DEVELOPING THE WORKING
KNOWLEDGE USING IT  

This section consists of:

IT Used in the Franchise Business Environment

Building Working Knowledge Profiles

Putting the Working Knowledge Profiles in Action: A Case Study

IT Used in the Franchise Business Environment

Based on the business environment illustrated in Figure 1, information technologies that can improve basic franchisor headquarter operations fall into five major categories (Table 1).  They are: (1) Franchise Support System, supporting business units using applications software for tasks such as help desk, performance tracking marketing and auditing; (2) Franchise Development System, contacting and building relationship with Prospective Franchisees using applications software for tasks such as marketing, contact management, and real estate management; (3) Franchisor Headquarter Management System, helping the Franchisor deal with office issues using applications software for tasks such as human resource management, accounting, and financing; (4) Suppliers/Government Contact Management System, contacting and building relationship with Suppliers/Government using applications software for tasks such as scheduling and reminders; and (5) Communication System, helping the Franchisor communicate efficiently and effectively with Business Units, Prospective Franchisees, Suppliers, and Government.  

Table 1. The Benefit of Information Technologies for the Franchisor Office

Based on the business environment illustrated in Figure 2, information technologies that can provide the basic franchisee unit operations are summarized into three major categories (Table 2).  They are: (1) Front Office Operation System, serving Customers using applications software for tasks such as business transactions and marketing; (2) Back Office Operation System, dealing with office issues using applications software for tasks such as accounting and financing; and (3) Communication System, helping the Franchisee communicate efficiently and effectively with Customers, Franchisor Headquarter, Suppliers, and Government.  

Table 2. The Benefit of Information Technology for Franchisee Stores

Based on Figure 3, we can summarize useful ITs for basic functions into three categories (Table 3):  (1) Internet for Business-to-Consumer (B2C) collaborations,  (2) Intranet for Intra-enterprise collaborations, and (3) Extranet for Business-to-Business (B2B) collaborations.  

Table 3. Applications Among the Franchise Community

Building Working Knowledge Profiles

Working knowledge is generally accumulated from information obtained from data analyses.  A franchise system generates volumes data every day from various applications systems, for example, the Front Office Operation System at the Franchisee Unit shown in Table 2.  At the end of each business transaction, billing, customer tracking, inventory control, and labor all generate enormous amount of data.  At the end of day, a report is sent through the communication system to the franchisor headquarter to summarize the daily business transactions such as total sale, total cost of raw materials, and total cost of labor.  If the report is not received after a pre-determined time, a message is triggered to request prompt actions by the franchisee.

Once the daily sale reports are received from all the business units, they are converted into information using a variety of analytical methods such as (1) statistical data modeling including regression analysis, correlation analysis, time series analysis, forecasting, Pareto analysis, and quality assurance; (2) data mining modeling including decision tree analysis, cluster analysis, market segmentation analysis, cross-sell analysis, and association analysis.  These statistical data analyses also help generate many business intelligence reports.  For example, a business unit will typically receive its performance ranking report with respect to the franchise system along with the top 10 business units having the best sale reports.  Some kind of reward program can be built into the information generation process.  For example, the owner of a business unit may receive a free trip to Hawaii if he/she has been among the top 10 lists for a number of consecutive time periods.

The information contained in the daily business intelligence reports becomes the foundation upon which the working knowledge of the franchise system may be built.  Consider the three very important sets of working knowledge for a typical franchise system: Site Profiles, Personality Profiles, and Customer/Product Profiles.  How the profiles are obtained is briefly discussed below.  The examples are summarized from Chen, Justis, and Chong (2000a).

·  Site Profiles.  Selecting a good site is perhaps the most important decision in the franchise business. A well-run franchise system will have the working knowledge, e.g., Sites Profiles, on how to choose a good site for its prospective franchisees.  The Profiles enlist vital elements of value and risk for sites, which are identified based on several years' experiences.  For example, sales data at each site is pulled daily and analyzed.  The information on the best and worst performers on the previous day is identified immediately.  The analyses over the years will exhibit the vital value and risk elements of sites, which will become the working knowledge of site selection of the franchise.

· Personality Profiles.  A successful franchise knows well what franchisees must have strong work ethic, self esteem, relationship extension (the desire to become friends with the customers), a commitment to service, team orientation, and exactness and cleanliness (Webb 1999).  The information on the best and worst franchisees can be identified through comprehensive analysis comparing these traits with the sales and performance reports.  The analyses over the years will exhibit the vital value and risk elements of personality, which will become the working knowledge for franchisee recruitment.

· Customer/Product Profiles.  According to the 80/20 Principle, we may observe that (1) 80% of sales come from 20% of total products; and (2) 80% of business comes from 20% of customers.  We can see immediately that in order to be successful, we need to: (1) Be market-led in those few right products, and (2) Be customer-centered for those few right customers.  Thus, we need to build product profiles that focus on the vital few product groups, i.e., 20% of the total products that generate 80% of product sales, and customer profiles that focus on the vital few customer groups, i.e., 20% of customers generating 80% of total sales.

Based on the discussion above, franchise software applications can be classified into data, information, and knowledge.  Table 4 gives some examples of how these three types of the software applications are used at the franchisor headquarter (shown in Table 1), the franchisee units (shown in Table 2), and among the franchise community (shown in Table 3).  

Table 4. Applications Classified By Type: Data, Information, and Knowledge

Putting the Working Knowledge Profiles in Action: A Case Study

We use the “Steps to Becoming a Franchisee at Smoothie King®” (www.smoothieking.com) to illustrate how information technologies and working knowledge profiles are used in real-life practices (Table 5):

Step 1:   Obtain Franchisee Information Packet - You may request a franchise information package by submitting an inquiry.

Step 2:   Submission of Information Forms, Financial Statements and Resume - Complete and submit the forms in the packet to Smoothie King®. Our executive staff will review the information. Upon preliminary approval, you will be notified of our interest. This information will be kept confidential.

Step 3:   Interview/Presentation - A Franchise Development Representative schedules an interview with you at our headquarters in Kenner, LA. During this visit, you will get an in-depth introduction to the Smoothie King operation, receive your Uniform Franchise Offering Circular (UFOC), meet the executive staff, and have an opportunity to visit several existing franchise locations.

Step 4:   UFOC Reviewed by Prospect - The UFOC contains valuable information to help you analyze our franchise system.

Step 5:   Meet with Existing Franchisees - After careful review of the UFOC and your visit to headquarters, you may wish to interview some of our existing Smoothie King franchisees.

Step 6:   Information Review - We evaluate your information forms, financial statements, credit forms and background information. Upon a mutual decision to proceed, you may be scheduled for a second interview if necessary.

Step 7:   Second Interview - A Franchise Development Representative schedules a second interview with you at Smoothie King headquarters. At this meeting, you will meet our corporate franchise support staff and visit our training center in Metairie, LA.

Step 8:   Enter Into a Franchise Agreement - By this point, you should have enough information about Smoothie King to make a prudent decision. If you are approved, you may sign a franchise agreement.

Step 9:   Orientation - As soon as possible, you will attend a one-day orientation class. At this class you will be oriented on all of the steps involved in opening your store. This will include budgeting, financing, planning, site selection, ordering, construction and much more.  After orientation, our real estate department will work with you to find the perfect site.

Step 10:   Training - You and your management staff attend training at our training center.

Step 11:   Complete Construction - Upon completion of construction, store set-up and on-site training begins.

Step 12:   Open For Business

Table 5. Smoothie King® - Steps to Becoming a Franchisee