Abstract
The following quote was obtained by the news editors from the background informa tion supplied by the inventors: “Franchised restaurants are ubiquitous throughou t the US economy. In the franchise system, a franchisor provides brand recogniti on, systems and procedures, contract pricing, and marketing support, in exchange for a percent of all revenues (typically ˜%), while a franchisee will operate the physical restaurant location. In many cases, the savings on foo d costs through contract pricing make up for a large portion of the royalty cost s. Support and resources provided by franchisors vary. Recent court cases have b egun to target franchisors, in cases focusing on questions relating to the amoun t of control that these entities exert over the business operations of their fra nchisees, thereby opening the franchisor up to litigation brought against a fran chise. As a result, franchisors have grown increasingly reluctant to provide gui dance on many pivotal aspects of a franchisee’s operations. It is incumbent upon franchisees to handle functions such as pricing, labor, HR, accounting, among o thers, at their sole discretion. Additionally, franchisors and franchisees deriv e profit differently. Franchisors receive a percentage of top line revenue from a franchisee, while a franchisee operates to maximize bottom line profits. These differing motivations can lead to inefficiencies when it comes to areas such as staffing and waste.
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