Heterogeneity and Relationship Management †MyAssignmenthelp.com

Question: Discuss about the Heterogeneity and Relationship Management. Answer: Introduction The case study Mixed Fortunes at Dominos is based on a compilation of investigative reports by Fairfax media. The case highlights some problems experienced at Dominos. Some of these problems include the stress on the franchisees who think the investment is not working well for them as the costs of running the outlets increase while the prices of pizza decline due to competition. There is also a problem with employees unhappiness due to underpayment and working for long hours without compensation. Some franchises consider the head office style as dictatorial putting pressure on the employees and the franchisees. This paper will discuss the background to the Dominos case, suggested solutions and recommendations. Dominos is an Australian pizza chain comprising a network of franchises and over 600 retail stores nationally. The company was listed on the Australian stock exchange in 2005. The company has been very successful with the shares having surged 2500 per cent in over a decade making it one of the best performing in the market. The company has the largest pizza menu with over 200,000 options. Dominos offers service guarantee to the customers of deliver between 15 to 20 minutes for extra cost. The business model is using franchisees to grow sales with the head office earning royalty from every sale as opposed to profits. The company encourages more stores being opened to increase the sales and thus royalties for the head office. The situation however has not been very rosy for the franchisees as a number of problems have been reported. These issues need to be addressed if the company is to continue with the success story. The effective management of restaurants lifecycle and the quality o f life issues are important for growth and development of a restaurant (Parsa, Self, Njite King, 2005 p 304). Identification of Issues and Problems The first issue is on royalties taken by head office based on sales that encourage more stores in one region to increase sales. The franchisees are required to pay the royalties based on sales and not profits. This means whether an outlet is making profits or not, it has to pay royalties to the franchisee making the business untenable for franchisees and leading to their inability to pay the operational costs and make a profit or recoup their investment. The Franchisees feel as if the head office is interested only in their welfare and not their welfare. The push for higher sales puts unnecessary pressure on the employees and thus burn out. The issue of quarterly bonuses to the store managers is a good motivator to increase sales. However it might do the opposite of low morale to other employees if they feel left out in the recognition. The CEO should not get engaged in the minute details of micromanaging employees but focus on the strategic part of the business. When a franchisee is not doing well, the stores management is blamed for poor performance. There is no evidence of any support to the franchisee from head office in order to improve on performance. While the franchisee costs are increasing, their profits are declining because the cost of pizza is declining due to reduced pizza prices as a result of competition. Dominos profit is doubling while the franchisees struggle to make profits as they cannot pass on their costs of operating. The CEO is well educated, talented and experienced. He is focused on growing the people and the business. He knows how to deal with challenges and turning them in to opportunities. He takes risks in changing the business model with the current revolution on retailing and social media use. Staff retention is high and thus improvements in efficiency and reduced mistakes. This is viewed as good for the company. The labor costs have also gone up especially due to legislation and employees are more engaged. The employees are encouraged, incentivized and trained to keep them more engaged and motivated. The top employees are taken on a tour to the Silicon Valley, USA every year to learn about technologies that could be introduced to the company. However, many employees are not happy as they work overtime without payment and suffer from burn out. They are afraid of reporting to head office. The employee who reported never received feedback from head office. The company is therefore not living the CEOs motto of zero tolerance to worker exploitation. There are illegal and improper work practices that are making the employees unhappy. The employees are underpaid by lowering the hours worked thus reducing their pay. Some reported working for very long hours and the working environment not good lacking in basic facilities like air conditioning. When this was reported, the company terminated the contract of some franchisees. The company does not tolerate exploitation of workers. However, some of the workers dues remain unpaid. Due to the pressure on the franchisees, some unauthorized practices have arisen. This is affecting the standards of pizza negatively. They were making more pizza per bag of flour than allowed in order to increase their earnings. They say they are not making any money and require the head office to support them meet their increased costs. These improper practices will likely affect the companys reputation, sales and the future success. Possible Solutions For the business to be successful, head office must work together with the franchisees and cooperate in resolving the problems that are being faced. Proper communication, control and s strategy that is influencing are seen as key factors in influencing the competitive advantage of franchises (Inma, 2012 p4). When the franchisees feel as if the company does not care about their welfare, they will not deliver on their goals and this will lead to a bad reputation on the company and loss of customers. Proper channels and strategies for conflict resolution between franchisor and franchisee will be of great help (Strutton, Pelton, Lumpkin, 1993). An overhaul of the franchisees remuneration may be needed to ensure that they are motivated in business. Royalties based on sales are not working for them as they are not making profits. Another method that takes in to account sales and the profitability of the outlets can be considered with consultation between all parties. Head office support in outlets with higher operational costs may be necessary to keep them in business. Employee motivation and engagement needs to be reviewed. Unhappy employees do not deliver the results as per expectation. If this is not addressed, it will soon lead to customers mistreatment and dissatisfaction too. The employees need to be consulted and involved in decision making so that they believe the decisions made cater for their welfare. Only when they feel important will they contribute fully to business success. The labor practices need to be fair to avoid law suits. The salaries that have been unpaid need to be paid and the working environment needs to be conducive. Proper expertise of the business is needed by people who understand the franchise business. Proper leadership and guidance will benefit both the franchisor and franchisee and in the long run lead to business success. There are stakeholders who are important for success of the business and need to be taken care of (Mottl, 2016 para 7). These include the employees, the customers, the community in which you operate and the franchisees. All their interests must be looked in to gain their loyalty as they determine how successful the business will be. The business strategy must support the brand and make it stand out. It also must support differentiation and growth and profitability of the franchisee and the overall business. The franchisor needs to consult with franchisee before revision of strategy (Mottl, 2016 para 5). Recommendations The franchisor needs to employ strategies that will enhance employee and customer retention. Customer satisfaction has a strong effect on loyalty of customers (Gustafsson, Johnson and Roos, 2005 p 210). Loyal customers in turn tell others about the business and act as the ambassadors by spreading a positive word about the business (Nyadzayo, Matanda, and Ewing, 2011). This will be achieved through regular training and engagement activities for the employees at the same time close monitoring to ensure best customer service for the customers. Necessary tools to survey customer service parameters like NPS, waiting time, customer satisfaction will be necessary and necessary measure put to keep on improving. Another strategy is consolidation of the market where the franchisor analyses the market regularly with a view of understanding the market and structuring the business model to suit the market conditions. The franchisee in turn must understand the business model as defined by the franchisor in order to align appropriately for success. Franchising represents strategic alliance between franchisor and franchisee (Hoffman, 1991 p75). Relationships management is therefore very critical when building a strong franchise business (Inma, 2002 p3). This paper has discussed the issues and problems in Dominos case study and given some suggested solutions and recommendations. References Gustafsson, A., Johnson, M.D. and Roos, I., 2005. The effects of customer satisfaction, relationship commitment dimensions, and triggers on customer retention.Journal of marketing,69(4), pp.210-218. Hoffman, R.C. and Preble, J.F., 1991. Franchising: Selecting a strategy for rapid growth.Long Range Planning,24(4), pp.74-85. Inma, C., 2002.Building Successful Franchises: the Influence of Franchise Heterogeneity and Relationship Management on Franchise Success(Doctoral dissertation, Murdoch University). Mottl, J. (2016). 5 Strategies for Franchise Success over the Long Haul. Retrieved August 22, 2017 from: https://www.fastcasual.com/articles/5-strategies-for-franchise-success-over-the-long-haul/ Nyadzayo, M.W., Matanda, M.J. and Ewing, M.T., 2011. Brand relationships and brand equity in franchising.Industrial Marketing Management,40(7), pp.1103-1115. Parsa, H.G., Self, J.T., Njite, D. King, T., 2005. Why Restaurants Fail.Cornell Hotel and Restaurant Administration Quarterly,46(3), pp.304-322. Strutton, D., Pelton, L.E. and Lumpkin, J.R., 1993. The influence of psychological climate on conflict resolution strategies in franchise relationships.Journal of the Academy of Marketing Science,21(3), pp.207-215 .