Virginia Tech at forefront of learning about franchising

12 Mar 2015

Although franchising is one of the most popular methods of doing business, it has found little ground in higher education programs. Virginia Tech was among the first in 1998 – and is still one of few colleges or universities – to include franchising in its graduate course curriculum.

In spring 2016, Virginia Tech plans to offer a three-credit undergraduate course on franchising.

Mahmood Khan, a professor in hospitality and tourism management, has written and lectured extensively about franchising, both in the United States and abroad.

When he joined Virginia Tech in 1998, Khan developed and taught Franchising in Hospitality Management to graduate students in the former College of Human Resources and Education. Today, Pamplin College of Business offers this course in the National Capital Region (and through interactive video to students in Blacksburg) and it is a requirement for masters of business administration students with a concentration in hospitality and tourism management.

Last fall, Khan's revised and updated third edition of “Restaurant Franchising: Concepts, Regulations and Practices," was published by Apple Academic Press. The first edition, in 1991, broke new ground with an insightful look into the many facets of the restaurant franchising industry.

The latest volume uses vignettes and case histories that help explain how to develop a winning franchise. Among the topics included in the book are: selecting a franchise that fits your style and goals; securing financial backing; and developing healthy franchisor/franchisee relationships. There is also information on state franchise rules and regulations; international franchising; and unconventional franchises. An accompanying instructor’s manual is available.

“Franchising is a win-win-win situation for franchisors, franchisees, and customers,” Khan said. “I believe it is important for business students to understand the many aspects of franchising and especially how it has contributed to a thriving restaurant industry both in the United States and internationally.”

According to figures from the National Restaurant Association, the franchising sector of the restaurant industry accounts for nearly 40 percent of total restaurant industry sales of more than $660 billion in 2013, 30 percent of the more than 13 million restaurant industry jobs, and nearly 20 percent of all restaurant establishments.

The first formal franchising in consumer goods firms dates back to 1851 when Isaac Singer accepted fees from independent salesmen to acquire territorial rights to sell his recently invented sewing machine. This way of doing business gained momentum in the automobile industry and, beginning with Howard Johnson in the 1930s, extended to the food service industry – today’s most popular form of franchising.

The proliferation of highways and women entering the workforce were both instrumental in the growth of restaurant franchises. Expanded services geared to busy, modern lifestyles – like easy in/out access, special parking for pickup orders, delivery, and apps for ordering – have contributed significantly to continued growth, Khan noted.

Another positive aspect of franchises is that they tend to be socially responsible. “Many are active in community fund-raising efforts, and promote environmentally friendly practices such as recycling,” he said.

Virginia Tech students learn about two different forms of franchising.

An already established franchise has the advantage of support from a corporation which minimizes the risk of starting your own business, explained Khan. “The franchisee benefits from consumer recognition of the trademark and service mark; you can avoid costly marketing mistakes because the franchisor provides advertising, training, continuing supervision and training,” he said.

“But at Virginia Tech we also introduce franchising as an entrepreneurial opportunity,” said Khan. “If you want to start a franchise, it’s all about concept. This can be grounded in an idea, name, process, product, or format. But, you have to offer something that people want and it has to be simple because it needs to be duplicated exactly the same way everywhere.”

Not every concept will work as a franchise, Khan cautioned. “You might have a great recipe from your grandmother, for example, but if there are too many ingredients and/or the process of making it is too long or complicated, it won’t translate well to a franchise,” he said.

Khan said he is amazed at how franchising has grown so rapidly in other countries. “People tend to rely on franchises because of their strict food safety considerations. In many cases, visitors feel more comfortable going to these kinds of establishments, not trusting what they might get in an independent restaurant. Or maybe they are just not used to indigenous foods,” he said. “China and India, for example, are ripe for franchising, and we encourage students to think globally.”

Manisha Singal, assistant professor, Department of Hospitality and Tourism Management will teach the course, Franchising for the Services Industries, offered next spring to undergraduates in Blacksburg. Singal conferred with Khan in developing a curriculum that will introduce students to the theory and practice of franchising both as a form of business ownership and as a vehicle for entrepreneurship.

“It is somewhat surprising that other colleges and universities have ignored this aspect of global business,” Khan said. “Adding a course on franchising to our undergraduate curriculum continues to ensure Virginia Tech’s lead in this important area.”