The Logistics of a Distribution System as Applied In a Restaurant Franchise
A franchise is a legal agreement in which the owner (franchisor) agrees to give rights or privileges (license) to someone else (franchisee) to sell products/services under specific conditions while a distribution system links them; the franchisee will get the goods/services and retail them (Khan 20). Franchises grew tremendously in the USA in the 1950s due to the effects of the building of interstate highways and the after effects of the world war. Notable examples include the Kentucky Fried Chicken and McDonalds.
Distribution is key to a successful franchise; many use the vertical system of distribution. The options available in case of disruption of supply are rescinding the distribution contract, suing for resulting damages and or allowing the franchisee to manufacture the product in a controlled system (Farnham 258) Rescinding the contract unties the franchise from the bankruptcy woes of the primary distributor and allows for fresh bidding from other interested distributors.
Suing may aid recover losses especially if the distributor is put under receivership or has assets that can be auctioned (Den) Suing might be disadvantageous as the law is favorable to bankrupt parties. Allowing the franchisee to manufacture the product reduces the distribution cost and inefficiencies, improves turn-around time for retailing but may risk the quality of the product or compromise a business secret.
Take the case of McDonalds. The distribution models available for the restaurant franchise are routes to market, business to business and business to consumer. (Kenneth D. Lawrence et al. 250). Routes to market model increase the ostentatious value of the product but increases turn-around time for reaching the consumer. Business to business model also increases the value of the commodity but also reach the consumer late. Consumer to consumer is faster, consumer can identify with franchisor but this may decrease the ostentatious value of the goods.
Khan, Mahmood A; Restaurant Franchising: Concepts, Regulations And Practices, Third (Den) (Kenneth D. Lawrence)Edition, 2009. Print
Farnham, Henry P; The Law of Waters And Water Rights: International, National, State, 2008. Print.
Den, Julian; Distribution Channels, Understanding and Managing Channels to Market, 2008. Print.
Kenneth D Lawrence, Ronald K Klimberg, Virginia M Miori; The Supply Chain in Manufacturing, Distribution and Transportation. 2010 Print