SPECIAL REPORT
FRANCHISING
HAPPILY EVER AFTER In the hospitality arena, conflicts have always revolved around the same main players: the owner/investor, the brand owner and the operator. Ralph Nader, CEO of Amber Consulting, gets down to the nitty-gritty of manchise agreements.
Owners wanting to have more control and safeguard their investments are usually faced with two options: to hire the “brand” that operates the asset or engage with a third-party operator through a franchise agreement. However, in order to avoid franchise fees, investors are often enticed by the idea of having a well-established and famous brand managing their assets. On another note, brand operators typically look for long-term contracts of at least 10 to 15 years, thus limiting instability in their brand distribution and avoiding relocation challenges as well as trying to find new positions for key employees, among other things.
A revolution Luckily, over the past few years, some hospitality brands have announced a shift toward manchise agreements, which some analysts have described as “the great manchise revolution.”
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HOSPITALITY NEWS ME | JUN - JUL 2021
In simple terms, “manchising” is the harmonious combination of the features and benefits of the franchise model with the advantages of a specialist. This unique business model is well designed for investors looking for more flexibility and stability, and for operators seeking growth and expansion of their brands in different markets. By combining a franchise agreement with the option of a management contract upheld by an experienced operator, the win-win situation becomes more secure.
All gain, no pain One of the obvious benefits of the manchise model is that it gives new entrants the opportunity to learn the business without risking their investment while aiding the brand owner to have access to the appropriate infrastructure in the market. Therefore, manchising offers an attractive growth opportunity with several key advantages for all parties. “Let the experts
do the job, even if it costs you more” is the motto many investors believe in when entering a manchise agreement. A manchise generates a stable profit stream, offering investors a guaranteed return and security for the management of their assets. Also, when it comes to human capital and training, owners do not have to worry since the operator hires team members who are knowledgeable in their areas. As for the operator, direct management enables them to establish strict operating controls and set standards and systems that accelerate stability and maturity of the operation. In addition, this type of agreement accelerates a brand’s expansion and ensures it has access to different markets. Nevertheless, when acquiring a well-established brand, immediate consumer recognition is a valuable marketing plus.
