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Centralisation: Benefits to Franchisees (Worked Answer to AQA Grade Booster 2019 9 Mark Question)


Last updated 2 Apr 2019

Here is a worked answer to the 9-mark question on the benefits to Domino's franchisees of a centralised approach to managing a multi-location business.

Q: Domino’s has a centralised approach to managing its business. Analyse the benefits to Domino’s franchisees of this way of managing a multi-location business (9 marks)

A benefit to franchisees of Domino’s centralised control of activities such as supply chain management and website and app development is that the franchisees can focus on activities where they have relevant expertise and where they are adding the most value. A franchisee is unlikely to know how to create an effective Domino’s app or even how the financial resources to do it well. However, franchisees are very experienced at all aspects of the human resource flow necessary to manage an effective Domino’s outlet, such as recruitment, training and motivation of store and delivery staff. By focusing all their energies on what they do best, the franchisees benefit as does the Domino’s franchisor.

Another benefit of centralisation to franchisees can be seen in the way that outlets are provided with the key ingredient – dough balls – from a central factory. The large investment in dough ball production capacity is also likely to have resulted in greater productivity, whereby Domino’s can reduce the unit cost of producing a dough ball through the greater use of automation and, therefore, achieve economies of scale. An individual franchisee could never operate an alternative dough ball on its own as it would be too small to enjoy the benefits economies of scale. With the centralised approach, all franchisees benefit equally from lower unit costs and, probably, also better consistency of dough ball quality from the new factory.

Notes: The question requires students to address the "benefits" of centralisation. So the required range is two relevant arguments, developed using the context provided.

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