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Information Systems

The key to building and maintaining a flow of information between franchisee and franchisor is that the flow must adequately police the operational standards of the system and must provide feedback of exceptional performance to the franchisor for review and possible systemwide implementation. Franchise companies provide perfect organizations for accomplishing these objectives. The franchisor must know the sales of the franchisees to collect royalties. Franchisees need access to centralized systems such as supply arrangements, training materials, R&D results, and marketing materials from the franchisor. Many franchises have information systems that monitor franchisee sales and tie them to supply requirements. But a few have learned how to share information among franchisees to solve problems and exploit opportunities as exampled in TIP 2-2.

Tip 2-2 Theory into Practice: Monitoring Tasks: Technology that Identifies Flaws and Promotes Winning Practices

In the Jiffy Lube system, point-of-sale computers are integrated with inventory systems. If store A serviced 2,481 cars, the inventory check should reflect that it used 2,655 gallons of motor oil (4.1 quarts per car) and 2,481 oil filters. The flow of information between that store and Jiffy Lube headquarters can show discrepancies. If a franchisee was wiping off oil filters instead of replacing them, it would be picked up by the Jiffy Lube system

Information flow can also uncover innovations that can improve a system. If a franchise headquarters sees that a franchisee is spending 12.5 percent of revenue on labor compared to the 14 percent national average, it may be able to replicate the innovations that the store is using to reduce labor costs across the system. Indeed, that happens at Jiffy Lube all the time. For example, automakers are under heavy pressure to increase gas mileage for their cars. That pressure has led engineers to take weight out of the automobiles (maybe to balance the increased weight of SUVs!). Smaller oil filters in tightly compacted engines makes removal very difficult and excessively time consuming. When a franchisee in Baltimore, Maryland, reported lower labor costs, the franchisor dispatched a team to understand why. The franchisee had invented a strap-like wrench that easily slipped into tight places. The franchisor further engineered the device and made it available to all the franchisees. What had been a problem was converted into a competitive advantage because information flow informed the franchisor.



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