number of franchisees has remained almost the same around 33000. The global gross profit moved from 22€ billion to 33€ billion which lead to admit that the approach is profitable.

In order to understand what could be the drivers of pursuing a collaborative approach of going on line, it is important to primarily clarify the motivation for store owners to regroup under the form of franchise. These motivations mainly concern the enhancement in two aspects of business activities which are:

- purchase power: economy of scales and other effects on operations and supply chain.

- marketing :brand recognition, advertising.

Through the readings of divers articles concerning the relationship between franchisers and their franchisees, I have identified other aspects that should be as weighting as the previously mentioned in the choice of regrouping. Franchisees may be expecting these features as well :

- Leadership: the ability to analyse the context, to extract a vision, to set up and formulate common objectives and strategy.

- Internal communication: the ability to share experience and best practices.

- Training and learning : the ability to follow trainings that are relevant to the industry context and brand objectives.

Develop and quote

In an environment of growing pressure and competition there is a need to identify real stakes of the industry to extract a strategy. Store owners therefore look for management support in their mother chain to analyse and clarify the situation, and provide with consistent decisions and objectives to follow. The major challenge of leadership in franchise is to balance between what should be focussed on and what should be changed. K.Powell Chief Executer Officer of a US franchise company, reports in a article (Franchise executives share insights on leadership, 2007) that it is very difficult to implement changes trough a network when few franchisees feel they are successful and do not need to break anything. Yet, it is obviously more dangerous not to adopt changes to anticipate new requirements.

The communication may be a crucial part as there is a need for franchises to exchange good practices or test the one they have developed. There is a need for the small units’ owners to find out if they are doing right, to compare their results and to receive feedback on their actions. Exchanges can take place between franchisees themselves or with managers whether it is done trough day to day electronic exchanges or during punctual meetings such as conventions. The choice of Information technology and the frequency of meetings may impact the overall quality of communication. A good communication process can affect the level of satisfaction and the overall motivation of franchisees. E.STITES in a paper called “Satisfaction is everything” (2006) states that franchisers should allocate more resources in measuring the satisfaction level of their members toward the brand; this is based on the idea that what is good for the chain is good at the unit’s level. Insuring franchisee’s satisfaction may lead to these results:

- Work harder

- Follow the system

- Make more money

- Easier to manage

- More loyal the brand

- Bring good ideas to the table

- Create a marketing or public relation opportunity

- Validate better

- Refer more candidates

- Renew their franchise agreements

Learning about the industry and understanding a brand approach may be also important as it is generally focused on the specific issues of that industry. This includes development of technical, commercial or management skills. This aspect is tightly linked with communication or a consequence of it. But it is more specifically related to a process of knowledge management where expertise is identified and recorded to be shared. Training program can result in formal meetings such as class, or to ICT choices such as forums and e-learning plat-forms; K.Powell (2007) mentions a example of a Californian franchise that implemented a Peer to Peer system to facilitate exchanges between the experts of the brand.