Management contract: Difference between revisions
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In business management, franchising is a contractual relationship between franchiser (owner of the company) and franchisee (buyer of a brand name). The franchiser allows the franchisee to use its trademark along with certain business systems and processes in exchange for a fee.<ref>{{cite web|title=franchising|url=http://www.businessdictionary.com/definition/franchising.html|website=http://www.businessdictionary.com/definition/franchising.html|accessdate=29 October 2014|ref=http://www.businessdictionary.com/definition/franchising.html}}</ref> |
In business management, franchising is a contractual relationship between franchiser (owner of the company) and franchisee (buyer of a brand name). The franchiser allows the franchisee to use its trademark along with certain business systems and processes in exchange for a fee.<ref>{{cite web|title=franchising|url=http://www.businessdictionary.com/definition/franchising.html|website=http://www.businessdictionary.com/definition/franchising.html|accessdate=29 October 2014|ref=http://www.businessdictionary.com/definition/franchising.html}}</ref> |
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Business students usually get confused between the concepts of management contracts and franchising. Although they have much in common such as they both earn by selling intangibles<ref>{{cite web|last1=Lacoma|first1=Tyler|title=Differences Between an Operating Agreement & a Franchise Agreement|url=http://smallbusiness.chron.com/differences-between-operating-agreement-franchise-agreement-25768.html|website=http://smallbusiness.chron.com/differences-between-operating-agreement-franchise-agreement-25768.html|publisher=Demand Media|accessdate=29 October 2014}}</ref> and are both affiliated with other company, but where a management contract acts as a framework and provides formation and structure to the company and it’s members, franchisee remains to be an independent businessman.<ref>{{cite web|last1=Zhou|first1=Zongqing|title=The Differences between Franchising and Management Contract|url=http://purple.niagara.edu/zhou/franchise.htm|website=http://purple.niagara.edu/zhou/franchise.htm|publisher=College of Hospitality and Tourism Management|accessdate=29 October 2014|ref=http://purple.niagara.edu/zhou/franchise.htm}}</ref> |
Business students usually get confused between the concepts of management contracts and franchising. Although they have much in common such as they both earn by selling intangibles<ref>{{cite web|last1=Lacoma|first1=Tyler|title=Differences Between an Operating Agreement & a Franchise Agreement|url=http://smallbusiness.chron.com/differences-between-operating-agreement-franchise-agreement-25768.html|website=http://smallbusiness.chron.com/differences-between-operating-agreement-franchise-agreement-25768.html|publisher=Demand Media|accessdate=29 October 2014}}</ref> and are both affiliated with other company, but where a management contract acts as a framework and provides formation and structure to the company and it’s members, franchisee remains to be an independent businessman.<ref>{{cite web|last1=Zhou|first1=Zongqing|title=The Differences between Franchising and Management Contract|url=http://purple.niagara.edu/zhou/franchise.htm|website=http://purple.niagara.edu/zhou/franchise.htm|publisher=College of Hospitality and Tourism Management|accessdate=29 October 2014|ref=http://purple.niagara.edu/zhou/franchise.htm}}</ref> |
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== Advantages of Management Contracts == |
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A businessman who owns several companies, cannot pay attention to every minute detail of all his companies. He needs some expertise assistance with his work so he can concentrate on more important aspects. This assistance can be provided by the contract management companies. On hiring such companies, the owner will have more time to concentrate on expansion of the business rather than day to day working of the companies. The businessman can distribute some of his basic responsibilities to these management companies such as recruitment, deployment and retention. |
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There are several companies who cannot reach the peak of success due to lack of expertise in one field or another. Such companies should hire contract management teams. This way they would not just be hiring an experienced employee but an entire team of expert and experienced employees in technical fields of management, accountancy, marketing and etc. |
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Management contracts gives a businessman assurance of the continuity of the business. A manager or any employee can terminate from his job, leaving the business with no consistent team for the smooth functioning of the operations. While the contract management company can easily change few employees without stirring the constancy of the business model. <ref>{{cite web|last1=Ray|first1=Linda|title=Advantages and Disadvantages of Management Contracts|url=http://smallbusiness.chron.com/advantages-disadvantages-management-contracts-18886.html|website=http://smallbusiness.chron.com/advantages-disadvantages-management-contracts-18886.html|publisher=Demand Media|accessdate=31 October 2014}}</ref> |
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Through management contracts, a businessman can venture international business opportunities without taking a huge risk of putting his own physical assets at stake. For example, the Heathrow Airport Holdings Limited of Britain retains general airport management skills. In the EEUU Heathrow serves the Indianapolis Airport under a 10 years management contract. It also provides retail management at the air mall in the Pittsburgh Airport.<ref>{{cite web|website=http://www.heathrowairport.com/about-us/partners-and-suppliers|accessdate=31 October 2014}}</ref> |
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Government uses management contracts for the progress and development of the skill of the local managers and workers. They also accolade management contract companies to upgrade and operate public utilities. <ref>{{cite book|title=Fundamenta's of international business}}</ref> |
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Revision as of 08:39, 31 October 2014
 | This article needs additional citations for verification. (December 2009) |
A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of doing things (as with franchising or licensing) but involve actually doing them. A management contract can involve a wide range of functions, such as technical operation of a production facility, management of personnel, accounting, marketing services and training.
In Asia, many hotels operate under management contract arrangements, as they can more easily obtain economies of scale, a global reservation systems, brand recognition etc. It is not unusual for contracts to be signed for 30 years, and having a fee as high as 3.5% of total revenues and 6-10% of gross operating profit. The Marriott International Corporation operates solely on management contracts.[citation needed]
Management contracts have been used to a wide extent in the airline industry, and when foreign government action restricts other entry methods. Management contracts are often formed where there is a lack of local skills to run a project. It is an alternative to foreign direct investment as it does not involve as high risk and can yield higher returns for the company. The first recorded management contract was initiated by Qantas and Duncan Upton in 1978.[1][failed verification]
Difference between management contract and franchising
In business management, franchising is a contractual relationship between franchiser (owner of the company) and franchisee (buyer of a brand name). The franchiser allows the franchisee to use its trademark along with certain business systems and processes in exchange for a fee.[2] Business students usually get confused between the concepts of management contracts and franchising. Although they have much in common such as they both earn by selling intangibles[3] and are both affiliated with other company, but where a management contract acts as a framework and provides formation and structure to the company and it’s members, franchisee remains to be an independent businessman.[4]
Advantages of Management Contracts
A businessman who owns several companies, cannot pay attention to every minute detail of all his companies. He needs some expertise assistance with his work so he can concentrate on more important aspects. This assistance can be provided by the contract management companies. On hiring such companies, the owner will have more time to concentrate on expansion of the business rather than day to day working of the companies. The businessman can distribute some of his basic responsibilities to these management companies such as recruitment, deployment and retention. There are several companies who cannot reach the peak of success due to lack of expertise in one field or another. Such companies should hire contract management teams. This way they would not just be hiring an experienced employee but an entire team of expert and experienced employees in technical fields of management, accountancy, marketing and etc. Management contracts gives a businessman assurance of the continuity of the business. A manager or any employee can terminate from his job, leaving the business with no consistent team for the smooth functioning of the operations. While the contract management company can easily change few employees without stirring the constancy of the business model. [5] Through management contracts, a businessman can venture international business opportunities without taking a huge risk of putting his own physical assets at stake. For example, the Heathrow Airport Holdings Limited of Britain retains general airport management skills. In the EEUU Heathrow serves the Indianapolis Airport under a 10 years management contract. It also provides retail management at the air mall in the Pittsburgh Airport.[6] Government uses management contracts for the progress and development of the skill of the local managers and workers. They also accolade management contract companies to upgrade and operate public utilities. [7]
See also
References
- ^ http://www.iaccm.com
- ^ "franchising". http://www.businessdictionary.com/definition/franchising.html. Retrieved 29 October 2014.
{{cite web}}: External link in|ref=and|website= - ^ Lacoma, Tyler. "Differences Between an Operating Agreement & a Franchise Agreement". http://smallbusiness.chron.com/differences-between-operating-agreement-franchise-agreement-25768.html. Demand Media. Retrieved 29 October 2014.
{{cite web}}: External link in|website= - ^ Zhou, Zongqing. "The Differences between Franchising and Management Contract". http://purple.niagara.edu/zhou/franchise.htm. College of Hospitality and Tourism Management. Retrieved 29 October 2014.
{{cite web}}: External link in|ref=and|website= - ^ Ray, Linda. "Advantages and Disadvantages of Management Contracts". http://smallbusiness.chron.com/advantages-disadvantages-management-contracts-18886.html. Demand Media. Retrieved 31 October 2014.
{{cite web}}: External link in|website= - ^ http://www.heathrowairport.com/about-us/partners-and-suppliers.
{{cite web}}:|access-date=requires|url=(help); External link in|website=|title=(help); Missing or empty|url=(help) - ^ Fundamenta's of international business.
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