Explanation of the meaning and importance of chain store operations and how to succeed

In order to realize multi-store development, it is important to understand chain store operations. There are three types of chains : regular, franchise, and voluntary , each with its own characteristics.
In this article, we will explain the types of chain operations, their advantages and disadvantages, and the three principles that lead to success.

What is chain store operation and chain operation?

“Chain store operation” refers to the management method of developing multiple stores centered on the headquarters, and is also called “chain operation”. We will explain the overview, advantages, and disadvantages of chain store operations and chain operations.

Chain operation is an important concept in multi-store development

Chain operation is a management method based on the “chain store theory” that leads to successful multi-store development . In the first place, the chain store theory is a management method that was born in the United States, and efficiency is improved by having each store’s product planning, purchasing, promotion, recruitment, etc. It is a method of planning. Management will be smoother if the headquarters and each store share roles and concentrate on each other’s work.

Advantages of chain operation

A major advantage of chain operations is the reduction in purchasing costs . Headquarters collectively handles purchases for each store, and by purchasing large quantities of products, it is possible to establish favorable conditions such as price reductions. If you can purchase the same quality at a lower price, you can reflect that in the selling price. This allows us to keep our selling prices lower than our competitors and increase our profits. In addition, it is possible to reduce fixed costs and recruitment costs at each store by collectively managing them.

On the other hand, there are also benefits for consumers who visit stores. Consumers who always use the same chain want the same products and services at every store. Chain operations are characterized by the fact that the headquarters manages and standardizes the services of each store, such as creating manuals for service procedures, so that customers can receive the same quality of service . Being able to meet the needs of consumers is also a major advantage of adopting such a form.

Another advantage is that we can collect a lot of relevant and useful data from each store because we operate under the same management method. Collecting and analyzing information at the headquarters makes it easier to formulate effective management strategies.

Disadvantages of chain operation

One of the disadvantages of chain operation is that there is no guarantee of profit for the initial investment . Since we operate multiple stores, it is not guaranteed that each store will generate the same profit. Even if one store generates enough sales to recoup the initial investment, if the other store does not generate a profit, the overall sales growth will be sluggish. Also, as the number of stores increases, a certain number of employees will be required, and the cost of securing and training human resources will also increase.

One of the disadvantages is that there are many stores, so it may not be possible to manage each store well . Poor management can lead to differences in service quality between stores. If the service quality at some stores declines, the trust of the chain store as a whole may also be lost. From this, it is necessary to understand that in chain operations, if all stores cannot provide the same quality of service, it will lead to loss of profit.

3 types of chain operations

There are three types of chain operations. They are “Regular Chain”, “Franchise Chain” and “Voluntary Chain” . Let’s take a closer look at the three forms.

Regular Chain (Corporate Chain)

Also known as a corporate chain , we develop chain stores directly managed by the head office in various places. This is a form that is often seen in supermarkets and specialty stores, where the company itself secures human resources, manages purchases and sales, and manages store facilities . Since the head office controls everything, costs can be reduced due to its scale and economic efficiency, and management efficiency can be improved by standardizing brand value and sharing know-how. In addition, because of its characteristics, it is possible to provide uniform services at any store, so it is an advantage that consumers can use it with a sense of security.

franchise chain

This is a form in which companies with products and sales know-how solicit franchise stores with exclusive sales rights and open stores . It is often seen in convenience stores and restaurants, and in this case, the company is called the franchisor and the affiliated store is called the franchisee. Franchisees receive know-how from the headquarters of the company, operate it, and pay contract fees and royalties.

The big difference from regular chains is that the company that is the headquarters and the franchise store are not related in terms of capital. The owner of the store pays for the cost of opening a franchise store, and the headquarters gives the right to sell products and provides management guidance. This gives companies the advantage of expanding their market without having to invest a lot of capital. On the other hand, in addition to receiving management guidance for franchised stores, it is also a great advantage that a certain amount of profit can be expected because they can sell products and services that already have brand value.

voluntary chain

This form is to create an organization among member stores . Although there is a headquarters that provides management guidance like a franchise chain, the main body of management is the franchised store. It is characterized by sharing the same purpose and profit among member stores and forming a cooperative relationship to develop the chain as an organization.

The advantage of being a voluntary chain is that member stores can share information such as market trends, consumer needs, and management know-how. By sharing effective information between stores, each store can develop. In addition, it is possible to reduce purchasing costs because products can be purchased in bulk between member stores.

In addition, it is characterized by a high degree of freedom in terms of management compared to franchise chains . Franchise chains need to operate in line with brand value, such as detailed regulations regarding services. On the other hand, voluntary chains do not have detailed regulations, and it is possible for each member store to offer its own unique services.

Three Principles “3S” Necessary for Successful Chain Operation

In order to lead the chain operation to success, the three principles of “3S” are necessary. The 3S stands for Standardization, Simplification and Specialization . Three principles are explained here.

Standardization

What is necessary for multi-store management is standardization so that all stores can produce the same results and provide the same service quality . Standardization unifies operations at all stores, from purchasing to inventory management and sales. Manual creation is essential for this purpose . In order to create an effective manual, it would be a good idea to incorporate a dedicated tool. Specific examples of effective manual creation for standardization are explained in detail in the last section, so please refer to them.

Simplification

Simplification refers to taking measures to make complicated work simple and concise so that everyone can understand and execute it at once . If you subdivide an overall complicated task into a range of tasks that can be easily performed, it will be reborn as a task that anyone can do. It is also effective for improving work efficiency such as shortening work time and reducing employee training costs.

Specialization

Specialization is to deepen employees’ understanding of products and services and enable proposals that meet consumer needs . By having knowledge of the products and services handled by all employees and making proposals with confidence, we can gain the trust of consumers and lead to profits for the company.

Understanding and implementing the above 3S will be the key to successful chain operations.

summary

Chain operations have advantages such as reduced procurement costs, standardization of products and services, and ease of strategic planning . However, implementation requires standardization to provide the same quality of service, simplification of complex tasks, and specialization to deepen employee knowledge. For this purpose, it is essential to create a business manual .

However, creating effective manuals is not easy. Therefore, by using tools, you can easily create high-quality manuals.
Create a manual that anyone can understand with images and videos, standardize the operations of each store, and lead chain operations to success.