Nov 10, 2017 in Economics

Franchising

The firm chosen in this context is Hilton Hotels and Resorts. The hotel is ranked position 101 in the top 500 franchises in the United States. The firm was founded in 1919 and started franchising in 1965. To date it is estimated that Hilton Hotels and Resort has a total investment of between $56 and 97.12 million. The hotel owns, manages and develops hotels, resorts and timeshare properties and franchises lodging properties.

Hilton Hotel and Resorts franchise has over 490,000 rooms in over 2,800 properties hotels in 84 countries and it is seeking new franchise units worldwide (Plunkett, 2008).  According to Plunkett (2008), its hotel brands include Hilton, Hilton Garden Inn, Doubletree Embassy Suites, Homewood, Hampton Inn, Conrad Hotels and Resorts and the Waldorf Astoria Collection. This implies that Hilton Hotels and Resorts controls a large market share in US and globally.   

Why is it Interesting

Hilton Hotel franchise is interesting because over the years the firm has attracted many franchisee partners. Its franchise fee is $85,000 with an ongoing royalty fee of 5%. The term of franchise agreement is 22 years and it is renewable. Another reason why Hilton franchise is interesting is because it supports its franchisees through training, ongoing support and marketing support.  Ireland, Hoskisson & Hitt (2005) noted that Hilton Hotels and Resorts has through its technology improvements program created kiosks in major locations where guests can do self check-in and get a room key in the lobby. The kiosks also enable guests to book rooms they will use in the future online. Another important feature about Hilton Hotels and Resorts is that in separate deals it is developing over 55 properties in Russia, the UK and Central America all planned to be completed by 2013 (Plunkett, 2008).   

The Firm in Terms of the Circular Flow Diagram

The circular flow diagram is a schematic representation of the organization of the economy. Decisions are made by domestic units and firms and in this case, by Hilton Hotels and Resorts. Mankiw (2011) says that Hilton Hotel and Resorts produces products using factors such as employment, property and resources entailing properties, equipments and furnishings. These inputs used by Hilton Hotel and Resorts are known as features of fabrication. On the other hand, domestic units and the consumers possess the features of production and use the services produced by the hotel (Mankiw, 2011).

Households and the hotel interact in various kinds of marketplace. Within the market for products, customers are consumers and the Hilton Hotels are sellers. Basically family units buy the production of supplies and amenities provided by the hotel. The entire diagram presents an easy way of categorizing the monetary deals that occur among consumers and the hotel in the financial system. Mankiw (2011) says that the internal circle represents the flows of raw materials and products. In this context the domestic consumers sell the exploit of their work, property and assets to the Hilton franchise hotels in the marketplace for the aspects of manufactures.

The hotels then utilize these features to create commodities and amenities, which sequentially are sold to consumers in the marketplace of various amenities (Mankiw, 2011). The external circle of the figure characterizes the equivalent stream of money. The family units expend funds to purchase services and other products from the hotel. On the other hand, the hotel uses certain proceeds from these transactions to compensate for the aspects of service, for instance, rent to landlord and wages and salaries for its workers.

The Two Roles of the Firm and how it applies to the Franchise

Hilton Hotels and Resorts plays the role of being the chain operator of the entire franchise and are actively involved in new product development. The system of the hotel is based on constant innovation. The chain operator takes lead in generating ideas when a product need is widely acknowledged. Secondly, the firm plays a role of investing in corporate resources related to system wide adaptation, through a corporate marketing staff, research and development and model test units, especially, for new franchise establishments. The hotel also supports new products developed by franchisees ongoing attempts to meet the demands of their local markets.   

Applying one of the Big Ideas to the Firm in the Way it Operates

Hilton Hotels and Resorts “big idea” is based on the hotel’s rational and emotional attitude to its customers. The big idea acts as a meaningful, believable and distinctive concept that cuts through the clutter. The hotels big idea is “go” divided into “go chill, go refresh and go foodie”. The big idea is a consumer favorite for the firm, although humor can be risky. Hilton Hotel and Resorts big idea “go” translates well across cultures.

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