Franchising: Pathway to Wealth Creation

Chapter 2. The Franchise Relationship Model

In 1986 Pizza Hut was struggling with upstart competitor Domino’s. Franchisor management was convinced that the competitor’s pizza delivery was a real threat and that Pizza Hut needed to respond with its own delivery offering. But the franchisor had over a thousand franchises with territory rights that were highly successful sit-down restaurants. “Why fix what isn’t broken?” was a common franchisee refrain. The delivery system added costs to the franchise operation with uncertain revenue. It also affected the way franchisees operated the sit-down business. Tension grew as the franchisor began to experiment with the Pizza Hut business model with centralized phone ordering and special procedures for home ...