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LEVERAGING FRANCHISE ORGANIZATIONAL KNOWLEDGE

As was shown in Table 1, developing the good “family” relationship between the franchiser and the franchisee is the most important sub-stage of the CSLC model.  Justis and Judd (2002) examined the franchisor/franchisee relationship issues in various franchise systems at different phases of the CSLC model.  They identify franchise organizational learning as the key for building the “family” relationship.  They also find that there are five vital factors for a successful learning program in franchise organizations: (1) working knowledge, proven abilities of expanding the franchise system profitably; (2) positive attitude, constructive ways of presenting and sharing the working knowledge; (3) good motivation, providing incentives for learning or teaching the working knowledge; (4) positive individual behaviour, understanding and leveraging the strengths of the participants to learn and enhance the working knowledge; and (5) collaborative group behaviour, having the team spirit to find the best way to collect, dissimilate, and manage the hard-earned working knowledge.  Through this “family” learning program, both the franchiser and the franchisee will progress gradually along the following five stages of growth: (1) Beginner – learning how to do it; (2) Novice – practicing doing it; (3) Advanced – doing it; (4) Master – teaching others to do it; and (5) Professional – becoming the best that you can be. 

It is quite clear that working knowledge is the real foundation of a successful franchise “family” relationship.  The working knowledge is structured in many forms of profiles that are embedded in the operational manuals of the franchise business processes.  Table 3 gives some examples of those working knowledge profiles with respect to the CSLC business processes -- sub-stages in Table 1.  A working knowledge profile is developed when a certain task of the CSLC process is repeated many times with good results.  Consider the Site Profile used at the “Marketing & Promoting the Franchise Products/Services” sub-stage in Table 3.  The Site Profile is used to help the new franchisee to find a good business site.  It is typically developed by the real estate department at the franchiser headquarters.  The Site Profile is continuously being tested and enhanced.  Various analytical reports monitoring the performance of the sites are generated at the Analytical Reports Level shown in Figure 1.  Based on those reports, the real estate experts and their teams are able to fine-tune the attributes and the parameters within the Site Profile.  Most often, the corresponding data collection procedures in the CSLC sub-stage also need to be revised and perfected so that better report scorecards can be generated.

This process of enhancing the working knowledge profile will achieve its high peak when both the franchiser and the franchisees are arriving at the Professional stage of growth.  A significant phenomenon of being a Professional franchiser or franchisee is his or her ability to leverage the assets of the hard-earned working knowledge profiles into dynamic capabilities and high-business-value-creation completive-advantage strategies.  The new products or services coming out of the process of leveraging the working knowledge profiles may transform the franchise business into a more, sometimes surprisingly, profitable enterprise.  Consider as an example the site selection working knowledge at McDonald’s as was mentioned in the INTRODUCTION section.  The Franchise Realty Corporation real estate business, a result of site selection asset leveraging, is the real moneymaking engine at McDonald’s.  A most recent high-business-value-creation strategy based on these real estate capabilities is the so-called Greenberg’s law (Samuels, 1996), named after McDonald’s Chairman and Chief Executive Officer: “The more stores McDonald's puts in a city, the greater the overall number of transactions per capita in that market.”  As we can see that McDonald’s can execute this Greenberg’s law for market penetration strategy because of its strong capabilities of real estate.

To cultivate the working knowledge profiles so that the “Professional” franchiser and franchisees can continuously leverage the valuable assets, we propose an Intranet-based Franchise Working Knowledge Repository as is shown in Table 4.  The Repository provides a framework based on which a franchise system may transform itself into a more profitable learning organization.  It consists of two important classifications: (1) user skill levels, including Beginner, Novice, Advanced, Master, and Professional – the five stages of growth of the franchiser and the franchisees; and (2) working knowledge level for the collaborative team, the franchisee outlet, the franchiser headquarters, and the franchise community – the environment where the franchiser and the franchisees learn.  Note that Knowledge, Attitude, Motivation, Individual Behavior, and Group Behavior are the fundamentals for perfecting the working knowledge profiles, so their major principles shall be learned first.  The working knowledge profiles in Table 4 can be modularized according to user’s level.  A curriculum of working knowledge modules can then be designed to effectively train the user.  The goal is to provide an efficient and effective learning environment so that the franchiser and the franchisees can speed up their growth process to become the “Professional” innovators to make the franchise system more profitable and competitive.

In sum, a well-designed DNS in the High Business Value Creation and Implementation Phase shall incorporate the Intranet-based Franchise Working Knowledge Repository framework depicted in Table 4, since it enables a franchise organization to leverage its working knowledge to acquire and maintain a competitive advantage in the market.