Functioning of the franchise system shows, that impression together with the strategy has impact on the creation of stable competitive advantages and profitability rise. If a franchiser spotlight used to be a creative execution of contractual obligations, now it is a necessity to study impressions and behavior of the trademark customer. Therefore, fresh approaches to the formation of the relationship system between the franchiser and franchisee are necessary. A special attention should be paid to personal relationships, because every franchisee needs to have a special approach.

Efficiency Enhancement of the Franchise System Operation

Increase in trademark costs, as well as acceleration of new processes in the sphere of franchise form of business organization, require an advanced relationship management mechanism between the parent company and the franchisee.

Creating and supporting an effective relationship management mechanism with the trademark customer, a franchiser thereby makes a prosperous image and relationships with the franchisee taking into account everyone’s unique features. Such approach promotes the efficiency enhancement of franchise form of business organization owing to:

• the increase of attraction and retention rates of the franchisee;
• sufficient level of service;
• profit increase;
• preservation of stable competitive advantage;
• increase in the company assets value;
• kind effective relationships with the franchisee.

The enhancement of relationship management mechanism will promote the development of trademark and franchise form of business organization.

Up-to-date requirements, placed to trademarks, make it necessary to improve organizational forms of franchise system, in other words the transition to corporate trademarks is outlined.

At the corporate form of organization of franchise system, names of companies are stated on the trademarks, thus the level of credibility of franchisee to the offered goods is increased on the stage of entrance to the market.

In such conditions every trademark has its own attitude and its budget for the market structure study, development, advertisement and other items of expenditure. When the company creates and promotes independent trademarks, the franchiser invites large expenses. The basic decisive factor at the corporate form of organization of franchise system is the creation of conditions, which define the financial appraisal of trademark.

Foreign practice shows, that there is a great difference between the developed and undeveloped corporate form of organization of franchise system, which is the material and nonmaterial value, in addition, a considerable part belongs to trademark.

Other non-materials assets including patents, franchisee databases, licenses, know-how and macrocontracts also play a special role, but the trademark value is much more important. Sometimes a trademark value is higher than the value of the companies. It is connected with the fact that the sums are defined not only by the value of tangible asset belonging to the company, but the sales potential of the trademark in future. Indeed, the corporate name possesses additional financial potential, which may be appraised of and used for various purposes.

-          Mergers and acquisitions. In these situations the value of trademark lies at the centre. It may be explained by the fact that potential franchisees, companies with trademarked goods, as well as investors and banks strain after the justified price according to the value of specific acquired assets.

-          Bonds with foreign investors. Creation of branded portfolio on the worldwide level is the main objective of the activity for some companies. Estimated value of the trade mark is conducted in order to reinforce some weak arguments.

-          Intercommunication. Estimation of trademark may be the indicator of the company’s efficiency. Companies, who receive interests for the use of trademarks, rely upon the latest, and show a real value of corporate assets to the companies.

-          Internal marketing is a strategic approach to trademark estimation, which allows the administration of the company to compare a strategy and an actual result of marketing activity of the franchisee.

-          A new-product evaluation and market development are necessary for modeling and effective use of new strategies of the franchise business form.

-          License trade. A correct assessment of trademark allows to define the actual size of remuneration for the franchise use.

Consequently, it is necessary to take into account certain operational conditions of this system, as well as conditions of every franchisee subsystem at the formation of the relationship management mechanism between the franchise system parts.

Such approach allows to reveal the means and tools for the effective franchise system functioning. This will allow to create conditions for stable bonds with the franchisee, and they may also become the best vendors and supporters of the franchise business organization system.

Formation of relationship management mechanism between parts of franchise system is connected with the fact that a new stage of business development begins. The basis for the development of business in the period of formation of information economy is not tangible assets (land, employees, monetary funds), but the development and application of ideas, knowledge and information. Therefore, it is necessary to improve marketing theory and practice, taking into account new economic demands. New economic conditions in business have dramatically changed the methods of promotion of company products (goods or service), but, unfortunately, marketing textbooks say nothing about them, and the recommendations are out of date; which means that at the production and sale of goods the interests and relationships of customers (franchisee) are not taken into account. Unfortunately, only few people understand, that large amounts of information about the clients allow to increase the company’s profit essentially.

For a long time many companies have been aimed at their inner interests without respecting the interests of the customers. Therefore the staff listing included such position names as "product-manager", "brander", "head marketer", but not "manager on consumers" or "director on relationships with customers”. In recent years major companies, which are focused on business communities, began to appear; they began to initiate a post of “manager on consumers”.  The companies share the opinion that trademark management has become non-topical. It is necessary to orientate the management mechanism of franchise system relationships on the trademark together with the customer but not the goods.

Mechanisms of consumer relationships management are impossible to identify with the elements of marketing activity. It has some distinctive features, which are as follows:  mechanisms of consumer relationships management should not be focused on the advertisement. It differs from the advertisement as it is directed for the marketing partnership relations, but not for the mass communication. Advertisement is only one of the methods of communication with the consumers, it is focused on the mainstream audience, but the mechanism of consumer relationships management is focused on one person.

It is impossible to compare the management mechanism with the direct marketing, which is in widely used abroad. Direct marketing is a mailing of information on the product, and trademark to several addresses using acquired or leased out agencies, about which the companies know almost nothing and have no idea whether the people will be interested in buying the goods. The lists for control groups are formed, and various creative styles and motives are applied, in order to ensure the highest per cent of responses. But even a very good direct marketing can give only 1-2 per cents of responses. Consumers treat such type of marketing negatively, as the possibility that the provided production (goods or services) may interest them at the moment is too low.

It is true, however, that in recent years a direct marketing has undergone essential changes as a result of technological revolution, which is the appearance of powerful program decisions. This allows to use various sources of information for the composition of the address lists. But despite of this fact the rate of responses is still low. It is connected with the fact that franchise system targets at the increase of sale of goods, rather than establishing good relationships with the consumers. Direct marketing will function effectively, if it is focused on personality, which is using of information on the customer and providing necessary information to him. The mechanism of relationships management is closely connected with the customer service function, because its objective is to develop the trademark. A distinguishing feature is that the objective to build long-term relationships with the customer during service is not necessary. So many franchise systems do not use such a potential, which has a negative impact on the image of their trademarks.  Bad service is connected with the inability to listen to the customers or incompetency to help them, because the vendors have no specific knowledge. If the customer is not satisfied with the service, this means bad service, which decreases the importance of trademark of the franchiser and the efficiency of franchise business organization system.

Mechanism of consumer relationships management is the aggregate of resources (acquaintance with customers, communicative skills, technological service, knowledge etc.) and management methods (procedural and institutional, economic, social and psychological), securing the achievement of the set goal, which is the enhancement of the weight of the franchise system trademark based upon maintaining of continual contacts with the consumer taking into account their demands and interests.

Let us consider the fundamental management method of relationships with the trademark consumers.

1.       Acquaintance with customers. The process of getting acquainted with the customer may take place in various forms: mailing of newsletters to customers via Internet, personal interviews etc. Mailing of newsletters via Internet is the most efficient at present; these newsletters contain the data on all services of the franchisee as well as specific recommendations on the new goods and offers on the improvement of financial management. A newsletter is an ideal form of acquaintance with the consumers, because they not only notify them about the current trade mark, but it also provides information on additional products types, so that the customers could see their importance and feel, that the basic set of goods is being filled with something new and useful.

New information support allows to retrace the relationships with every franchisee and find the ways for their improvement. This will allow the franchisers to give hundreds of various recommendations and scripts that will make the service highly personalized.

2.       Ability to conduct a dialogue with the customer. Relationships between the franchiser and the franchisee depend on skilful dialogues of partners. But if the franchiser does not conduct regular dialogues with the customers of his trademark, he will not know what they want and how they react. Trade mark consumers will feel disinterest to their demands.

If a franchiser constantly keeps good relationships with the real customers of the trademark, regularly answer their expectations, then they may become the best customers and potential sellers of the trademark. New customers gained owing to the word-of-mouth recommendations may earn profit by drawing new potential customers.

3.       Special approach to customers. The recipe for success of the mechanism of customer relationships management is the focus of the franchise system on the customers.

A conventional model, which has quite a logical comprehension, is oriented on goods. Such approach is typical for new high-tech branches, when technology is of utmost importance.

A franchise system focused on goods defines its inner potential, which is personnel’s skills, raw materials and supplies of the company etc., and only then there is a development of goods necessary for the customers. A driving element of the process of relationships management is top management.

The most efficient approach to the formation of consumer relationships management is the focus on the customer. At this approach a parent company should strain after the creation of a strong trademark through the customer, which means studying of the potential and real clients.

All this is reached on the basis of the improvement of organizational management of the franchise system.

At this form of organizational management the operating personnel is empowered to support customers on each level, which means focus on the external environment (with deep understanding of opinions and needs of the customers).

1. Study of interests and needs of the customer (his occupation, family, salary, interests, needs, impressions etc.).
2. Connection between the trade mark and the consumer. The connection is carried out by various means: by phone, mail, via Internet, by face-to-face contact. Communication channels should be open for the customer, which means that they should be able to communicate freely with the franchiser.
3. Information support of the consumer. The customer should be informed on the potential of franchise system; on what they will be able to purchase; trademark development strategy; negative factors, which influence the trademark development; what will be done to increase the value of the trademark.
4. Information support of the process of customer relationships management should be well-defined, clear and impersonal: how often they go shopping, what sum they spend, their latest purchase; what they like in the trademark; what competing trademarks they purchase, why they avoid buying the trademark of this franchise system.
5. Creation of the complex program of the information support of the management process of customer relationships. Creation of databases, combining all basic characteristics of the franchise system. This database is used in the process of customer relationships management by all elements of these systems.

The above mentioned principles promote the elaboration of the strategy of customer relationship management, which promotes the establishment of close relationships between the trademark and the customer based on the information about the customer. Such approach will disable the action of rivals. Franchiser, who knows the customer well, is without a rival.

1. Analysis of all subsystems of the franchise system. It is necessary to analyze all systems, which are connected with the collection, processing and storing of the information on the customers. Sales, marketing, and bookkeeping subsystems of offer and application processing, post sale service subsystems, and credit monitoring systems are subject to the analysis.

At the evaluation of controlling subsystem it is necessary to detect, how the administration is ready to implement this management mechanism, which is as follows:

-          to conduct a  fundamental analysis in order to detect  the dubbing of functions in the management process;

-          to analyze the information support (the level of information richness, information traffic flow on all subsystems of the franchise system), to specify the common key data during management;

-          to carry out the calculation of time consumption, which is necessary for the development or acquisition of information about customers and its application for the  composition of personal messages;

-          to take up the development of pricing system;

-          to define costs of the implementation of mechanization in the customer relationships management.

2.      Analysis of customers’ information (collection and storage). To carry out the data analysis, reveal its duplication, perform combination and deduplication.

3. Analysis of relationships system. It is necessary to detect how the customers promote the distribution of the trademark of franchise system, called elasticity. Trademark elasticity is explained by the dedicated attention to the customer and is formed on the basis of a single approach to the choice of target customers with definite characteristics, taking specific situations into account. 

Quantitative and qualitative characteristics are used to conduct a demand research.

At the quantitative research the size and structure of a separate market segment, preferable trademarks for the franchise system, as well time and place of purchase are defined.

Various forms are used for the interest inventory tests: at respondent’s homes, in the street, over the telephone, via Internet.

Qualitative research is carried out on the one hand on the basis of the observation of the occurring events and their interpretation. This enables to detect the impression from the trademark and new departures. On the other hand, in-depth interviews with the limited number of respondents may be used: individual, mini-groups (5-8 people), focus-groups (8-12 people). The most objective information is received when a combined approach is used (both qualitative and quantitative research).

Qualitative characteristics are connected with the feelings of customers concerning the trademark; as people are attracted to the trademarks by the appellative advertisement.

When creating questionnaires and questions for the interviewing of customers it is necessary to pay attention to the following aspects:

-          if the offers of franchise system are efficient and effective;

-          what are the ways of provision of valuable goods for the customer;

-          if the company is able to provide the goods necessary for the customer;

-          What actions of franchise system annoy the franchisee  and what behavior should be changed;

-          if the company is able to show the customer the difference of its goods from the others and its advantages.

The analysis allows to provide information for the administration of franchise system and the financial subsystem. With its help the parent company may learn how to strengthen its trademark and which categories of customers may allow to do so.

4.      Financial subsystem analysis. A financial analysis helps to determine how effective the process of customer relationships management is. Therefore, at the formation of mechanism of customer relationships management, it is necessary to conduct its technical and economic substantiation.

The development of financial model of formation of consumer relationships management requires a study of its basic sources and items of expenditure, which are connected with the development of franchise forms of business organization:

-          amounts of expenses for the attraction of one customer at the moment;

-          amounts of expenses for the long-term keeping of one consumer;

-          amounts of profit from every customer, if the franchise company is able to  have long-term business with him;

-          the amount of additional profit in case if the customer changes his interests and behavior.

Financial analysis and construction of financial model of customer relationships management is carried out by the financial subsystem (subdivision) of franchise system; besides the system makes reports for the higher management authority of this system.

5. Strategy development of the process of customer relationships management It is connected with the strategy of franchise system, based on the conducted analysis of franchise system and technical and economic substantiation of the efficient customer relationships management.

The development strategy of management should reflect the following tendencies:

-          transformation of franchise system is carried out in order to use the potential of trademark to full extent by applying the new approaches and methods of work with the customers, restructuring, and re-equipment of the system;

-          creation of economic mechanism for  the determination of reward and keeping of the best customers by means of the reward scheme;

-          increase of new customers in the number owing to the participants of franchise  system, which attract other customers;

-          determination of the rivals’ potential on the grounds of constant carrying-out of the analysis and evaluation of all programs. All expenditures connected with the carrying out of these procedures must be foreseen in the marketing budget. The received information helps to understand how each rival presents his trademark, what their distinctive features are, what a company should do to advertise its trademark, and how to improve the mechanism of consumer relationships management.

-          elaboration of measures on saving of the consumers’ time.

Business refers to a tense and intensive activity of merchants, which may experience no lack of money, but may be limited in time. For such customers of the franchise business organization system, saving of time may be either more important or at least equal to saving of money.

Internet and other actual technologies contain various ways of customers’ time saving. They all enable to learn more about the organization of franchise system. A franchiser needs to adjust his style of communication to individual characteristics and wishes. However, as the practice shows, trade via the Internet causes more suspiciousness of the customers, than the offer of goods on television. That is why it is necessary to remember that trust in the trademark and means of communication is a basis for the organization of franchise business form, as well as building of close relationships with the customers.