Franchisee Advantage
As a global company, Ruby Tuesday advocates a mission to provide better environment for its customers as well as employees. The implementation of smoking ban in Hong Kong restaurants will serve as a conducive setting to integrate this corporate influence to franchisees. Franchise owners can readily possess the advantage of gaining their reputation that they diligently follow the mind-set and features of the global company as reflected by complying with the mission. As a result, they can exploit the customer base that serves as regular customers of Ruby Tuesday in other countries (global marketing). This is in conjunction with the fact that Hong Kong is an international business hub so numerous foreign investors and businessmen go in the country. In addition, local customers can also see added-value in the franchisee’s service as it respects laws that proportionally imply its social responsiveness (societal marketing).
Franchisee Support
The 32-year operations of the firm can provide franchisees with knowledge and systems on how to mitigate the effects of smoke ban. For example, the smoking Hong Kong customers can take home their orders in the firm’s “To Go Curbside” service. Second, with regards to the outcome of the total smoking ban proposal, the local franchisees can opt to seek the real estate support of the franchisor especially when designing a required floor space and ventilation. Aside from complying with a law in the offing, this can improve global set-up of the store and provide cost-savings from consultancy and engineering. Third, the provision for free consultancy services of the franchisor via the Director of Franchise Relations can ease the sales anxiety of franchisees in the future developments of the smoking ban. The risk can be minimized through business consultancy that can lead to customer assurance and profitability regardless the outcome of the ban.
International Opportunities
As stated, the smoking ban can serve as competitive advantage for a franchisee located in Hong Kong business hub due to numerous foreigners and businessmen. In effect, the proliferation of Ruby Tuesday outlets in different countries can increase the benefit of network effect including ease of recognizing a Hong Kong outlet. Advertising need not be explicit rather come from word of mouth of repeat customers or simply brand retention. The passing of the smoking ban can also be inelastic with regards to foreign customers as they are expected to follow local laws and customs. The chance of this idea occurring becomes large as most foreigners in Hong Kong are within the upper class, business and professional sectors of the international community.
Diagnosis (Weakness of Franchising with regards to the Ban)
The smoke ban posts high risk with regards to the future earnings of franchisees. Hence, a proportional or higher future returns should compensate a franchisee investment. However, with several financial constraints like required minimum liquid assets, net worth and corporate preference for franchisees that can maintain five stores in different locations, relatively small investors may find it difficult to survive in the business. The franchisee adjustment when the ban is completely enforced may limit itself from obtaining its required sales that may fall short those required by the controlling and regulating franchisor. As a last resort, the franchisee may sell the franchise which is allowable. In the contrary, such sale may extend as the company would have the right to appraise the background and capability of the buyer which can aggravate the already loosing franchisee.
With regards to competition, the smoking ban can take away an option for franchisees to create advertising schemes that can differentiate their similar products with say T.G.I.Fridays. They will not be able to integrate the firm’s motto of “To Be Chosen More Often” to smoking customers, thus, would have to intensely compete in menu rather environment with T.G.I.Fridays. This strategy becomes blurred as the two has similar products. Franchisees can select a strategic location (in its discretion) but the company has to approve it. This can lead to modifications and other constraints that the franchisee did not expect which can also change his response to the risks involved with the compromise location and strategy. Lastly, the company-tailored set-up of the stores that merges a restaurant and bar can result to negative network effect. Although restaurants are less affected by the smoke ban, its adjacent bar is. When customers of the bar are withdrawn in their right to smoke inside, they would rather choose different location which is detrimental to the restaurant.
Credit:ivythesis.typepad.com
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