Franchises Again-Kyle Davis

(Disclaimer to Audience: This may look familiar. As the great author and industry genius I am, apologize for my minor miststake which has lead to this mixup.)

Recently it has become more difficult for entrepreneurs considering investing into a franchise. Due to the economy, franchisers have raised their previous standards and requirements for those interested into buying a franchise. Popeye’s, for example, made it so that all potential buyers have to own a restaurant already to be eligible to be a franchisee. To confirm how well an owner the candidates are, inspection of currents restaurants are conducted as part of the evaluation process. Popeyes opened since these changes have performed better than those previously opened. Financing of franchises is also of concern so franchisee candidates are having much more elaborate financial evaluations and stricter requirements. “At Zoup Fresh Soup Co., candidates now must have $150,000 in cash, $350,000 in net worth and a credit score greater than 700. Previously, they needed only $100,000 in cash and $300,000 in net worth to open a store, which costs between $250,000 and $400,000” This gives more confidence to franchisors that their investment will be more successful.

This change in requirements makes sense with the economic trend but I think that the shift is good from the franchisor’s perspective. Stricter requirements attract higher talents and higher quality of work and management. It weeds out a large portion of potential buyers who would just run out of business. It also increases the longevity of the franchise. Great changes historically have come from low times and when the economy does become good again, I predict these changes will remain and the franchise will continue to grow and prosper.

http://online.wsj.com/article/SB10001424052748704361504575552803956439716.html?KEYWORDS=restaurant

Joining a Franchise (Irma Mendez)

It has become harder for entrepreneurs to get involved in some franchises. To become part of a franchise, higher standard requirements are needed. This has occurred because of the recession in the economy. In order to join a franchise entrepreneurs need to demonstrate that they have some knowledge on how to handle the business. Preferably it would be better for these people to already have a successful, running business that demonstrates their capability to take care of a business. Mr. Vojnovic says, "We're looking for those that have experience…sweating about payroll and paying taxes every month." Having experience gives a person who wants to join a franchise, a better chance to get approval to join.
Another reason it has become harder to join a franchise is franchises are demanding more money from prospect franchisees. At the same time banks are not willing to loan money to just anyone. A person has to look really good to banks in order for them to accept to give him or her a loan. If a person can't get financing, then his or her idea of opening a new franchised restaurant will not happen. Now it is harder to open a franchised establishment, unless a person has money and enough experience. Mr. Vojnovic also believes, “Popeyes restaurants that opened in 2008 and 2009 generally have better sales than those that opened earlier.” Because the standards are higher, the new franchised places that are being opened are of higher quality. The people who open these franchises are ones that have overcome and complied with the new, higher standards, which means they will be more likely to provide better services.
http://online.wsj.com/article/SB10001424052748704361504575552803956439716.html?mod=WSJ_Hospitality_leftHeadlines

Informational Interview with Mr. Hasan Wanli

For my informational interview assignment, I interviewed Mr. Hasan Wanli, resident manager of Crowne Plaza Kuwait. Mainly we discussed the marketing strategies that hotels use to stand out between their competitors. Since Crowne Plaza is a branch of InterContinental Hotels Group, a major player in the industry, Mr. Wanli was able to provide me with some really insightful details about the various strategies used.

Hotels have been struck hard by the recession as they are the one of the most vulnerable industries to consumer taste. There is much competition and it is seen mostly as a luxury. Because of consumers wanting cheaper hotels to accommodate their travels that have also been cut back, major brands have had to restructure and reshape their operation system to meet these new demands. One of these changes took the form of outsourcing. To lower their internal costs in order to lower the cost on the consumer sections of the management that are not vital to the everyday operation of the company, such as advertising, have been outsourced to expert companies that do this job very efficiently.

Another aspect Mr. Wanli pointed me towards was the extreme importance of segmentation in the industry. Hotels have to specifically target their consumer so that they can give them the exact experience they want. They start of with business versus leasure, then high income, middle or low, then they will choose the location that these customers want, after that they will take into consideration what these customers look for (trendy, relaxing, green, etc.), they might even add a theme that helps them stand out. If the customer is not clearly defined the outcome of this chain could be catastrophic. If a hotel that is for low income customers is built in an exotic Caribbean island, they will probably have more costs than they will have revenue.

All in all the interview was a successful one as I was able to learn a lot from him and his first-hand experience in the field.

Hotel Technology - Irma Mendez

In order to better accommodate the different kinds of customers that hotels get, the hotels need to innovate their different services. The hotel industry has incorporated technology in different aspects of its products and service. One way technology influences hotels in through the internet. The internet has allowed hotels to grow. It provides easier access to the locations of hotels and to booking a room at a hotel. A person can find out the different services offered at a hotel through the hotels’ websites. The appearance of hotels’ websites is very important. Recently hotels are trying to make their websites suitable for everyone. What this means is that a color blind person, a deaf person, and people with other disabilities, have access and are able to navigate through the hotels’ website. The American Hotel and Lodging Association state, “The primer helps hoteliers look at every aspect of their site and ensure all content is usable and understandable no matter how it is presented, and that it integrates seamlessly with other platforms like social media networks and mobile devices.” Hotels have to work hand in hand with technology in order to better satisfy their clients.
I think that it’s important for hotels to be considerate of their customers and try to find ways to facilitate their services for their clients. The more pleased and satisfy the guests are, the more they will want to return to the hotels. Making people’s lives easier will encourage them to come back. If implementing new technological innovations means attracting more customers, then that is what hotels are doing.
http://www.hospitalitynet.org/news/154000320/4049071.search?query=hotel%20industry

Starwood Swings to Loss on Divestiture- Jesse Binder

Starwood Hotels & Resorts Worldwide Inc. reported a small loss($6 million, or three cents a share) in the third quarter compared with a profits of $40 million($.22 a share) last year.   A $55 million charge related to a sale of an asset contributed to the loss.   Excluding the lost, Starwood earned $.25 a share, well above the Company’s July forecast of $.15-.19 a share.   The company is recovering from last years slump in the hotel industry.  Revenues rose 8.6% and Revpar(revenue per available room) jumped 11% which was far better than last year’s decline of 20%.   In the Company’s fourth quarter, Starwood is projecting profits of $.36-$.38 on Revpar growth of 7%-9%.   For 2010, it now expects to earn $1.09-$1.11 a share on Revpar growth of 9%-10%, well above their prior forecast of $.93-$1.05 which was based on Revpar growth of 7%-9%.   Like other competitors such as Wyndham and Marriott that also posted sizable improvement in their quarterly earnings, Starwood is definitely citing improved demand and substantially higher Revpar growth rates. 

Based on the gradual improvement in the US GDP, low interest rates, modest growth in business travel, Starwood Hotels & Resorts Worldwide Inc. should be able to generate solid growth in Revpar and Revenues and at least mean their fourth quarter and 2011 earnings forecast.  Starwood is aggressively cutting costs, raising room rates and benefiting from the rebound in travel and tourism.   The improvement in demand and room rates as well as efforts to reduce costs should contribute to a starry-eyed 2011 for Starwood Hotels.

http://online.wsj.com/article/SB10001424052702303362404575579910742433800.html?KEYWORDS=hotels

Consumers Shouldering Price Increases

The hospitality industry is looking for solutions to deal with changes in its supply chain that have increased input costs. Over the past year inflation, higher foreign demand and less supply ability have all contributed to the higher costs of staples such as beef, milk, and sugar. Groceries and restaurants have taken in these costs over the past couple of years in fear that passing them along to consumers will push them towards their competitors who have kept their price costs internally. Now, however, executives are looking towards alternatives to deal with this situation. Pete Bensen, chief financial officer of McDonald's, has claimed that "The question will be exactly at what point will we be able to take some of that pricing," and chief executive of Starter Bros. Jack Brown has quickly backed him up by stating that "The big challenge will be, how much can we swallow and how much can we pass along?" While many see that this could hurt their business, those with a high brand equity such as Starbucks, Domino's Pizza and Morton's Restaurant group, believe they have enough wiggle room and pricing power not to hurt the business too much. With costs expected to rise 2% in the US and 3% percent in Europe, international and local organizations will find a difficulty in transitioning.

Here is where I believe brand loyalty plays a significant part in business decisions. If a company knows that it has built a strong loyalty within its consumers it knows that they have some breathing space to deal with higher costs. Another important factor in this new approach is timing. Companies who change their prices earlier than their direct competitors could easily loose customers even though the competitor will eventually have to raise prices. BJ's Restaurants has played a slight-of-hand trick as they raised prices but also changed the decor and table settings of the restaurants. BJ's chief financial officer Greg Levin as said that they followed this trategy because "in this business, you can't just raise prices without improving the overall dining experience." Others will have to find their own ways of loading off some of their costs unless they see a true potential for long-term growth if they swallow the short term costs.

http://online.wsj.com/article/SB10001424052748704506404575592313664715360.html

Hotel Plan-Kyle Davis

Residents and officials of a neighborhood in Williamsburg are questioning the governments decision to finance the construction of a hotel. The hotel developer is applying for 15 million in federal tax exempt financing and next tuesday The New York City Capital Resource Corp will vote on whether or not to aprove the loan. The location the hotel would be built is in an area that is designated for industrial and manufacturing jobs. Management at the company trying to purchase the land claims that no one else was trying to acquire the space and that a hotel would make a great addition to the area. Earlier in the year, the new york capitol resource gave 20 million to finance a hotel in harlem. They claim that it will help the economy by stimulating construction and hotel jobs.


This article brings up an interesting government and economic issue. Theoretically the hotel would stimulate the economy to some extent but it is a risk to invest in a hotel that could possibly not be profitable. Also the money that is being used for these hotels could probably be used for other ventures that are more secure and that create more jobs. A hotel does present a variety of jobs such as management, custodial work, receptionist jobs and chefs for potential restaurants or room service. Also construction of the hotel, interior design, electrician and what ever else is necessary to create the hotel. In my opinion, i do not think the hotel should be approved for loan unless more research is done on the amount of jobs they hotel will stimulate. Also i think research should be done on the need of a hotel in the area. How man people visit Williamsburg? What is the competition in terms of other hotels and the demographic of tourist and visitors of Williamsburg?


http://online.wsj.com/article/SB10001424052748704462704575590270402178614.html?KEYWORDS=hotels#articleTabs%3Darticle