Subject category:
Strategy and General Management
Published in:
2004
Length: 13 pages
Data source: Field research
Abstract
During the height of the Irish Celtic tiger Abrakebabra, the country's largest fast food franchiser, faced a serious revolt by its franchisees. Abrakebabra had lost its focus. At a time when 80% of group sales came from independent franchisees, management at Abrakebabra spent 80% of their time focused on the small number of restaurants that Abrakebabra owned. Unhappy with the value provided by Abrakebabra management, franchisees sought to renegotiate the 7% in levies on gross sales paid to Abrakebabra. In response to the revolt Abrakebabra franchised out its remaining restaurants and became a 100% franchise operation with new, franchisee focused, control systems. The case explores how Abrakebabra created and captured value through a series of control systems that recognise goal conflict between the franchiser and franchisees. These include new franchisee selection systems, detailed control systems that ensure conformity of customer service across all franchisee restaurants, and simple mechanisms to minimise cheating by franchisees on the reporting of their sales. The teaching note analyses the case from an agency theory and control systems perspective.
About
Abstract
During the height of the Irish Celtic tiger Abrakebabra, the country's largest fast food franchiser, faced a serious revolt by its franchisees. Abrakebabra had lost its focus. At a time when 80% of group sales came from independent franchisees, management at Abrakebabra spent 80% of their time focused on the small number of restaurants that Abrakebabra owned. Unhappy with the value provided by Abrakebabra management, franchisees sought to renegotiate the 7% in levies on gross sales paid to Abrakebabra. In response to the revolt Abrakebabra franchised out its remaining restaurants and became a 100% franchise operation with new, franchisee focused, control systems. The case explores how Abrakebabra created and captured value through a series of control systems that recognise goal conflict between the franchiser and franchisees. These include new franchisee selection systems, detailed control systems that ensure conformity of customer service across all franchisee restaurants, and simple mechanisms to minimise cheating by franchisees on the reporting of their sales. The teaching note analyses the case from an agency theory and control systems perspective.
Settings
Location:
Industry:
Size:
Small to medium sized enterprise
Other setting(s):
1997-2003