Clearance pricing and end of season inventory management are challenging and important problems in retailing. Sales rates depend upon price, seasonal effects, and the remaining assortment of items available to customers. There is little time to react to observed sales, and pricing errors result in either loss of potential revenue or excess inventory to be liquidated. This paper develops optimal clearance prices and inventory management policies that take into account the impact of reduced assortment and seasonal changes on sales rates. Versions of these policies have been tested and implemented at three major retail chains and these applications are summarized and discussed.Marketing, Pricing, Retailing

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This paper addresses the questions of market penetration and locational conflict in a franchise system of distribution. The models developed provide a means to evaluate alternative scenarios and the effects of various franchise policies. It is shown that the market pcnctration and location goals of the members of a franchise system coincide only under a very limited set of circumstances.Subject Areas: Location Models, Discrete I'rogramming. and Math Programming. INTROINJCIIONOver the past decade there has been a significant amount of research conducted on the franchise system of distribution [ I I ] [30] [43], mostly addressing the behavioral and/or legal aspects of the franchisor-franchisee relationship (31 14) 116) [ 17) [I81 [35) [39] 1411 1421. This research has revealed certain conflicts in franchisor-franchisee objectives on such issues as advertising support, supervisioii and training, and repurchase of existing franchise outlets [4] [I61 (341 [41]1421. Anolhcr form of conflict involves the optimal market penetration and locatioiial objectives for the members of a franchise system. Although the literature on opcralional types of conflict within franchise systems is extensive, the market peiictration and locational aspects of conflict have been given little previous attention.Locat ion practices vary widely among franchise systems, one of the biggest differences between systems being the amount of control exercised by the f'rancliisor. McGuire [30] suggested that franchisors are reluctant to give the f'ranchisec any part in the location decision and almost never relinquish the final decision. I n a study of pancake restaurants, however, Lamb [21] found a range of procedures, varying from no franchisor assistance to a strict set of locational criteria imposed by the franchisor. Lamb [21] found that the franchisor usually looks for a set of minimum requirements in a site proposed by the franchisee. An c'xtrcnic example of franchisor control of the location process is McDonald's, which selects the location, constructs the building, and then leases the package to tlic I'ranchisee (21. The franchisee has no input into the location decision. In fact the location is often selected before a franchisee is found.Whilc most research on franchising has addressed the franchisor-franchisee relationship, a disparity of locational goals also exists between the individual * [he authors are indcbtcd to James Ginter, Vijay Mahajan. Alan Sawyer, and the revicwcrs for ihcir comnicnts on an earlier draft of the paper. 58 19801FRANCHISE SYSTEMS 59 franchisee and the master franchisee.' The individual franchisee is concerned only with selecting the profit-maximizing location for one outlet while the master franchisee is concerned with maximizing his profits from a set of outlets. To maximize profits, the master franchisee must consider the optimal number of outlets for the market, the spatial distribution of the outlets so as to maximize aggregate profit, and the trade-off between the cost of additional outlets and the additiona...

OBJECTIVES: This study compared the incentive payments for premium shelf space and discounts on volume purchases paid to retailers by 5 types of companies. METHODS: Merchants were interviewed at 108 randomly selected small retail outlets that sell tobacco in Santa Clara County, California. RESULTS: Significantly more retailers reported receiving slotting/display allowances for tobacco (62.4%) than for any other product type. An average store participating in a retailer incentive program received approximately $3157 annually from all sampled product types, of which approximately $2462 (78%) came from tobacco companies. CONCLUSIONS: Future research should assess the impact of tobacco industry incentive programs on the in-store marketing and sales practices of retailers.

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