A MULTIOBJECTIVE APPROACH TO DESIGN FRANCHISE OUTLET NETWORKS

The economic goals and the resulting locational objectives of a franch isor and its individual franchisees are frequently in conflict. For ex ample, one goal of the franchisor is to maximize system-wide market co verage, while the corresponding goal of the franchisee is to maximize his or her individual market share. Consequently, the optimal facility siting scheme from one perspective may be suboptimal from the other. That is, the facility siting scheme which maximizes system-wide covera ge will not necessarily maximize the market shares of the individual f ranchises which make up the system. In this paper we introduce a multi objective integer programming model to design franchise networks. The model selects franchise locations and identifies individual franchise market areas. Constraints in the formulation guarantee that all franch ise locations are assigned at least a minimal threshold market area wi th sufficient demand to ensure economic survival. An underlying assump tion of the model is that a rationing mechanism exists to assign deman d to various franchise locations. Consequently, the model is most appr opriate for service delivery franchises in which the franchisor can de fine and enforce exclusive franchise territories for the various franc hise outlets. The purpose of this model is to generate alternative sit ing configurations which demonstrate the inherent trade-offs between t he objectives of the franchisor and the individual franchisees. Given these various location alternatives, it is expected that the franchiso r will then evaluate them in terms of other criteria such as the likel ihood of the individual franchisee's success, pricing strategies for t he various sites, total costs, total profit, and the effects of the re sponse of competitors. Consequently, the proposed model should be view ed as an aid for one aspect of the decision process, i.e. the generati on of alternative courses of action.