Alvaro Luiz Neuenfeldt Júnior
Federal University of Santa Maria, UFSM – Brazil
E-mail: alvjr2002@hotmail.com
Julio Cezar Mairesse Siluk
Federal University of Santa Maria, UFSM – Brazil
E-mail: jsiluk@ufsm.br
Marlon Soliman
Federal University of Santa Maria, UFSM – Brazil
E-mail: marlonsoliman@gmail.com
Kelen Franciane Scheroldt Marques
Federal University of Santa Maria, UFSM – Brazil
E-mail: kelkelh@yahoo.com.br
Submission: 08/10/2013
Revision: 30/10/2013
Accept: 08/11/2013
ABSTRACT
The gradual development of the
control systems and management of information about the organizations
environment through measurement systems made, in this day and age, the
reflection of reality. For the Brazilian franchise system this relationship is
not different, evidenced by the variation of more than three times the amount
raised in comparison to gross revenues achieved since from 2012 until 2001 in
Brazil. Given this scenario of growth, this article has for primary objective
to propose a performance development system for a segment of existing
franchises in Brazil, through the elaboration of indicators related to external
factors considered business critical success factors, based on financial and
non-financial data made available publicly by the Brazilian Franchising
Association (ABF). As a result, five performance indicators were developed for
the system in question, in addition to the application of this model in a
specific thread within the franchise system for the purpose of analyzing the
information obtained and testing the reliability of the parameters used,
identifying both that the model is reliable in accordance with the criteria
established.
Keywords: competitiveness; franchise segments; management; performance
development; production engineering.
1.
INTRODUCTION
Currently,
the competition to keep and expand new markets makes management and systematic
control of data regarding the business becomes a highly necessary task, where
the assessment of the position in which the company is, in relation to the
market, one of the correct paths to be followed to convert diffuse and
independent data in accurate information, in order to demonstrate the real behavior
of the system in which it is inserted (KAPLAN; NORTON, 2008; PORTER, 2009;
PARMENTER, 2010; MEDEIROS; ROIBEIRO, 2013).
In
this context, the franchises can be regarded as a form of commercial business
that encompasses, among several factors, the production and distribution of
consumer goods, established under contracts signed between two parties: the
franchisor, responsible for the brand and the franchisee, which signals with
the use of the trademarks (AAKER, 2004; RIBAS, 2006; MAURO, 2006; SILVA; AZEVEDO,
2012).
Along
with the growing competitiveness between organizations observed since the last
century, the interest in studies about the dynamics that involves organizations
is present in academic subjects, expanding to the franchise market and, in particular,
to the development of the franchise system in Brazil and its economic
importance, being directly linked to entrepreneurial studies in the
relationship between franchisees and franchisors, characterized, mainly,
through the relationship between mortality rates of business, where franchises
have a 20% smaller rate in relation to new ventures that does not have this
kind of support (LACOMBE; HEILBORN, 2003; ABF, 2012).
In
this sense, the main objective of this article is to demonstrate the application
of a model to performance development of an existing franchise segment in
Brazil, through the elaboration of indicators related to the external critical
success factors considered as the most relevant for franchise system ,
including the verification of the results obtained for each branch of activity,
in order to identify potential points of improvements, evaluating the behavior
of the results as the proposed calculations.
The
reader must be warned that this research does not intend to advise, recommend,
or link any information regarding the particular situation of any of the companies
studied. Instead, it seeks to highlight the plight of the companies jointly, as
the proposal found in the study.
In
order to meet the characteristics of the system, the methodology involves the
applied research, using as the basis the intuitive method, starting from the
observation of the characteristics of the particular case in relation to a
segment of franchises until checkout. Since this model is based on experimentation,
it was possible to use statistical techniques to verify its confiability,
in order to control the variables used, featuring as a quantitative analysis,
thus avoiding the production of disturbed effects unrelated to reality investigated
(GIL, 2010; MINAYO, 2010).
To the
performance development system, it was proposed the use of the methodology
known as Key Performance Indicators (KPI) in conjunction with the indicators
standardization method presented by PerformancePoint Server software (2007),
widely spread for the conversion of different scales in common standardized
metrics, enabling the development of general classifications, in order to
compare the values established for the research purpose.
In addition,
the technical procedures used were based on the monographic method, and the
primary data was collected through semi-structured public information of the organizations
studied, available at the official franchise guide 2012 prepared by the Brazilian
Franchising Association (ABF), plus the use of references and reviewing
documents with scientific basis to support and clarify the problem discussed in
descriptive form.
2.
THEORICAL REFERENCES
The
performance evaluation is a process inherent in human nature, where interaction
and action between the various members of one or more groups are analyzed
according to the optics and the goal of the individual evaluators (NEELY, 2005;
KAPLAN; NORTON, 2008; PARMENTER, 2010).
This
way, after the evaluation of the available systems consistent to the scenario to
model and to develop performance indicators, we opted to use the KPI as
parameters of the model, to be able to define financial and non-financial metrics
to express the evaluation of the Critical Success Factors (CSF) of an
organization or project, in order to obtain quantitative results on certain
activity for a given period of time (OLSON; SLATER, 2002; PARMENTER, 2010; PERRAZZA;
RODRIGUES, 2010; PAVLOV; BOURNE, 2011).
In
Brazil, the franchises that belong to the category called regulator of the ABF
reached in 2011 an annual revenues of $ 44 billion, equivalent to about 2.14%
national Gross Profit, through a network with more than 2,000 companies distributed
in a total of approximately 93,000 franchised units throughout the country,
generating a total of 838,000 jobs directly (ABF, 2012).
Due
to the success achieved with the expansion in recent years, the industry has
been undergoing a process of activities expansion, resulting in an average
gross growth of 16% per year since 2005 and more than 200% considering the
difference from 2001 to 2011, according to the description mated in Figure 1.
Figure 1: Data
about the Brazilian franchises of 2001 to 2011
Source:
Based on ABF (2012)
Some
points have fundamental importance for the notorious growth of franchises,
like: safety in relation to the investment made against financial crisis and
opportunities economic recessions, increase in the number of people living in
urban areas, and lack of services and products that meets the demand required
by the population (CRETELLA, 2003; WINDSPERGER; DANT, 2006; LAVIERI, 2008).
Because of this expansionist
characteristic, the franchise management is considered an innovative
organization form that has radically modified the vision of the small and
medium enterprises, characterized by the structure of networked collaboration,
thus to other aspects of its organizational architecture, requiring business
management and technological forms more evolved than traditional enterprises
(RODRÍGUEZ et al., 2005; GRUNHAGEN; MITTELSTAEDT, 2005).
3.
PROPOSED MODEL
The
steps of the modeling follow the definition of indicators, through hierarchical
levels, where the central strategy for the proposal has been defined as the
study of the current context of Brazilian franchises, by determining the level
at which each segment of franchising held their activities, taking for
reference the year 2012.
Thus,
the determination of objective indicator (KPIs)
was performed through of the various formatting categories belonging to the
franchises group, following the parameters and guidelines set out and the way
in which these interact with each other, using Equation (1) below described:
Where c
The determination of the target (Ts) for the KPIs obeys the criteria where
performance is considered satisfactory, according to a parameterized value
between a maximum (
The definition of indicators that
make up the KPIemp
is held as the strategic objective for organizational best practices, that leads
to obtain superior performance, enabling an enterprise to look the way that the
others companies of the same class (or similar) get their results, taking into
consideration that the franchise systems can be analyzed contextualized with
the operating results and characteristics of the strategies applied, through
non-confidential data made available to general public (HAPONAVA; AL-JIBOURI;
2009; SILVA; AZEVEDO, 2012).
The strategy on the franchisor part should
be directly linked to the input factors to market, as well as stabilization of
attraction and differentiation factors aimed at the protection of the quality
of the products or services offered (ROTHAERMEL et al., 2006). It is also
considered the status of the relationship between the franchisor and franchisees,
even empirically, in order to develop the effective management of information
incorporated in the system, focusing on activities and indicators able to achieve
good results for both, focused on generating a sense of unity and mutual
cooperation between the two parts (CORONA, 2009).
The
economic basis of franchises are directly linked to possible operating profit
or losses that the company may represent for the stakeholders, being a major
factor for potential generations of opportunity (CASTROGIOVANNI et al., 2006).
Thus, to make the decision to invest or not, it is necessary to take into account
the market value of the franchise, which is the present value in relation to
receivables future values discounted in the cash flow, considering the
investment, expenditure and revenue over the all periods, in order to apply the
criteria for the investment analysis (RAUCH et al., 2009).
This
way, the strategic study of these two dynamics serves as the basis for determining
the situation of a franchise over their direct and indirect competitors. To
this end, in addition to the references already cited, literary works such as
Shane and Maw-Der (1999), Dant and Kaufmann (2003), Lafontaine and Shaw (2005), Mauro (2006) and
Silva and Azevedo (2012) have been used as the basis to
support the definition of performance indicators developed for the measuring
system, as shown in Table 1 below.
Table
1: Indicators used for the study of franchises
|
Indicator (Basis) |
Characterization |
KPId |
Measurement Unity |
|
Size of franchise system (non-financial) |
The customer demand is directly related to the spanning
conditions of franchises, as its branch of activity and the products/services
sold, to facilitate access of customers and increase the mark exposure. |
KPI1 |
Absolute |
|
Brand excelence
(non-financial) |
For this case, it is related to three
basic criteria for the measurement of excellence: (i)
the awards by a recognized organization in the franchise system; (ii) the
growth rate of the franchise since its opening; and (iii) the services
offered by the franchisor in relation to franchisee, through the definition
of thirteen aspects of support, based on the works of Windsperger
and Dant (2006) and ABF (2012). |
KPI2 |
Absolute |
|
Investment reliability (financial) |
By definition, known as the portion of the
remuneration of the capital invested, the measurement of profitability to
acquire a franchise for the franchisee is critical to guide towards choosing
the best alternative among several financial options available on the market. |
KPI3 |
Currency (Dollar) |
|
Financial strength
(financial) |
The monthly gross revenues reflects
the conditions of products sales and services, with focus on quantity or
value added through marketing, being the indicator that best fits the
potential of generating financial gains by the franchisor with the use of the
mark. |
KPI4 |
Absolute |
|
Financial obligations with taxes (financial) |
In order to appreciate the balance in
the relationship between the franchisor and the franchisee, the projection of
remuneration rates can be performed according to the type of franchise, where
are considered the costs related to the development of the strategic plan and
the franchising system until the economic balance point. |
KPI5 |
Percentage |
The conclusion about the use of this
number of indicators is assumed in order to clearly express the facts about the
franchise system, including the factors set as more relevant to its evaluation.
As described previously, the evaluation of the KPIemp depends on the
relationship between the five indicators defined, but cannot perform the direct
comparison of these, because each one has an unique unit of measurement according
its metrics, being required to normalize each of them to the same default unit
of measurement, in this case the percentage (%). To this end, the methodology
of standardization proposed by the software
Performance Point Server 2007 meets this demand, by executing six
sequential steps of data treatment.
Briefly, the first step, called raw
score (
Meanwhile, the converted score (
After this
data processing, occurs the verification
of the performance level of each branch and, consequently, of the sector chosen
for the study, based on the evaluation of each companies, according to the
Equation (5), being now possible to perform the calculation for KPIs proposed previously by Equation 1,
to get the final value to be compared with the proposed target in Ts, generating
the possibility of obtaining conclusions regarding the application of the
model.
Aiming to better understand the
behavior of the indicators in relation to the context and possible changes that
may influence the profile of results, it was proposed the verification of the
variables used, to demonstrate the level of reliability of the model, in way to
check the level of significance of the variation found in the values. This was obtained
by the sensibility analysis of trend curves (
4.
APPLICATION
To test the modeling, it is proposed
the application for franchises associated with the category Alimentation,
because these besides having a high rating in relation to annual gross sales of
franchises in Brazil (second with 22% of the market), have the highest growth
rate, for the same criterion, found since 2010 (104%) (ABF, 2012). Thus, in
order to find similar companies in the same group, the ABF separated the
category into three distinct segments: Alimentation in General (s=1), Restaurants/Pizza Shops (s=2) and Drinks/Coffees/Candies/Salted (s=3), following the flow described by
the Figure 2.
Figure 2: Segments and branches contained in the
category Alimentation
The
calculation is proposed from the prior definition by the researchers, where the
limits and ranges of the five tracks were developed to standardize the performance
level, according to the relation: Unsatisfactory (F=1):
It is possible to verify
that five tracks were scaled, in which the raw score may be located
between the extreme values 100% and 0%. Then, the calculations for each of the
four indicators were made, in order to show the effects of each on the total
for each branch, as shown in Table 2, for Ts=70%.
Table
2: Obtained results for each branch
|
Segments |
Branch |
Franchises |
KPI1 |
KPI2 |
KPI3 |
KPI4 |
KPI5 |
KPIram |
|
Food in General (s=1) |
Typical
foods (c=1) |
33 |
74% |
76% |
69% |
74% |
68% |
74% |
|
Natural
products (c=2) |
18 |
49% |
59% |
63% |
58% |
66% |
59% |
|
|
Restaurants
(c=3) |
12 |
47% |
58% |
70% |
90% |
83% |
70% |
|
|
Sandwiches/grilled
(c=4) |
23 |
73% |
69% |
65% |
77% |
72% |
71% |
|
|
Varieties
(c=5) |
20 |
65% |
61% |
66% |
72% |
77% |
68% |
|
|
Rest./ Pizza Shops (s=2) |
Typical
foods (c=6) |
8 |
65% |
52% |
86% |
69% |
59% |
66% |
|
Pizza
Shops (c=7) |
19 |
56% |
46% |
75% |
48% |
80% |
61% |
|
|
Restaurants
(c=8) |
11 |
55% |
55% |
74% |
93% |
49% |
65% |
|
|
Varieties
(c=9) |
8 |
43% |
42% |
61% |
61% |
40% |
49% |
|
|
Drinks/ Coffees/ Candies/ Salted
(s=3) |
Drinks
(c=10) |
10 |
71% |
66% |
61% |
22% |
62% |
57% |
|
Coffees
(c=11) |
13 |
62% |
51% |
53% |
32% |
69% |
54% |
|
|
Candies
(c=12) |
30 |
72% |
67% |
70% |
33% |
58% |
60% |
|
|
Salted
(c=13) |
16 |
60% |
59% |
66% |
26% |
68% |
56% |
For
foods in general (
Another
important point is the number of awards won by the Seal of Excellence awarded
by ABF, where approximately 50% of companies in the branch are stamped, 15%
higher than the rate found for the second place (Sandwiches/grilled). Regarding
the branch Restaurant, according to the previous description, it is worth the
emphasis on financial indicators, results mainly due to the superior
relationship found between the average monthly billing offered by franchise, on
average $ 10,715.36 higher than the second place, besides offering high returns
over the invested capital, with averages leverages by companies of 17.33 times
the amount invested for a period of check equal to 60 months.
For the
branch of Varieties, it is worth noting that this has the best franchise placed
at the end of the classification, which contributed to the overall result
achieved of 68%, mainly due to non-economic indicators, being the second best
placed with
Potentially,
the negative highlight of the study was for the Natural Products Branch, which
obtained an overall score of 59%, due to the worst economic results found (
Finally,
the segment achieved a result of 69%, where together with the branches of
Typical Foods Specialized (
Regarding
the classification of franchises individually, although this is not the
focus of the work, it was found that 55 of 106 franchises analyzed (52% of
total) were above the mark of 70% set as the minimal ideal, with emphasis again
to the branch of Typical
Foods Specialized, because among the fifteen best
companies ranked, nine belong to this group, justifying the good placement obtained in overall result.
For
the category Restaurants/Pizza Shops, it was found that the Typical foods
reached the best result with 66% of the total possible, highlighting in the
first place in two of the five indicators,
Moreover,
the rest of its KPIs (KPI2, KPI4 and KPI5) are located in second place if compared to the others values
designed for the measurement. Following it is located the branch Restaurants,
with a special emphasis on the KPI4 (93%), through the average rate between the
gross billing and the necessary investments equivalent to 3.54 on a scale
maximum of five points.
In
third place is located the Pizza Shops, from the good results determined by
economic indicators above the target
In
general, Restaurants/Pizza shop (
For the
third segment (Drinks/Coffees/Candies/Salted) the Candy branch, with 60%, it is
ranked as the most successful on. This fact is determined basically by the good
results obtained from the non-financial (70%) and financial (53%) indicators,
due to the predominance of their scores in relation to four of the five
proposed, a fact that is not observed only for KPI5 (58%) because of the relative ratio of monthly fees is 4%
higher when compared to the second worst (Drink branch).
Thus, as
key points for the success of this business group, it has the highest absolute
number of open networks in the country (2,355 networks), mainly due to the
products featured as marketing of chocolates, which typically have large sales
in Brazilian Shopping Centers.
Then,
the Drink branch took the second place with 57% of total score, due mainly to
non-financial indicators (
Finally,
the branch called as Coffees has been ranked in the last place, with only 54%
of the value reached, although in relation to other groups it obtained a high
value for KPI5 (69%), mainly on the
relationship between investment and gross sales benefits possible to be
conquered.
In general,
through the calculation proposed by Equation (1) and to a target set as 70%, it
was possible to identify that Drinks/Coffees/Candies/Salted achieved a segment
result of 57%, 13% lower than the stipulated as the minimum for consolidation,
in which similarly none of its four branches exceeded the performance expectations
calculated in Ts.
The result
found in KPI4 for all groups receives a special highlight. With an average
value equal to 29%, it represents a poor relationship for the estimates of
gross financial returns (overall average of $ 23,000.00/month per franchise),
fact that should be carefully observed at the moment of formatting each
business plan, especially when these values are compared to the proposed
investment for its opening (overall average of $ 130,000.00), in order to offer
an additional attractive to their current or prospective investors.
To verify
the model confiability, it was proposed the use of
the technique known as sensitivity analysis, which makes possible to check the
behavior of the model in response to changes in the Ts values, being able to observe
the final seeding behavior. The focus in this case is directly linked to the
results of each one of the five branches belonging to segments studied,
according to Figure 3.
Figure 3: Results of sensitivity analysis
for the segments under study
It was found that the largest
differences are in the ranges located at the extremes of the three graphs (on
average below 13% and above 90%), being possible to consider this variation as
acceptable, because of the greatest variation found is below 3%, not
influencing substantially the reliability of the proposed model. For the range
contained between 13% and 90%, it was not observed significant changes in the
relative positions to the system, being consistent to state that the model has
a normalized variance of the indicators even with the change of targets for
each, respecting the behavior characteristics of the curves, taking into account
the profile of the branches analyzed.
5.
CONCLUSIONS
According to the proposal of
demonstrating the application of a model to the performance development of an
existing franchise segment in Brazil, it is possible to affirm that the results
enabled the verification of the company’s growth towards direct and indirect
competitors, as well as the detailed analysis of how each branch, in relation
to the context, contributes positively or negatively to the segment result as a
whole. Therefore, this work, in accordance with provisions in the proposal
initially, contemplated the basic methodology and factors able to the meet
initial demand of analysis the situation of the franchises within the context
in which they are inserted.
As a key concern for the development
of model, it became the reflection of the indicators to the reality found to
the situation of each of the companies involved, from the perspective based on
financial and non-financial issues, in order to serve as concrete standard and
feasible to attend the interests of the model.
Thus, it was diagnosed as a
limitation of the model the lack of contextualization of the indicators in
relation to the deployment behavior at a specific demographic region and its
regional quirks like geography, seasonality, culture and social relations,
especially to potential consumers, because the model treat only the direct
relationship existent between the franchisor and the franchisee, in order to
consider these data type only in intrinsic way.
For further studies, it is hoped the
development of measurement models based on other methodologies such as data
envelopment analysis and multi-criteria schools to support decision-making,
expanding the horizon of knowledge through this kind of verification.
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