Franchise vs Joint Venture

Topics: Leasehold estate, Renting, Lease Pages: 35 (8301 words) Published: December 14, 2012
Hospitality Management 21 (2002) 353–369

A franchise by any other name? Tenancy
arrangements in the pub sector
Conrad Lashley*, Bill Rowson
School of Tourism and Hospitality Management, Leeds Metropolitan University, Calverley Street, Leeds LS1 3HJ, UK

Recent changes in ownership and consumption patterns within the market have brought many operators to follow strategies that are more concerned with a retailing orientation. Many of the companies operating pubs are aiming to grow sales, and respond quickly to changes in consumer tastes and fashions. They no longer own brewing facilities and frequently control whole estates of the pubs that are marginal, and where the actions, skills and motivations of local unit managers are crucial for the success or failure of the property. The exploration of different forms of indirect control via tenancy and lease arrangements is recognition of the need to provide more entrepreneurial incentives for those managing these more marginal properties. In many ways, it is possible to view pubs owned by chains operated through both tenancies and leasing as a form of franchising. Certainly the literature and research of franchising hospitality services can help inform a study of leasehold and tenanted relationships in licensed retailing. Franchising in licensed retailing is almost wholly based on the tenanted/leased agreements, which stem from the ‘tie’. This paper argues that in the more retailing and service quality competitive environment pub operating companies will need to use more traditional franchising approaches than have been practised in the past. r 2002 Elsevier Science Ltd. All rights reserved.

Keywords: Franchising; Licensed retailing; Agency theory; Resource scarcity theory

1. Introduction
Pub ownership and control has long been an unusual feature of the English and Welsh ‘bar trade’ when compared with other countries. Licensing laws and the increasing concentration of the brewing industry has, in the past resulted in large *Corresponding author. Tel.: +44-113-283-3121; fax: +44-113-283-3111. E-mail address: (C. Lashley).

0278-4319/02/$ - see front matter r 2002 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 2 ) 0 0 0 1 5 - 4


C. Lashley, B. Rowson / Hospitality Management 21 (2002) 353–369

numbers of pubs being in the control of a small number of firms (Price et al., 1999). Given restrictions on the numbers of licensed premises, the brewers were keen to maximise the numbers of outlets available to sell their output and restrict the sale of competitor’s product (Lashley and Lincoln, 2000). In these circumstances, the more marginal properties were let out to tenants as a way of securing outlets for the beer product and at the same time tapping into the entrepreneurial, managerial and financial resources of the small firm.

Recent changes in the industry have resulted in a shift in control of these tenanted properties from the large brewer retailers to a new breed of ‘independent’ retail operators who, though no longer tied to a brewer, tie the publican through either tenant or leasehold agreements (Martin and Coulson, 1998). These licensed retail organisations are motivated by a concern to benefit from the added resources that the tenant brings, particularly the need to exploit the entrepreneurial drives and skills of tenants and lessees. In some ways they resemble ‘adhocracies’ (Goffee and Scase, 1995) in that these organisations attempt to be large and small, centralised in strategic direction, yet decentralised in tactical operation, global and local. From the tenant/lessee’s perspective, the nominally independent business potentially benefits from the expertise and know-how of the larger firm. Even in contexts where the brand might be fairly loosely defined round a beer brand and a ‘blueprint’ (Lashley and Lincoln, 2000) the potential support of the larger company can overcome some of the resource...
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