Essay Sample on Franchise Opportunity in the Hospitality Sector

Introduction

The hospitality industry deals with the provision of services to the customer. For better understanding, the sector is classified into quick-serve restaurants, limited-service hotels, extended stay hotels, and the list is unlimited. The categorization of hospitality is based on the type of service offered to consumers. The entrepreneurs are actively participating in running franchised hospitality services. A franchised product is a brand whose rights do not fall with the seller but the innovator. Therefore, the seller is chosen on behalf of the company to sell the product. The seller is bound and has no power over the price of the service.

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Customer Profile

Understanding of customer profile is one way to success for quick-serve restaurants. Demographically, youths are the leading market segment for this type of restaurant. The portion of the male who consumes fast food is higher than the female. Male teens find it difficult to perform home chores such as cooking because of the cultural setting. Traditionally, they were forbidden from preparing meals. Another factor that constitutes customer profile is the socioeconomic status. The majority of the consumer are middle-income earners. They afford the services provided by the restaurant. The product offered is worth the price and does not compromise the quality. People move from the countryside to urban to seek employment making the towns and cities densely populated. The high population consideration is directly proportioned to the market share. Therefore, the restaurants are established in towns and cities where the demand is high for hospitality. Fast food hotels take into consideration the purchasing power of the consumer, which has revealed the increased power of spending in the industry.

The customer value is the benefit an individual derives from the use of a brand. In the quick-serve industry, it goes beyond the physical consumption of a product. The value of the customer is realized from the point of service delivery. Factors such as waiting in the queue, customer approach, and after-sale services determine the customer value. Also, most of the customers in this industry have common characteristics. They are busy with their business, and to maximize time; they opt for fast food. Moreover, a significant portion of the consumers is singles. They lack children that give them more responsibilities for cooking. Lastly, the needs of the restaurant depend on the requirements to be fulfilled by the consumer. Therefore, hotels employ strategies that increase customer value. The human resource identifies the gap in restaurant needs and matches customer needs.

Franchise Brands and Opportunities

McDonald and Taco Bell are some of the franchises that operate as a quick-serve restaurant. It functions as the largest restaurant around the globe and established in over 100 states with about 36,900 outlets (McDonald's franchise for sale - restaurant, n.d). It is estimated to offer services to 69 million customers per day ("McDonald's Franchise for Sale - Restaurant," n.d). For one to become a franchisee in this company there is a financial requirement to be fulfilled. The financial commitment involves the initial investment ranging from $ 1.058 million to $ 2.23 million, a franchise fee of $ 0.045 million, and a liquidity level of $ 0.5 million (Daszkowski, 2019). Other costs include the royalty fee of 4% and an advertisement fee of 4% (Hatic, 2017). Taco Bell is the fourth largest company that operates as fast food. Daily, the company provides services to about 46 million consumers (Daszkowski, 2019). To start a franchise, it requires the initial investment from $ 1.2 million to $ 2.6 million, minimum liquidity of $ 0.75 million, and a franchise fee of $ 0.025 million (Daszkowski, 2019). Other costs include the royalty fee and market fee of 5.5% and 4.25%, respectively ("Taco Bell vs. McDonald's Franchise Comparison," n.d).

Franchise Brands Pros and Cons

The first advantage of MacDonald is extensive training. It offers extensive on-hand training to the franchisee. It provides training that aids in starting operations and understand the technical aspects of the franchisor. The company is known in most parts of the world. The risk of penetrating the new market by the franchisee is reduced. Even though the company does not provide financial support, the purchasing power of the franchise helps the entrepreneurs to enjoy a low interest in financing the business. However, the organization also has cons. To start up the company, it involves several costs apart from the high initial investment. The franchisee is denied a chance to be engaged in decision-making. The pros and cons mentioned above also apply to Taco Bell.

To establish a franchise, both companies require initial investment amount, liquidity amount, application fee, royal fee, marketing fee, and renewal fee. The organizations engage in the provision of similar brands such as panda express and wild Buffalo wings. Additionally, each franchise occupies the largest market share in its significant segment of operation. On the other hand, initial cost, franchise fee, and a renewal fee of starting up MacDonald are higher than that of Taco Bell. The American based company is the market leader in the fast-food sector and offers more extensive training than the other restaurant. The McDonald's brand is recognized in the market and continue to reach out to the public through extensive advertising and promotion. However, Taco Bell has other competitive advantages over Macdonald's. They include the free option of gluten, availability of online menu, and different better delivery means.

I would select MacDonald. This brand is well known in the world because of the quality of service offered. It would be easy to penetrate the market since the customers are already aware of the product. The company also engages in frequent advertising and promotion as a way of marketing their product, which continuously will increase sales. The company gives an option of taking over a franchise that is already established that reduces the risk of failing. Lastly, the restaurants provide the entrepreneurs with the necessary training to meet the needs of the business, which is usually reviewed according to customer taste and preferences, thereby improving and maintain brand loyalty.

Conclusion

In summary, quick-serve restaurants in the hospitality sector are performing well in terms of profit. The entrepreneurs are encouraged by the high returns and demand to invest in this sector. The first step before investing is carrying out a study to understand the market players. Like in the study, the dominant player McDonald, who is the market leader, competes with Taco Bell for the same market share. The difference in competitive power is brought by how each company assessed and evaluated customer profiles. Understanding of customer profiling helps the organization to be focused and be specific about the market targeted. The customer profile is developed from the targeted market. The needs of the restaurant are matched with the desire of the market. If the match satisfies the consumer, then the value of the customer is realized. This process will increase brand recognition that results in improved performance. As a way of reducing the risk of market penetration, a franchise is the best form of business to adopt. A franchisee enjoys many benefits such as brand recognition, free advertisement, and training to perform business operations effectively and efficiently. However, the entrepreneurs in a franchise business are also limited in terms of decision-making. They operate business as per the franchisor directives. Despite the initial cost, other types of fees are involved, which makes the process of establishing a franchise expensive.

References

Daszkowski, D. (2019, March 13). Requirements to open a McDonald's franchise. Retrieved ssfrom https://www.thebalancesmb.com/requirements-to-open-a-mcdonald-s-franchise-1350970

Hatic, D. (2017, May 8). Franchising a restaurant, explained. Retrieved from https://www.eater.com/2017/5/8/14936008/how-to-franchise-restaurant-mcdonalds-arbys-subway

Daszkowski, D. (2019, November 29). Owning a Taco Bell franchise. Retrieved from https://www.thebalancesmb.com/taco-bell-franchise-review-1350384

McDonald's Franchise for Sale - Restaurant. (n.d). Retrieved from https://topfranchise.com/products/mcdonald-s-restaurant-franchise/

Taco Bell vs. McDonald's Franchise Comparison. (n.d). Retrieved from https://thefranchisemall.com/franchises/compare/10159,10357-taco_bell_vs_mcdonalds.htm