You are here: Knowledge, Learning and Capabilities in Franchise Organizations > Organization of Franchise Knowledge

ORGANIZATION OF FRANCHISE KNOWLEDGE 

In their pioneering paper on Knowledge Management, Alavi and Leidner [8] defined knowledge as “a justified personal belief that increases an individual’s capacity to take effective action.”  According to this definition, knowledge becomes “working” when the action produces results.  In the context of franchising, a working knowledge profile is developed when the working knowledge of a certain task has been repeated many times with good results.  Consider, as an example, the process of becoming a franchisee at Smoothie King [9], a leading nutrition juice bars franchise: 

·         Step 1: Complete the on-line Request for Consideration

·         Step 2: Interview/presentation

·         Step 3: UFOC (Uniform Franchise Offering Circular) reviewed by prospect

·         Step 4: Meet with exiting franchisees

·         Step 5: Information review: Prospective Franchisee Profiles

·         Step 6: Enter into a franchise agreement

·         Step 7: Orientation

·         Step 8: Training

·         Step 9: Complete construction

In the Orientation task (Step 7), a working knowledge profile of Site Selection [10], is used to help the new franchisee to find a good business site.  The Site Selection Profile, developed by the real estate department for years, has been repeatedly tested and enhanced. 

A typical working knowledge profile in franchising includes three major components [10]: Value, Cost, and Risk (VCR).  Using site selection as an example again, “Value” is defined to be the attributes that may increase the profit potential of a site.  “Risk,” on the other hand, is defined as the attributes that may decrease the profit potential of a site.  “Cost” includes all the tangible and intangible costs of building the site.  Table 1, taken from the first author’s previous work [10], is a simplified example of the VCR evaluation of three prospective business sites.  The VCR evaluation data in Table 1 can be aggregated into an easy-to-understand VCR diagram shown in Figure 1(a).  The value-risk pair represents the center and the cost is the radius of the circle.  As is evidenced from the figure, Site 1 is the best choice, since it has the highest value, the lowest risk, and the lowest cost.  The VCR procedures can be further enhanced to enable the site selection team to compare a candidate site with the best and worst sites of the franchise system in similar areas.  For example, Figure 1(b) shows that the VCR approach enables the site selection team to make the decision easily.  

    Figure 1(a): The Value-Cost-Risk Diagram for Alternative Sites

Figure 1(b): The Value-Cost-Risk Diagram for Comparing Alternative Sites with Company's Best and Worst Sites in Similar Areas

 A working knowledge profile is usually embedded in the operational manual of a business process.  For example, the Site Profile shown in Table 1 and Figure 1 is embedded in Step 7 of the operational manual for the process of recruiting a franchisee at Smoothie King.  Many operational manuals are needed in the franchise business environment, which includes the franchisor headquarters, the franchisee or company outlet, and the franchise community:

• At the franchisor headquarters, major daily or periodical operations include: (1) helping and supporting business units owned by franchisees or the company; (2) recruiting prospective franchisees for franchise development; (3) managing employees who perform franchise support and franchise development; (4) dealing with financial issues related to accounting and finances; (5) selecting and partnering with suppliers, e.g., marketing agents, accountants, insurance providers, attorneys, real estate agents, human resource management companies, etc.; and (6)  abiding the government regulations, e.g., taxes and worker compensation.
• At the franchisee or business outlet, major daily or periodical operations include: (1) making sales to the customers; (2) getting the support from the headquarters, e.g., issues at the outlet operations, personal demonstrations from field representatives, and training from the franchisor; (3) managing employees making sales to the customers; (4) marketing and advertising to customers; (5) dealing with financial issues related to accounting and finances; (6) dealing with suppliers; and (6) abiding the government regulations.
• In the franchise community, where the franchisor-franchisee relationship is developed and built, three interrelated groups of relationship can be identified: (1) relationship management within the franchise system, e.g., how to deal appropriately with the hot issues such as encroachment; (2) relationship management with consumers, e.g., customers, investors, competitors, media, and government; and (3) relationship management with suppliers, e.g., a good relationship between the franchisor and the International Franchise Association will have positive impacts on the franchisees’ businesses.

Thus there are many opportunities for working knowledge profiles development in the franchise business environment.  Table 2 enlists some examples.