Restaurant Franchising: Concepts, Regulations and Practices, Third Edition

600 Pages·2014·32.73 MB·English

by  Mahmood A. Khan

RESTAURANT FRANCHISING Mahmood A. Khan, PhD
Concepts, Regulations, and Practices
RESTAUtTRoh RifsEr abnASocohkTNis iinsA gtTh, eURit so FpnERlryoR SsuA paAT-ntNodA -NcdoaTUntesC, bRaFonHodARk ooItANfh SeitrsN IikTmNinp dCo FtrGhtaaHRnt tp aArIospSveNidcIetssN. C aIt ciGsoH mthep I leoStnel yIa gnNudi dtheGo troo u frgahn cinhtirsoindgu ction Khan MahmMoaodh mAMo. aoKhdhm aAon. o,K dPhh ADa.n K, PhhaDn, PhD
wCroittnenc eepxctlsu,s ivReelyg fuorl afotoiodnsesr,v icaen pdro Pfersasicotnicaels,s and it will be an indispensable resource for anyone
wishing to breaCk oinntoc eonpet so,f Rtoedgayu'sl amtoiostn dsy,n aamnidc sPerrvaiccet iicnedusstries.
Concepts, Regulations, and Practices
This book is the only up-to-date book of its kind that provides a complete and thorough introduction
Since the late 1800s when the idea was first conceived, the restaurant franchise has become a Khan
to franchising, Tiths ips rboos oakn ids cthoen so,n alyn du po-tthoe-rd aimtep boortoakn to af siptse kcitns.d I tt hisa tt hper oovnidlye gs uai dceo mtop flreatnec ahnisdin tgh orough introduction
This book is the woonrlyld uwpid-teo -pdhaetneo bmoeonko onf. iOts pkpinodr ttuhnaitt iepsr oavbidoeusn ad cfoorm repsletateu raantedu trhso arnodu gfoho indtsreordvuiccet iopnro fessionals with Khan
to franchising, itsw rpitrtoesn aenxdc lucosinvteso,l y af rfnaodnr cfoohtohisedinrs geim,r vipitcso epr trpaornost f aeansssdpi oeccnotasn.lss ,I,t aaisnn ddth eoit tohwenilrlly ib mgeup aiodnre ta intnodt i fsarpasenpnceshcaitssbi.n leIgt rise sthoeu rocen lyfo gr uaidnyeo Ktnoe f rahnchaisingn R
the know-how to dive into and stay afloat in the growing, ever-changing sea of franchise operations.
wishing to breawkr iitnteton oenxcel uosfi vtoedlya fyo'sr mfooosdt sdeyrvniacme ipcr osefervssicioen ianldsu, satrnieds i.t will be an indispensable resource for anyone
written exclusively for foodservice professionals, and it will be an indispensable resource for anyone
With the help owf ivsihginnegt tteos barneda kc ainsteo h oisntoe roiefs t,o tdhaisy 'cso mmopslte dteylny aumpdica steedrv inceew in edduitsitorine se.xplains how to E
wishing to breakdS ioinn tciote r oitghnheet ,lo affrt eoto m1d 8ad0ye'0sv sem lwoophseitn ndg y thnaea w miidniecn aisn ewgrva fisrca efni ricsnthd icsuoesn tcrcioeensiv.ceedp,t tthoe dreemstaysutriafynint gfr athnec hleisgea lh ianst rbiceaccoiemse o af
Since the late 18fwr0ao0nrslcd hwwishiede ena gpthrheeee nSimdoineemcanee tw snt.haoesn .fl aiOrtsetp c1po8onr0ctu0ensiv iwteiedhs,e anth betho reue nisddtae fuaor raw rnaets sf trfaairunsrtc achtoeisunerc she iaavsne ddb ,ef octhooemd rseee sratva icuer apnrto ffreasnsicohnisaels h waist hb ecome a SR
the know-how wtoo drlidvwe iidneto p ahnedn osmtaey naoflno.a Ot ipnp tohret ugnriotiwesin agb, oeuvnerd- cfhoar nregsintagu rsaetae uorfs fraanndc hfoisoed oseprevriaceti opnrso.f essionals with
worldwide phenomenon. Opportunities abound for restaurateurs and foodservice professionals with T R
Wdthoei t hikt nrthiogewh h-t,he folrpow mo tfo T•• Wdfdvr o odaiepigi tnWFvvhiinretcce aehslhrt ohnt iiaigtinspeecnteht ih scoinh t sil,a agsue afgifnd lnrrnparaodeged nm :ow e cWtdpcsfhmai htorndeavoisie tnie seyhisgkntiiv n nnnahtaertsgghieofilng.slo etowdtfhtp orea h-taisrc,htne in oefoaiglrcnpnsown h, sa mtdoi hts th fowee c idv saidcngie sgcoinrvevnooneie nemwhlc ogtieiitnpspn eptftligosroetna ,rt atg ienoaeen lcn avsyddh,de ueiwr tcs-hmpseaictnida sshycna eysacoit tninoaehnfgygdfmicsli oi netfnnporpagagelrett in w tetstihcenoe seehl, ay tddihlt sehueoieetgimpif so cagd fyncorlrasa o onitetnnimewcfxtcydepripihnip nlclniagetgsa e,iett nc ewot eihsole vy edephse u edeorloe-mpirwtcfagdi hyo taatsianooltt in e nfienygdsxiti .nprnn iglcgea a wtishnce ieseea dhsl e oiotogifwof a fn rlta oienn xtcprhilciasaieREnc isoe phs eoorwfa ttioo nCos. AES E
franchise agreem• enStesl.ecting thefr afrnacnhcihsies ea gthraeet mfitse nytosu.r style and goals S ncUT S
T•o pWichs aint cislu fdraen:c•••T••ho i spFDIiWFnniircnetgahesvdn areiincnntl aohcgisitlp sui foifiidnnrnnaeggaan: n•Tlhpc ocfe hrripoaaiaWsislnlcit nhhscbag yhaani nitdcfs rckii asnlciu nngofdrgcnaehsn:iscohri/sfirnagnchisee relationships CTA eptsConRAAU CoTA
•••• FSFDrienealvdenecicnlthoignips gfiiinn ntggha enph •Tac••••refrhois aaa iswUlslSFDIn t n haibecepnnetynhlealcrvdel ad ricofecsitnrnc kolentacaoitig nvinnoftptc eirhggcnfoaianianh nsnlntt gtihaiafs coi feo••••nrhlihn ts rc sifefta/srr-i aaaofFSFDaylhr roilenlrnafanet asrhlucbcnnavde nyhrahaecdcnic niinhlcsft schsoriigtkdiinehnayisnpsi lgiefnnfgeitistoinonh egcne trgag a hhsamre n tieenps nhad flocrtaeiftr troirisagtaeao/is olpolfnyn t rhaonrbaca ewynshualnsn hdiricfcsle ril khpesa cuitbi snnoyrsteshlegcne ahecse at ioxs rntfenoritdelsrsa/i m dgtfyireooeoarlunanyinsrl cs uhghssi tipyeeslsenfeuet ela rrtneoindl agh gt oitoohsnpaesi ltswhaiolpitrsyld a ocaf dfreamncichiiasinnsg a.nd studenoncepts UR , RegceptsNRA ncepUR Third Revised and Updated
••Ta“Ths hiwIUsne epnt enlcrlra oentconwat vitflcieryoaan nrlnt eiafcoivlrh nscbA“sgia•T“sfistearTsleTueh-ss eaaohclh hcsins dnwsUsrtofateieeos sro cnecpnna 3 i rhrnrceanlidcrnaslrsai a senosed c blttsoiico odwnwhni noa otfef gviifg lotfc lscondyetoryuteaahkahr n,i isrmt rdl.eendet iwe eiofne cIoe aiv••Ta“UvtUrehntm bntiTrsihs iis iSse Stoaso shaie-iiewIUsp os cnhlnoeread e d r erepnf atak cet csrwe nlrm cr3na3o .l nogrea ai coednrnltenrWnuarclolndnwd caauaotoiblt dv hien ttrmsfltcmemeieei rsyief so-atsado a dn oiepfyceneyrlcnriutr i. n.oeustxiam tf ece oilbiit.tvn.rol rohrn n atpsoieds.of.noistnt artsi romo-ee.difa . eo olh i Dsikl denTtsepTrsifaneh gs rr hc rlhrcn aa yi.3 aeehhnwbe aoe dn Kr n uigtc onic svtd celbeshbo liilldeohn ane edauoaopeb rkifgnfsr stsooiunodieots,sntseco ekr l i kii s.sgcmcetfcer t ieooroi ix. ionnsbae osbrtrn .rtn gv htocrn oaesairi.e oooioenmeo intndpsOhnsmkv gk e erpoe eiae e nrwsmlci fcaxyixt nwi n oaicon cstcbleeugohlllv evge iauencs tbereell yeerlhlsldlaerda ser esnfmiaa i u n innsnnitceoccletlsdgofto gxt afrr to b t ns oioio irdfbnnonnotores of eagrthni tn mvodrimmtrtn oneiohehkotebechs ig de edrclhortpoecyiie au inuinfoi aIfmstxw uncng cagivntttntsht tteohlebs ieiee igoooent raeronfyral.inuu ndu nn notmnmael,t , da kg d o fcrtmaomoo toi, afnvi os ssro rdufnigtuht tnertun a ecaa ecovfevdtamhnhenhwlisi e bbl pyocre inm mercohFri eftatwai niarsnadotosna nohclienirirntntettreee s iy lgwoa c da ba.tmathnn nhhhnooci ddoaosadoaof e sn n dffkvvwts r i e,iattatavt uhamanaa i dinblclnsi e cthr dsts, Regulnaiia s tnsinn ts g aANTa.nndd vsittuadle nulations, , Regulatts T FRANT FETdts, RegulahitiirANT odn RREEeTddvhEiititisiirooednnSd RFRaRETnTdehdRviEEti iiArUsodeAnp SSddR URaaNeTtnTevdEdis ARAUeCSdp dAaUUaHnTtdeNd AURRIpSdUAAaTIteNd NNRGATTN T
sectors of the UtgoSe leneceaorrannlo mamcoya.rd e.e s.am e.bc iTotcohu tretrs e tbohaofits mot hfkeae nis scUt iaonSnf a e ttehcinxoecgn et,oo lflmpaeisnyct.t.- p.i. n a.. t c.r. oe TOddh,une ac bbtnieoodhon dak, yl mfin so uaafcm nhthi ceme xi ncoInedrteluel esrtnnhtratay .tni”nio tanr oadl uFcrtaionnch, imseu ch maore than a aio tF
general academ—AsicSs totercveieaa tCtimoaneld,n ewti groeaef , an tChreeFer aE gtl,or aaPprctieecasf.di ud.el e .mt no.t i OcaD ntnrr.de bK aCehtEmhaOanel ,nff oIton roft efrtr ehtnhveaie stIi inontotngepa railnc Fna.r dta.i on.b nc.r haiOnils gneFi rnAbagsens hocoahucliitfas aetoi ofn ntehwe eIndtietironna toiof nthails F tirancFhise nnNR io
Association, wec laarses igc rbaoteofku.l ItAto si ssD oarc. imKahtuioaltnni-, p fwourre pr aeovrseeis igbnrogao taken,f udsle btrovri innDggr.i naKgsh coalunat s fsaor ron oreemwvi steeindxgittb ioaonno dko ,fb rtrehinfiesg rienngc oeu bt oao kn,e awn edod itioRn of this ds nR CFonRceApts,N RegCulatHionsI, SanId NPracGtices
cbtAM—MhUaolanu.Baa aSSsdslOsne.h ti s senacaumUievcoegnrre Tnosnveib vs esC moTeo mudgdHaroel stuo ilnikiEndAntirt.id ee,ge. tA Ieie sP rtKaUoa. abaAMMahUabtAM—MahUa ihboncD,smoawnTawn.uB.B aaah aSo aSCHsdSosdramasOlapOn..ihn ne.uh t ink rs F OrselnacKaacum,admutiUmedgU.eEnv o goe nnghsnrrPtRs,reW, TounTvhn eosnviaa e Cih rfvfv ePss emlosoiC moegnoTeetTDes uomrdudisdrg eHedrr Haer-lel il,e fastslmspts uhoi nhilaineiiEnaAiEn diiAnrtntiuirsdtitgitsees irds ,hegee,. ge.tAcrcte Ae n a e ieeeswP pswPMcbtA— MhUaKidhrnK Uotaa.U oonaa. abalo oano uP,eto. hBaahnicbanD a a mcSTD,mosSTfrsdsrslalaruO ah saoh snoe.ikhHt tekCHiromB rmgps nntseiu.pinn.i,acnfau,hunnm Uineku e OdldFvh OelKbcoae,Kgaia,onrtigagrg.ssen E ns t Tnnohosnv enhnPiisraRC,nPbet,R, Wvn, s e hao as Ca mooCaadh CddhrTodeo frmEeuPdegnrnigaegkn deDm HarofD soeOso rlh hs esdtst, ieuose silsnli,noikeli ei,EneidfaeAlmst n lms t,senisr eat-ea af.i dai eiire,eger.tvs phitrIgtsdhAteg serhtesa hnIrieeh ee srP acrtaKcaecentaeanUeoaV entva. aberarcheidsh ncsti ha at ib nnicc Doo ,sm oTo P,D nrrPa,eetai stliha hs ogn a sfrmCiH sofrargameudalaeu vepob si.ionsaiuitBsnBk rnnetu grFnnp,tOiulmofKhaifvt,ahmtinv uge. undieiEendd ah eaeaoo openhosPssgtR,gses Ws, srutdhn dk inasoraa CisraCh te, .rnnTcn Pom a slo iad aegndsoeedtodDiselfoDir Ederinniarnsnl eamaec ftme-sf Os lid ,ei fa dr i dtlFmhsspssinosni .ssmansemnoiatyi s ii rr’t end,uentnsd tK afg-ssaee afrn r hoartv airtvp isrcIoorcehtehsnanah tsanahNeen ene pn idhtnafot eVatfcne Vnrntar mryrco o oyP,aeetaaacH hmanaii ct ic a s oDsrfrrDrrshtiealatuliihit lghom siognii smtecmi thB opvegednntbiviuerbeiitfaish sn snaeaupennepea ddphp,ioep bmoiitomn g niAsssv naioxais soataoaipoaoop israCtedget, tgeslrrnrrrae koon a bkonottldse.ottd3Tu.fnCTEemaeslnma sosrnd aaeoksicemfD 5sOs D ddtninia udatccle, ityaesoctstes noi dt riirti rhpt nioFhyn,. enenosnik. aa-vy aff rty’ reri’edrttnvxpodi.rIKtn,eo sttKonsa htsnan ”a iaoteer so darsoohtelrdhlnehVNntvahNe rrrlc en eef n ancffasaaa fciai csamo moRsoaTD nrfr,aHesnHht lnhnst gen osemri iitrghitdwa veiinvb iiony aioirgusthcsothponep eepn,re omroeos itsiar a asnaaa nisniloa ypainiap raoonypemsnessvaAs gsevkasnir cinm dk v noete vttefdttil.nTsrlca reamonee sed ials ec3else3Cu sleCD dlwer glinrraolaic actcite5ba d5 staddit ai raueytFhcsmnehynonit.al oe l ty psr rii ’py eigydoetn avapKtaasavyopfrpn eio eixuexo .stoo enttrmchnnrkuaaahtN”aiwatn odioedrofdhoeadfcs,sral mrla o f na fh asin .n Hhmsna etmaResnmR Tj,rThs,tesinoiH s no sioe gosneicthi owapdsewvasrvtretguyse g udias aienena eoniop oooir imrn Aslovayxlsoiyriniyrnnys sted tkt snkl nra ema dma bdefilsef3ui Co enlnolniolico cic s 5 ssdtgwragaruaactaeyott i i rs ti pmn sitymnheakaeaavyefsseiggxo.ot,eaotttpaonp ”a iat uudrom ccermduccurwl ieihi n nhisssa ssaamaRaTfh,i.shai.nnte onjet jieioweHainovHogyrogguddernerotoe ne inr ns, and Practicess lo ynir nsy s s kn. c.mdefi eoni c sw graANCHIStb i tmnhaoegotaop u mckuwihs,sa hai.an jenoHgndrte ds Practices , and Practices CHISINGANCHISI s, and PracticesANCHISCFonRceAptsC,N oRnecgeCupltCaFstHo,i onRRnecesgIA,pu Satlsan,NtI diRoN ePngrsCau, cGlaatinctHideos nPsIr,a SactnicIde NPsracGtices
awards for his work, and he haas wsearrvdesd f oinr hmisa wnyo rimk,p aonrdta hnet rhoaless s ienr vseedve irna ml parnoyfe ismsipoonratal nats sroocleias tiino nsse.veral professional aIssociations. N I
N
N
ISBN: 978-1-926895-69-7 G
90000 G
G

ISBN: 978-1-926895-69-7
ISBN: 997080-10-0926895-69-7
ISBN: 978-1-926895-69-7
90000
9 78192960809050697
9 781926 895697
9 781926 895697
www.appleacademicpress.com 9 781926 895697
RESTAURANT FRANCHISING
FFMM..iinndddd ii 1122//0088//1144 22::5555 ppmm
FFMM..iinndddd iiii 1122//0088//1144 22::5555 ppmm
RESTAURANT FRANCHISING
CONCEPTS, REGULATIONS, AND PRACTICES
Third Edition, Revised and Updated
Mahmood A. Khan, PhD
FFMM..iinndddd iiiiii 1122//0088//1144 22::5555 ppmm
CRC Press Apple Academic Press, Inc
Taylor & Francis Group 3333 Mistwell Crescent
6000 Broken Sound Parkway NW, Suite 300 Oakville, ON L6L 0A2
Boca Raton, FL 33487-2742 Canada
© 2015 by Apple Academic Press, Inc.
Exclusive worldwide distribution by CRC Press an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government works
Version Date: 20140924
International Standard Book Number-13: 978-1-4822-2349-1 (eBook - PDF)
This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to pub-
lish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the
consequences of their use. The authors and publishers have attempted to trace the copyright holders of all material reproduced in
this publication and apologize to copyright holders if permission to publish in this form has not been obtained. If any copyright
material has not been acknowledged please write and let us know so we may rectify in any future reprint.
Except as permitted under U.S. Copyright Law, no part of this book may be reprinted, reproduced, transmitted, or utilized in any
form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and
recording, or in any information storage or retrieval system, without written permission from the publishers.
For permission to photocopy or use material electronically from this work, please access www.copyright.com (http://www.copy-
right.com/) or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC
is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted
a photocopy license by the CCC, a separate system of payment has been arranged.
Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification
and explanation without intent to infringe.
Visit the Taylor & Francis Web site at
http://www.taylorandfrancis.com
and the CRC Press Web site at
http://www.crcpress.com
For information about Apple Academic Press product
http://www.appleacademicpress.com
To my family
Maryam, Samala, Safdar, Zaki, Layth, Feras, and Nufayl
for their affection, patience, and support
FFMM..iinndddd vv 1122//0088//1144 22::5555 ppmm
FFMM..iinndddd vvii 1122//0088//1144 22::5555 ppmm
ABOUT THE AUTHOR
Mahmood A. Khan, PhD, RD, FAND, FMP
Professor, Pamplin College of Business
Virginia Tech’s Northern Virginia Center
7054 Haycock Road, Falls Church, VA 22043-0362
Phone [phone] Fax [phone]
E-mail: [email protected]
Dr. Mahmood A. Khan is the Professor in the department of Hospitality
and Tourism Management, Pamplin College of Business at Virginia Tech’s
National Capital Region campus. He has served in teaching, research, and
administrative positions for past 40 years, working at major U.S. universi-
ties. Dr. Khan is the author of seven books and has traveled extensively for
teaching and consulting on management issues and franchising. He has been
invited by national and international corporations to serve as a speaker, key-
note speaker, and seminar presenter on different topics related to franchising
and services management.
Dr. Khan has received Steven Fletcher Award for his outstanding con-
tribution to hospitality education and research. He is also a recipient of the
John Wiley & Sons Award for lifetime contribution to outstanding research
and scholarship; the Donald K. Tressler Award for scholarship; and the Cesar
Ritz Award for scholarly contribution. He received the Outstanding Doctoral
Faculty Award from Pamplin College of Business.
He has served on the Board of Governors of the Educational Foundation
of the International Franchise Association, on the Board of Directors of the
Virginia Hospitality and Tourism Association, as a Trustee of the International
College of Hospitality Management, and as a Trustee on the Foundation of
the Hospitality Sales and Marketing Association’s International Association.
He is also a member of several professional associations, and is a Fellow of
the Academy of Nutrition and Dietetics (FAND).
vii
FFMM..iinndddd vviiii 1122//0088//1144 22::5555 ppmm
FFMM..iinndddd vviiiiii 1122//0088//1144 22::5555 ppmm
CONTENTS
List of Tables ............................................................................ xi
Foreword ................................................................................. xv
Preface .................................................................................... xvii
Acknowledgments .................................................................... xix
Chapter 1. Introduction to Franchising ............................. 1
Case Study: McDonald’s: Menu Glocalization ......................... 27
Chapter 2. Impact of Hospitality Franchising
on the U.S. Economy .......................................................... 35
Case Study: Taco Bell: Beef Controversy .................................. 62
Chapter 3. Pros and Cons of Franchising .......................... 69
Case Study: Panera Bread: Customer Loyalty Programs ........... 90
Chapter 4. Franchising Agreements and
Legal Documentation ........................................................ 95
Case Study: Quiznos: Franchisees and Legal Battles................1 44
Chapter 5. Franchise Application and Franchise
Package .............................................................................1 51
Case Study: Subway: Franchise Historical and
Operational Aspects ...............................................................1 76
Chapter 6. Franchisee/Franchisor/Franchise Selection ....1 85
Case Study: Chick fi l A: A Different Type of Franchise .............. 207
Chapter 7. Standard Franchisor Services .......................... 213
Case Study: Pizza Hut: Menu and Service Innovations .............2 35
ix
FFMM..iinndddd iixx 1122//0088//1144 22::5555 ppmm