DubaiStar and SunRoll Companies Franchise Agreement

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Abstract

DubaiStar is a small hotel in Dubai that has been underperforming since 2008. It is in the verge of collapse. The hotel has not been making profits for the last five years. Franchising is seen as a favourable method of improving its performance. The appropriate company that is found for the franchise is SunRoll America, which is a chain of hotels that operate mainly in North America. This company agreed to provide its logo, rights, trademark, and training to transform the hotel to SunRoll Dubai. The characteristics of the franchise agreement include its affordable price, easy payments, low royalties, effective training, marketing plan, quality products, dispute resolution venues, and jurisdictions. This essay discusses the implementation of some of the sections, which are essential in a franchise agreement. It also discusses the advantages and disadvantages of this undertaking.

Introduction

DubaiStar is a small hotel in Dubai. It has continued to underperform over the past few years for several reasons. The business has been on the decline since 2008. The only way to rescue it was seen as entering a franchise. The company that is selected to rescue DubaiStar is SunRoll America, which offers services that are almost similar to those offered by DubaiStar. SunRoll Dubai is an adequate franchise partner. The franchise agreement is also favourable for the two companies. The franchise agreement is favourable because it is affordable, easy in terms of payment, and has low loyalties. It also offers effective training opportunities to oversee the transformation of the company back into productivity. The following is an analysis of a franchise agreement.

Type of Agreement

The type of franchise that will be adopted between the two companies is the business type of franchise where the DubaiStar will engage in the whole business process that was used in SunRoll America. The business type of franchise suggested for use is also used in other firms such as in the fast foods industries in the US. The franchise agreement is also a single-unit franchise union since SunRoll Dubai will only operate one hotel in the city. SunRoll Dubai will operate the original store that was operated as DubaiStar to ensure that the same premises are utilised efficiently.

The agreement will involve providing services to the community and customers just as SunRoll does in any of its other branches. According to Inma (2005), this type of agreement enables a company to use the brand name of the other company to market itself. The reason behind the agreement is to increase the profitability. The agreement also ensures that the risks and liabilities are shared with the franchise company. Besides, funds are available for the joint projects.

Price

The agreement between SunRoll and DubaiStar will involve an initial payment for the agreement. The payment will be in the form of original services to be provided to DubaiStar. The price to be paid will also be for the contract that the two companies will be entering. According to Inma (2005), the price for a franchise agreement is a significant part of the agreement since it binds the two parties that are getting into this form of agreement. The payment between the two parties is also subject to changes based on the agreement between the two parties.

Despite the initial payments for the franchise, DubaiStar will have to factor in more added costs when getting into the agreement. Some of these payments include the loyalties that will be paid to SunRoll America for the provision of services under its name. The payment of loyalties for companies that are involved in a franchise is an important part of ensuring quality service delivery and/or enhancing the relationship between the two parties. In the case of SunRoll and DubaiStar, the agreement is that the loyalties should be paid on a yearly basis. The actual amount will be dependent on sales in the areas that the franchise covers.

A favourable characteristic of the agreement between SunRoll and DubaiStar is that the payment modes that are used are easy. Agreements on the payments will be undertaken for the two companies to be used in the operation of the hotel that is formed in Dubai. The services charged to customers of SunRoll Dubai will have a component of the payment that is to be given to the mother company in America. This strategy will ensure that the payment is easier and more effective.

Training

Training is an important part of any organisation and business. Any organisation that undertakes training for its employees is considered more successful (Sivakumar, & Schoormans, 2011). The franchise agreement between SunRoll America and DubaiStar has effective measures to undertake training. The human resource department at SunRoll America will train the staff people who are currently working at DubaiStar before the services can begin. The training will involve educating employees on the methods of conducting the services as per the standards at SunRoll America. Staff members will also be taught certain values such as ethics, relationship with customers, and the right procedures to use at the workplace.

The other form of training that will take place at the organisation is the training of employees to be recruited into the franchise. The number of staff people who are currently working at DubaiStar is inadequate to meet the need of the franchise that will result. Therefore, there is a need to increase the number of employees while at the same time ensuring that they are adequately skilled to provide the best services to customers. The human resource department will carry out the training practices laid down in the franchise agreement. A special unit in this department will be formed to oversee this training.

Inma (2005) reveals that an internship is an important part of training in any organisation. SunRoll America has an internship programme in place. The franchise agreement means that the training programme in existence at SunRoll America will continue to be applied in SunRoll Dubai. SunRoll Dubai will also have a training plan that will be operational at the operating period of the company. Employees will be required to undertake training activities while at the organisation. This process will be done in internal and external training institutions.

Marketing Plan

The marketing plan that will be adopted for the new company will ensure that the organisation is popularised in the Dubai. The company will use a significant part of the revenues to market itself. Marketing is a major component of any organisational framework. It allows the organisation to increase its competitiveness. One major marketing tool that will be used to market SunRoll Dubai is the brand name that will be created. According to Inma (2005), the brand name is an important part of marketing. Any marketing campaign is only effective if there is adequate brand strength.

One of the reasons that franchises exist is so that one of the parties may use the brand name of another party that is considered better performing (Sivakumar, & Schoormans, 2011). Some brands are internationally recognised. Customers are attracted to the brand name based on their experience with the brand or the experiences of others (Inma, 2005). SunRoll Dubai will be relying on the brand name that exists in the form of SunRoll America. This firm has managed to create a relatively strong brand in the international arena. If this brand is used, it will attract a large number of customers to the organisation.

The other tool that will be widely applied in the marketing plan for SunRoll Dubai is print advertising. The company will advertise the services in many of the available print media. The franchise will use the advertising campaign that is use by SunRoll America to advertise its products and services. One of the advantages of franchising in advertising is that the marketing campaign is standard in many aspects, only varying based on the different preferences and characteristics. The other forms of marketing that will be used include television adverts and the internet.

The use of the internet in marketing has risen over the past few decades. Many companies have a website to run online marketing. SunRoll America has a website that it uses to market its goods and services. However, this website is limited for use in other parts of the world. It is not widely used in the UAE or Dubai. SunRoll Dubai will create a new website that will be used to market the company in Dubai. The launch of this website will also be marketed, with some services such as bookings and reservations being made. This form of marketing is effective in areas where the population has access to the internet such as Dubai (Perrigot, & Pénard, 2013). The website will also be a link to the mother company where the services provided by SunRoll America will also be available.

SunRoll Dubai will embark on the establishment of a loyalty programme in the region and the city in general. This programme will be used to reward the loyal customers of the organisation. Frequent customers will have special services and rates, which will be determined by the loyalty programme in place. The institution of a loyalty programme promotes the marketing of an organisation to its customers. Besides, it creates a method of attracting and retaining new customers (Madanoglu, Lee, & Castrogiovanni, 2013). The franchise will create a marketing plan that is better than the one that was previously applied in DubaiStar.

Products

The products that will be available after the franchise will be similar to those that are offered by SunRoll America. In the form of franchise that the two parties entered, DubaiStar will be allowed to replicate the products offered by SunRoll America. The specifications for the products to be provided under the franchise will be provided by SunRoll America. The paid loyalties will allow the production of products under the same name as those offered by SunRoll America. The Dubai part of SunRoll will have the same requirement for staff people, just like in SunRoll America.

Some of the products that will be available in the franchise include the food provided by SunRoll America, the refreshments, and the same services. The other part of the agreement between SunRoll and DubaiStar is that the Dubai-based company will accept some of the products it has to offer from suppliers who are contracted by SunRoll America. The supply of these products to SunRoll Dubai will be crucial in that it will ease the process of procurement and inventory management.

Dispute Resolution and Jurisdiction

Dispute resolution or jurisdiction is an important part of any franchise agreement between organisations. In the relationship between SunRoll America and DubaiStar, adequate measures have been made to ensure that the two organisations solve any disputes amicably. The agreement spells out the terms of the contract clearly, including measures to be taken in the event that one of the partners breaks the accord. The payment of the prices spelled under the contract agreement is one of the areas that the agreement specifies the methods of dispute resolution. The franchise requires DubaiStar to pay the agreed amount in full.

The other area of interest in the franchise agreement is the ethics part where the interaction between the two companies and their employees is spelt out. SunRoll America is to oversee the transition from DubaiStar to SunRoll Dubai. The process to be followed is indicated in the contract agreement. The other part of the agreement is the jurisdiction that is to be followed. This jurisdiction is favourable in the franchise agreement between SunRoll America and DubaiStar.

Advantages of the Franchise

The franchise between SunRoll America and DubaiStar has several advantages over any other form of interaction between the two organisations. One of the advantages is that the franchise allows DubaiStar to enter business with the help of a partner. According to Inma (2005), a franchise allows individuals to enter a business by themselves because businesses are associated with risks. Franchises are involved in the reduction of these risks.

Another advantage of the franchise is that there is a relatively high level of independence, despite the interaction being associated with accountability. As Inma (2005) observes, in the case of SunRoll America and DubaiStar, the franchise agreement allows DubaiStar to offer the same services that are available at SunRoll America with independence. This independence allows the organisations to exercise responsibility while improving on their skills and output. Firms in a franchise are also able to exercise diversity in their operations. By operating in a franchise, a firm can enter a market more easily than when using other forms of business agreements. Employees are also diverse. They are allowed to work in the existing cultures of their area.

As stated earlier, the other advantage is that the practice of franchising offers a product that mostly enjoys a good brand performance. The presence of a strong brand name allows the new organisations operating in the franchise to use the brand name to attract more customers as opposed to using their own brand name (Szulce, & Świekatowski, 2014). In the case of SunRoll America and DubaiStar, the latter company will be using the renowned brand name for SunRoll America to increase performance in the brand in Dubai.

Apart from the strong brand name that is associated with franchising, the other advantage of this method of partnership in organisations is that it allows organisations to market the already existing products. The marketing of new products requires a large input in the form of capital. Most organisations may not afford this amount (Sivakumar, &Schoormans, 2011). When firms such as DubaiStar and SunRoll America enter a franchise agreement, the new organisation provides goods and services that are already proven effective (Sivakumar, & Schoormans, 2011). This process saves the company money and time that would have been used in the development of a new product.

A franchise agreement will be a good way of attracting more customers to the organisation that was initially unproductive. The franchise agreement sets a level of consistency in the products on offer. This means that the organisation can attract more customers based on this plan. Some of the other advantages that are associated with a franchise agreement are increased support for the new organisation in terms of training, financing, construction and design, advertising, bulk purchasing, and operational assistance. Therefore, the franchise agreement will lead to a positive change in the organisation.

Disadvantages

There are a number of disadvantages in a franchise agreement. Despite the high degree of independence that is reported as a favourable factor in this agreement, independence in this form of business is not complete. The franchises are required to operate within the restriction and procedures stated in the franchise agreement between the two parties (Hossain, & Wang, 2008). For example, SunRoll Dubai is required to act within the procedures that are spelled by the franchise agreement. Some of the features spelt in the agreement include products that may be offered, the geographical area where this move is to take place, and the prices at which the products should be offered (Hua, & Dalbor, 2013). These restrictions limit the franchise and the profits that may be realised if these conditions were absent.

The other drawback of having a franchise is the sovereignty and commercial charges that are to be remunerated. SunRoll Dubai will be required to pay significant amounts of money to SunRoll America in the form of royalties and advertising fees. This money can be spent in other areas, and hence the disadvantage of having a franchise. The other disadvantage of such a business plan is that the charter must be able to set of scales between the limitations made by the franchisor against the entity capacity for the organisation. SunRoll Dubai has a number of ambitions that are not in the agreement. The achievement of these ambitions will require the company to carry out an analysis of the restrictions under the agreement so that they (the ambitions) are not conflicting with SunRoll Dubai’s ambitions.

Another problem that may arise in the future is linked to the nature of franchises. Since the two companies are interlinked in terms of brands, there might be consequences for SunRoll Dubai if the brand name undergoes challenges in another part of the world. In the case of the present franchise agreement, SunRoll Dubai can face losses if SunRoll America experiences challenges in the home country such as image damage. The termination of a franchise agreement may also be unfair to the organisation.

Conclusion

In conclusion, a franchise agreement allows an organisation to offer goods or services under a well-known brand name. In the franchise agreement between DubaiStar and SunRoll America, a new organisation will be formed to offer services that are offered by SunRoll America. The franchise will be called SunRoll Dubai. Some of the terms of agreement and the means to effect the agreement have been provided.

Reference List

Hossain, T., & Wang, S. (2008). Franchisor’s Cumulative Franchising Experience and Its Impact on Franchising Management Strategies. Journal of Marketing Channels, 15(1), 43-69. Web.

Hua, N., & Dalbor, M. C. (2013). Evidence of franchising on outperformance in the restaurant industry: A long-term analysis and perspective. International Journal of Contemporary Hospitality Management, 25(5), 723-739. Web.

Inma, C. (2005). Purposeful Franchising: Re-thinking of the Franchising Rationale. Singapore Management Review, 27(1), 27-48. Web.

Madanoglu, M., Lee, K., & Castrogiovanni, G. J. (2013). Does franchising pay? Evidence from the restaurant industry. Service Industries Journal, 33(11), 1003-1025. Web.

Perrigot, R., & Pénard, T. (2013). Determinants of E-Commerce Strategy in Franchising: A Resource-Based View. International Journal Of Electronic Commerce, 17(3), 109-130. Web.

Sivakumar, A. A., & Schoormans, J. L. (2011). Franchisee Selection for Social Franchising Success. Journal of Non-profit & Public Sector Marketing, 23(3), 213-225. Web.

Szulce, H., & Świekatowski, R. (2014). Franchising as an instrument of integration in higher education. Log forum, 10(2), 175-183. Web.

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