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Franchise Organizations
by Jeffrey L. Bradach (Harvard Business School Press)
How much impact do chains such as Pizza Hut and McDonald's have on today's economy? Here are some telling numbers: a new franchise opens in the United States every eight minutes; by the year 2000, 50 percent of global retail sales will pass through a franchise chain; fully 96 percent of the American population has eaten at a McDonald's. Considering the astonishingly rapid growth of chains in recent years, it is not surprising that a comprehensive analysis has lagged behind the phenomenon itself. But no longer. In his new book, Franchise Organizations, HBS assistant professor Jeffrey L. Bradach offers the first fully realized documentation and analysis of this vastly influential organizational form.
Through an in-depth study of five leading restaurant chains (including KFC, Jack in the Box, and Hardee's), Bradach explores the inner dynamics of chains. "As a microcosm of the industry," writes Bradach, "these organizations serve as a window through which the problems and opportunities of chain management may be more fully understood." He discusses the singular challenges all chains confront and the practical solutions some have developed in response.
Bradach explains that traditional chain enterprises comprise two organizational units: company and franchise. The company-owned unit is run on a military model - the superior exercises authority, the manager follows directions - while the franchise unit is run more like a partnership. Bradach quotes a popular industry adage, "You can tell company people, but you have to sell franchisees." These two units have often been viewed as operational opposites, with academics and managers trying, as Bradach puts it, "to determine which one is better."
In a creative departure from the current wisdom, Bradach focuses on a powerful organizational arrangement he identifies as the "plural form"; that is, chains composed of both company-owned and franchise units. Plural form chains, Bradach says, leverage the strengths and balance the weaknesses of each of the traditional forms. Thus a restaurant operating under the plural form might, for example, be able to generate more, and more varied, ideas for innovation and at the same time use the two arrangements to test the new ideas more thoroughly. As Bradach concludes, "The challenge facing managers, then, is not to pick either company or franchise units but instead to use both and ensure that processes exist that leverage the strengths and ameliorate the weaknesses of each one."
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