I like it franchise!

9 May

I have already been to different 7Eleven stores, not Japan but in the USA and I really like this kind of stores because you can everything there. When I made a car trip through the states, I always bought my breakfast there. From the outside it looks like a little “Tante Emma Laden” but when you go inside, it’s all modern and you can get everything you want. But the best was that you could find such a store in every little town, so I was really surprised when I read that Japan has the most 7Eleven stores in the world even though it is a so much smaller country.

But what interested me the most was the franchise strategy of 7Eleven Japan because I have heard the word “franchise” so many times before and I knew that it is a business model but thinking more about it brought me to the conclusion that I don’t really know what franchise is or what it means, so I first asked some of my group members whether they know what “franchise” means. They thought a little bit about my question but could not give me a satisfying answer. Most of them didn’t know it either and another one said that she knows what it is but cannot explain it in a proper way. She only knew that Mc Donalds is a franchise company because she works there. So I thought that this must be something very difficult to figure out and I started researching on that topic.

First I found a nice definition of franchising on Wikipedia stating that franchising is the “practice of using another firm’s successful business model. The word ‘franchise’ is of anglo-French derivation – from franc – meaning free. For the franchisor, the franchise is an alternative to building chain stores to distribute goods and avoid the need for investments and liability for a chain. The franchisor’s success depends on the success of the franchisees.”

I like this definition but in my opinion it is too general so I did some more researching to find more detailed aspects of franchising in 7Eleven stores. What I have found was that around 60% of all 7Eleven Japan stores are modified from traditional family owned stores for example liquor or rice stores. These stores in the case of 7Eleven Japan are the franchisees that are an independent business but have to give royalties and a long-term commitment to 7Eleven Japan that is the franchiser, and must concentrate on selling and managing the products. Here the royalty that the franchisee pays is about 43% of its gross profit. In exchange the franchiser provides the so called Operation Field Counselors (OFC) to support the franchisees and to give advice how to maximize their profit because both sides benefit from it. 7Eleven Japan also provides training courses for the store owners before they open up a new 7Eleven store to introduce them to all the concepts of franchising and the way they are working together. 7Eleven shares its information with others rather than hiding it and being afraid someone would copy anything and this is also the key to success for 7Eleven Japan. All stores are connected through an open network of communication and everyone from the top managers to the little store owner and his employees know everything about that system and communicate if they have new ideas or questions.

In my opinion, to use the concept of franchising in case of 7Eleven Japan was very smart because in Japan there is only small land available so why build up new stores on the last little piece or land when you can just use the ones that are already there and so also the store owner can benefit from it because he does not have to close his small shop when they open a 7Eleven store right next to his. On top of that, he can also stay his own boss, sure with that concept he will always have someone to support to and to share his profits with but he can still take care of his own shop and can still make a lot of profit maybe even a more than he would have without a franchiser.

But these concepts of franchising does not only exist in Japan, like I said in the beginning Mc Donalds is a franchiser as well and there are also some German companies who adopt to this principle. Last week, I heard an advertisement on the radio about Joey’s Pizza and that there are looking for new Franchisees in Berlin. This got me hooked and I did some research on Joey’s Pizza and found out that their new concept is called “Franchise for Winners”. They say that the most important is the right business idea and the right partner and that’s what Joey’s wants to offer.

The first Joey’s Pizza was made in 1988 in a normal kitchen and even then was delivered personally by the chef in a zebra-Mini. Meanwhile, Joey’s has strongly developed and became one of the leading companies. Just opened, Joey’s business was already so popular that the first employees soon wanted to open up their own Joey’s businesses. That’s how Joey’s franchise business has established itself more and more as a delivery service in the catering business. The first Joey’s franchise partners always have been and still are convinced by Joey’s concept. “Always with one eye on the market and with the other one very close to the wishes of customers.”

To come to a conclusion here, I must say that the franchise business model is a great alternative to normal chain store retailers. I would also say that franchising is more and more common not only in Germany or in Japan but in the whole world.

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One Response to “I like it franchise!”

  1. lilmeu May 9, 2012 at 5:46 pm #

    Hey Julia!

    First of all: I really like the website of your group! Nice design, interesting topics and a very expressive title!

    I will make my first “hitthenailonthetop”-comment about your blog post because I was suprised about the fact that Joey´s Pizza is looking for new Franchisees in Berlin! I mean, I also didn´t know that McDonalds is a franchiser as well but this is just because I weren´t interested in franchising until now.
    But your blog post informed me very well about this topic! Especially, the inserted graphic “mutually beneficial relationships” makes a better understanding possible.
    Now, I even understand the 7ELEVEN Japan case study better. It´s totally cool that you involved material of our BusApps course in your blogging. That embodies your overall interest in business and IT!

    Keep it up! 🙂

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