The
Franchising Industries Use of Internet Technology
By
Department of Management and Marketing
Sam Houston State University
Huntsville, Texas 77341-2056
(936) 294-1312
Mkt_SSM@SHSU.Edu
and
Department
of Management and Marketing
Sam
Houston State University
Huntsville,
Texas 77341-2056
and
Douglas M. Kline, Ph.D.
Department
of Management and Marketing
Sam
Houston State University
Huntsville,
Texas 77341-2056
Mgt_DMK@SHSU.Edu
and
Balasundram Maniam, Ph.D.
Department
of General Business and Finance
Sam
Houston State University
Huntsville,
Texas 77341-2056
GBA_BXM@SHSU.Edu
Submitted to: Dr. Lorelle Frazer
Program Chair: International Society
of Franchising Conference
School of Marketing
Griffith University
Brisbane, Queensland 4111
Australia
61-7-3382-1142
L.Frazer@mailbox.gu.edu.au
The Franchising
Industries Use of Internet Technology
Abstract
The Internet has become an essential tool to
befor successful
in today’s franchising industry, not only as a potential marketing tool, but
also as a quintessential resource for bringing franchisors and their
franchisees closer together. The
Internet has made the process of monitoring and controlling much easier and has
become an instantaneous method of providing information. The E-commerce side of the World Wide Web
has further helped the franchise industry
to grow and prosper in the modern marketplace not only by selling existing
products online, but also as a means of creating entirely new and different
franchise formats. This paper examines
each of these areas and further suggests new methods of
utilizing Internet technology while suggesting improvements for existing uses
of this technology, such as expanding market research and providing more useful
information to channel memberscustomers and
franchisees alike..
Keywords: Internet,
Introduction
The tremendous growth of the
Internet has led to a proliferation of consumers and firms to
participateing in the global online marketplace
(sometimes called marketspace). This
has occurred because Tthe
Internet has proven itself to be a very important and effective tool for both
businesses and customers. The Internet
is an important tool for marketers because it possesses an unprecedented
ability to interactively communicate one-on-one with the target market. It further gives customers the ability to
comparison shop and find particular items much quicker than actually going to
brick and mortar locations and physically looking for the items (Wallace,
1995). Moreover, the Internet also
carries a greater selection of items than the largest warehouse and even
contains special sites that specialize in helping people locate hard to find
items (Hoffman, Novak, and Chatterjee, 2000).
The convenience of the Internet is only further strengthened
by the fact that it is available on demand to customers 24 hours a day, seven
days a week. Surfing and browsing the
web, in itself, has actually become a new and popular form of entertainment,
which is due in part to the number of visually appealing and unusual web sites
that are available on the World Wide Web (Hoffman, Novak, and Chatterjee,
2000).
Dr. Mehta, you
said that you wanted some internet statistics put into this section, the
numbers that I have found vary so much that I didn’t know exactly what you
wanted or what you consider to be reliable.
This web site has several tables that compare the different numbers of
people on the web as given by different reporting agencies. It also has some demographic data on web
users, so I thought maybe you could pull what you thought was important. http://www.askjeeves.com/main/followup.asp?qCategory=NERD&ask=where+can+i+find+internet+growth+statistics&qSource=0&origin=0&frames=yes&site_name=Jeeves&metasearch=yes&ads=&aj_ques=snapshot%3DJeeves%26kbid%3D1579096&aj_logid=F4A3947C3A8AD411BE64009027737A91&aj_rank=2&aj_score=10.692&x=21&y=14
You also said
you wanted to input something from an earlier paper you had done that talked
about the importance of the Internet.
The net population
is estimated to be
somewhere between 101 million (Strategic group) to 66 million (Media Metrix), depending on how
they define and measure net user (http://www.askjeekes.com/main/, 1999).
The
Internet has also become an essential resource for businesses. It has definitely proven
itself to be a cost cutting tool because buyers and sellers can access each
other directly without having to incur certain marketing costs. The time it takes to complete the average
business transaction is also reduced through the use of the web, because some
of the selling -functions
are transferred to the customer through the use of on-line ordering and
fill-out forms (Michalski, 1995). The
Internet is also being used as an affordable way to disseminate information and
effectively market ones goods and services throughout the
world. In fact, the Internet is probably
becoming more important than other direct marketing mediums
because potential customers are searching for the products they want and
visiting websites to find the information that they actually need (Seideman,
1998). Today, consumers are actually pulling
the products they want through the channel of distribution versus
producers/manufacturers pushing
products that may not necessarily fare as well in the marketplace.
Businesses can also gain further benefits from online
shoppers because web-based technology allows them to track the purchasing
behavior of their customers, although there has been some controversy over
whether this practice is actually ethical (Hoffman, Novak, and Chatterjee,
2000). Cookies, which are stored on the client's computer, are one form of
web-based technology that allows customer’s purchasing patterns to be
tracked. Cookies are one technology
that can be used to create a profile of customer’s interests and
purchasing patterns, therefore allowing their needs to be
more easily targeted. However,
aAlthough most many people
may feel negatively towards cookies,
they can actually provide benefits to consumers. An online ordering system could be developed using cookies that
would remember what a person wants to buy.
This way, if a person spends three hours ordering CDs at a particular
site and suddenly has to get off the net, they could quit the browser and
return weeks or even years later, and still have those items in their shopping
basket. It is important to know that an
HTTP Ccookies cannot
be used to get data from ones a user’s hard
drive, get e-mail addresses, or steal sensitive information about a person
(Anonymous, 1997-1998).
Internet-based opportunities are fast evolving for the franchising
industry.
and Wwith
a proven solid
history of satisfying customer’s needs and wants using traditional
mediums, the franchising industry as a whole could even further expand their
market and service capabilities with this technology. The Internet is also fast becoming the cornerstone to developing
and maintaining ann equitable franchisor-franchisee
relationship (Pipes, 2000). However,
fFor the Internet to truly be used to its
fullest potential, the franchising industry must realize that it can be
used not only for franchisee support, but also for vendor support, customer
support, and supply chain management (Seideman, 1998). TThis can
be accomplished through the use of both Intranets and Extranets. ,
as well as the traditional Internet.
Intranets
are secure web sites that are set up on the Internet for the exclusive use of a
company’s franchisees and corporate personnel; individuals must have a user
name and password to gain access to a company’s Intranet (Grunberg, 1997). Extranets
are set up on the same principle, except that they are created for the benefit
of ones vendors and suppliers and
therefore contain information that they may need.
This paper will focus on several different (existing) applications of Internet technology for the franchise industry and then recommend suggestions for further uses and ways in which the industry can improve their use of this technology.
Literature Review
Communication
“Because
franchise businesses are, by their nature, geographically dispersed
organizations, communication can easily become a barrier to efficiency and
quality of service” (Grunberg, 1997, p. 45).
Many franchised businesses have failed in the past, simply because
corporate headquarters failed to communicate and support its franchise partners
(Clapes, 1998). Sales and marketing
opportunities can also be lost in regions where
announcements of promotions and product line expansions may not reach the
franchise owner for a week or more (Hibbard, 1997). Internet based technologioes
(Intranets)
inform franchisees immediately of new situations such as these, and provide
them with a means to immediately respond (Hibbard, 1997).
For this reason, and others, the
Internet has greatly improved communication between franchisees, their
customers, and vendors, by providing them with a low-cost way to communicate
and an unprecedented power to help one another (Maddox, 2000). For example,
both Intranets and Internets haveThe Internet has
the capability to unite a widely dispersed group of business owners in a virtual community
forum, such as e-mail, chat rooms, or news and discussion groups, where they
can speedily and effectively communicate (Love, 1998). For thousands of members of the franchising
community nationwide, the Internet provides a means to communicate efficiently
and inexpensively among themselves about innumerable
things including effective business strategies, evaluating new
equipment, ordering supplies, or even tracking a whole franchise system's sales
figures (Love, 1998). In addition,
Intranets give franchisees the
ability to securely communicate with corporate officers and one another in
“real time”. Instead of waiting for
help from the corporate office, franchisees can work with each other rapidly
and efficiently to develop a solution (Seideman, 1998). For example, Texas-based Steamatic, Inc. has
even developed a chat room, where franchisees are given the opportunity to
utilize the experience of the entire franchise system (Seideman, 1998). Internets also allow for instantaneous
e-mailing of messages, real time updates, instantaneous news bulletins, and other imperative
information that needs to be disseminated quickly through the use of e-mail or
contact lists (Pipes, 2000).
The Internet
has also helped the franchising industry to vastly develop and
maintain improve relationships
with their customers. Many websites now
contain customer feedback forms, which give customers the ability to instantly
inform and communicate with franchises of their questions, comments, or
concerns. Through the use of customer
feedback forms and e-mail (with or without auto responders),
franchisees can now respond to their customers more rapidly and therefore
provide better quality service.
Monitor and Control
Similar to transactions
costs,
agency
costs
have been significantly reduced. Intranets
also provide a means for franchisors
to keep track of what is occurring with their franchisees on a daily basis
(Seideman, 1998). Intranets can also
provide support to franchisees by containing new procedures,
franchisee contact lists, business reports, software updates, or suggestions
and comments from other franchisees (Grunberg, 1997). Intranets ensure that individual franchisees have the information
necessary to “remain on the same page” as the other franchisees within the same
franchise.
Extranets also allow
for monitoring and controlling on the part of vendors. Vendors can monitor the use of their products
and their effectiveness. through
Extranets. By being involved, vendors can modify
or redevelop their products when necessary and possibly promote more when
needed (Pipes, 2000).
Provide Information
Intranets can further
be utilized to supply a wealth of information to franchise
partners. For example, on
RE/MAX’s web site, franchisees can access an entire
downloadable library of information, which contains presentations and other
business materials that can assist them in everything from employee training
to sales
and marketing (Seideman, 1998).
Other franchisors have even put their catalogs online (,
which are known as brochureware sites), this
allows their franchisees to order material from designated suppliers at
cut-rate prices (Seideman, 1998).
Franchisees can now even
watch training videos and franchising presentations on the
Internet (Maddox, 2000). Many
franchisors already have the ability to access point-of-sale information,
customer databases, and completed financial reports, meaning the franchisor can
support the franchised business better, which reduces the workload for the
franchisee (Maddox, 2000). In the
future, franchise seminars may even be held in virtual classrooms and
prospective franchisees will conduct three-dimensional tours of the units for
sale (Maddox, 2000).
Extranets can also be
used to make vendor relationships more beneficial. When an Extranet is in place, vendors can have direct and instant
contact with franchisees. Often, the
questions that franchisees need answered most can best be answered by the
vendors who provide many of them the
products and services to them (Pipes, 2000).
The Internet
is also being used by franchisees to
supply a wealth of information to customers.
Most websites today contain extensive product descriptions, along with
actual pictures of products for sale or use.
Geographic-based technology has also proved to be quite helpful to
customers wishing to locate a specific franchise (Leipnik, Mehta, and Maniam 1999)input Leipant, Mehta, and Maniam 1999. . Customers can type
their location on an interactive web page and then be returned maps and even
specific directions to help them find the franchise nearest to them (Pipes,
2000).
Selling New Franchises
The Internet is
also becoming a major source of new
franchise enquiries (Anonymous, 2000).
In the past, franchisors relied heavily on direct mail solicitation, customer
inquires, classified advertising, and national and regional trade shows
in order to generate new franchise leads (Fisher and
Mullin, 1999). Prospective
franchise candidates would then have to meet
with the franchisor’s in-house sales staff or franchise broker in order to
discuss the new business opportunity (Fisher and Mullin, 1999). With the vast popularity and effectiveness
of the Internet, this is no longer the case.
Many modern franchise sites are
very informative and contain descriptions of their franchise programs, company
fact sheets, news releases, franchise testimonials, and details on franchise
opportunities (Page, 1997). Most
franchise sites even contain the required initial capital contribution from the
new franchisee, as well as the amount of royalty and advertising fees that will
be due.
When franchise websites are
designed well, they can deliver quality potential franchise owners at a
dramatically reduced cost per lead, compared to other media (Anonymous, 2000). The Internet also allows franchisors to
research and immediately screen new potential franchisees online, further
cutting costs (Fisher and Mullin, 2000).
Perhaps the
most important aspect of the Internet for franchisors is that it allows them to
communicate with individuals and organizations from virtually every corner of
the world (Page, 1997). This advantage
has really helped franchisors in global
expansion efforts. When franchisors
have a website established, they can more easily market and sell their products
abroad and tap into an international pool of potential franchisees (Page,
1997).
E-Commerce
The public can
conduct all sorts of business with franchise companies on-line. The possible uses are almost endless and
range from ordering a meal to finalizing a mortgage (Love, 1998). For
example, the Internet is vastly changing the world of real estate sales. “Customers are walking in with everything
from listing to qualification letters gotten of the Internet, they are doing
the pre-shopping” (Seideman, 1998, p. 8).
This really shortens the time it takes to
make a sale and reduces the work on the part of the sales person. The Internet is fundamentally altering
everything from how new homes are marketed to the way sales people are trained
(Seideman, 1998).
One
cannot begin to count the number ofMany
franchises that have begun to sell their products
on-line. Even fast-food chains that do
not actually sell their food on-line, do sell an abundance of promotional items
such as t-shirts and caps, which further increases their market presence (See
appendix). Restaurants that do not
directly sell their food on-line can make Internet sales through the use of
intermediaries. For example, Cyberchefs.com (www.cyberchefs.com,
see appendix) will place consumer’s orders for them at their
favorite restaurants and then will deliver the food to their door for a small
fee. There are even virtual franchise
pharmacies that allow consumers to refill prescriptions on-line (e.g., www.medicaprx.com, see appendix).
Internet and Intranets also allow franchisees to take advantage of last-minute closeout specials on products and services that they may not otherwise know about (Pipes, 2000). This is a great benefit to many franchisees as it allows them to save both time and money.
New Franchise Formats
The vast
popularity of the Internet has caused a new
types
of franchise format to be developed.
There are now many new e-commerce-inspired franchise systemss,
such as Web site design, e-mail services, videoconferencing, and even virtual
secretarial support (Maddox, 2000). The growth of the Internet has also
spawned a multitude of companies that strictly provide services to
the franchise industry (Love, 1998). One such company, Franchise Solutions (www.franchiseowner.com, see
appendix), enables franchise owners from all sectors to meet online and ask
other franchise owners for help in solving specific problems (Love, 1998).
There are even sites, such as Franchise Solutions Information Services (www.bluefin.net/~fransale, see
appendix), that aid entrepreneurs in the purchase and sale of franchises (Page,
1997).
It can be seen that the franchising community is
utilizing the Internet now more than ever.
The Internet, along with Intranets, and Extranets, have has helped
to greatly improve relationships between franchisees, their customers, and
vendors. The World Wide Web has also
greatly increased the expansion of franchises and their sales of products and
services, and it has most definitely decreased the costs
associated with operations and sales.
The next section will discuss some further and potential
new uses of this important technology.
New Uses of Internet
for FranchisesFurther
Reduce
Direct Mail Costs
The use of the
Internet, and more specifically e-mail, could reduce costs even further by
replacing many of the brochures, letters, and memos that franchises send out regularly using
snail-mail or faxeveryday. Franchisees could further reduce direct mail costs through the use
of virtual coupons. Although some
department stores, such as Beall’s, have begun using virtual coupons, not many
franchises have. The use of virtual
coupons makes sense for many franchises, such as fast-food chains, because many
of these franchises send out direct mail coupons during
promotional periodseveryday.
Expand Market Research
Although
most franchise websites contain customer feedback forms, that is the extent of
their consumer research. Most websites
could easily incorporate some form of survey to gain more insight about their
customers. Franchises could ask
consumers to fill out a short survey in return for a discount off the next
purchase or some other type of sales promotion. Franchises could possibly ask for demographic data, or what features/attributes
the customer likes or dislikes the most about their products. When franchisees are able to acquire this
type of data, they can help the franchisor to better plan for the future and practice
the marketing concept better..
Monitor and Control
Client-server
systems built on Internet technologies can greatly reduce costs to both
franchisees and franchisors, while greatly increasing the ability to monitor
and control. The Internet has made it
easy to create systems that operate over distances. It is common to have many geographically scattered users access
the same system in real-time. In the
client-server paradigm, the franchisor operates a server system, while the
franchisees all access the same system via a web browser.
Many of the
benefits of communication, such as instantaneous e-mail, can also be used for
monitoring and controlling ones franchisees.
Monitoring and controlling is an important issue for franchiseesors
that own multiple units. It gives
multi-unit owners, which happen to be the most rapidly growing sector in the
industry, the opportunity to maintain constant control. In addition, fFranchisors
could possibly require new franchisees to
send daily reports of sales and other information to help ensure the viability
of the businesses. By staying on top of
the situation, franchisors can supply additional support when needed, instead
of when it has become too late.
Client-server
systems built on Internet
technologies can greatly
reduce costs to both franchisees and franchisors, while greatly increasing the
ability to monitor and control. The
Internet has made it easy to
create systems that operate over distances. It is common to have many
geographically scattered users access the same system in real-time. In the
client-server paradigm, the franchisor operates a server system, while the
franchisees all access the same system via a web browser.
In
traditional franchises, Aa common cost of opening a the
new franchise is thea set-up of hardware and software that is common to all franshiseesfranchisees. This might include accounting software and
custom software for the franchise. With the
Internet, this set-up can consist of a PC with a modem and a web browser – a much less
expensive system. Software
versions can become troublesome as franchisees’ software must
be updated, and systems become obsolete. In the client-server paradigm,
upgrades are done to the server system, and clients are undisturbed.
Coordination is
a common problem in existing traditional ffranchises, since
accounting, for instance, is done on
disparate systems, then combined at some point in time. In the client-server system, franchises use the
server to enter their data. Hence, information at the
franchisor is current, without the coordination issues. Accountancy standards are enforced, and the information is of better
quality,
and the system is more efficient.
Providing Information
Although some websites do provide maps with their locations indicated by a star, not many websites actually have the interactive sites that return the location nearest to the potential customer. This new geographic-based technology is quite useful in that it provides convenience, which is key in today’s time sensitive society. Most franchises could benefit by placing this technology on their website, especially those within the hotel/motel, fast-food industry.
New Channel of Distribution
(This is what they are doing, did you have some new
ideas on how they could improve upon this, you had a note after the provide
information section that said channel of distribution-mainly for service
oriented franchises –I put what I already knew existed).
The
Internet has also provided a new
channel of distribution for franchises.Similar to
music, books, and software (where you can download the most recent versions), the franchising
industry can also use this technology to distribute these and other products they sell. The franchisors can also use this new medium
to sell direct to the consumers. While
this strategy should be pursued with caution
(without creating a conflict with franchisee), it can
give franchisors an opportunity to increase sales.
While
Ford.com
gives customers an opportunity to design their car, the actual purchase has to
be negotiated and made with a local dealer.
The Internet proves itself most useful for providing additional services within
the franchise industry. For example,
when a franchised hotel allows their customers to make hotel reservations
online,
this greatly increases convenience for certain consumers which may make them
more likely to register with a hotel that offers this service. Another example of an industry
that has taken advantage of this new channel of distribution is online book
sales. Companies such as Amazon.com and
Barnes&Noble.com have found tremendous success when distributing their
books in this manner, presumably because of the convenience that it offers
consumers.
Monitor One’s Website on a Regular Basis
It
is also of the utmost importance that a franchisore
to regularly
monitor and update their website to ensure that it contains the most current
and up-to-date information. It can be
quite frustrating to a customer who orders a product on-line, and then later
receives an e-mail message stating that a product is no longer being carried or
made. The converse is also true, in
that, new products should be put on ones website as soon as they are available,
so that the franchisee does not miss out on lost sales.
Franchisores
should also make daily checks to ensure that their website is functioning
properly. Many websites contain links and
hyperlinks to pages that cannot be displayed or are currently
having technical difficulties. This also
causes customer dissatisfaction, especially when the customer is
highly interested in learning about the product.
Franchises
should also generally have their website
designed by a professional to ensure the highest quality. A website is an official representative of
the business and its products, and should be designed accordingly. Websites should contain information that is
easy to find, and the information should be explained clearly, so there is no
confusion. It is also helpful for a
website to contain an internal search feature and a FAQ section (Frequently
Asked Question section) so customers can more
quickly and easily find what they are looking for within the particular site.
Conclusion
It can be seen
that Internets, Intranets, and Extranetsthe Internet
haves vastly helped to improve several aspects
within the franchising industry. Not only
has this technology helped to improve communication between franchisors, their
franchisees, vendors, and customers, it has also helped to greatly decrease the
cost associated with necessary communication and improve efficiency due to the
wealth of information that is now readily available at ones fingertips. However, aAlthough
much progress has occurred in the use of overall Internet technology, it can be
seen that more progress is still yet to be made.
Franchisees could
further can make use of the Internet to cut their direct
mail costs, through the use of virtual coupons. They could also can make
greater use of the Internet in the area of marketing research; this is a great
opportunity that is seldom being used at this point. Franchisorses could
also can improve upon the information they provide on their site by
creating more interactive web sites, such as those that return the franchise
location nearest the customer; very few companies have implemented this new
geographic-based technology. It is also
key that franchises continuously monitor their websites in order
to ensure that they get the most benefit from them. Many web sites that exist today simply are out of date or contain
several technical problems, such as links that do not function properly. With the future of e-commerce moving towards
m-commerce (mobile commerce), the franchising industry, with its extensive
network, is in right place to take advantage of the opportunity. Another area that the franchising
industry needs to work harder at is the actual promotion of their online
presence. Very few URLs can be seen in
tradition medium (e.g., TV, newspapers) and even fewer in nontraditional
mediums (e.g., cross-links, affiliate
programs). If the
industry waits any longer to capitalize on the application of
the Internet technology, it may "miss the boat."
For
conclusion, you wrote dynamic websites, promotion of websites using traditional
and non-traditional methods, what did you mean?
AppendiAppendixx
|
Franchises and Their Use of Intranets |
||
|
Application |
Franchise/Website |
Author/Year |
|
Online support system for new owners. Message boards can help gain insight into the company and provide answers to commonly asked questions. |
Memphis, Tennessee - Amerispec. |
Pipes, 2000 |
|
“Franchise Assistant” a Web- and Java-based application used to provide food cost analysis, labor schedules, and other back-office functions. |
AFC Enterprises, also being tested by some Popeye’s franchisees. |
Rubenstein, 1998 |
|
Franchisees can use their password to access training manuals. |
Mail Boxes Etc. |
Maddocks, 2000 |
|
Fastsigns, Inc. uses their Intranet to download logos and other materials from their on-line system instead of waiting for them to be shipped. |
Fastsigns, Inc. |
Seideman, 1998. |
|
Franchises and Their Use
of the Internet |
||
|
Application |
Franchise/Website |
Author/Year |
|
Website provides access to customers about their products and restaurants, as well as, classifieds, product and nutritional information, and promotional merchandise. |
Chick-fil-A |
Rubinstein, 1998. |
|
Online product ordering systems—franchisees can order products directly from approved vendors or the franchisor itself. |
Purified Water To Go, MediCap Pharmacies, Inc. |
Pipes, 2000 |
|
Online product orders |
Rubenstein, 1998. Rubinstein, 1998 |
|
|
More efficient—no phone tag, instant dissemination of information, allow franchises to capitalize on time-sensitive opportunities |
General |
Hoffman, Novak, and Chatterjee, 2000. |
|
Generate new franchise inquires. 205 of all franchise sales inquires are generated by online advertising, yet they only spend 10% of their budget online. |
Blimpie International, Inc. |
Alden, 1998 |
|
GNC Franchising attracts most of its franchising prospects though in-store solicitation and through web site advertising. However, they say their most cost-efficient method is through online inquiries. |
GNC Franchising |
Fisher and Mullin, 1999. |
|
7-Eleven has replaced their video sales presentations with interactive CD-Rom programs. |
7-Eleven, Inc. |
Fisher and Mullin, 2000. |
|
Marriott, International gets thousands of visits from people who want to know if there is a hotel neat their travel destination. This saves front desk time by reducing the number of times staff has to give directions over the phone. |
Marriott, International. |
Seideman, 1998. |
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