• Journal of the Korea Academia-Industrial cooperation Society
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• v.13 no.1
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• pp.178-184
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• 2012

This research is an empirical research that surveys the influence factors of franchisee's compliance and precedence, which have a direct effect on the success of franchisor, from the view of relation exchange theory. The results herein show that the trust of franchisees towards franchisor has a complete mediating effect between conflict and compliance. This means that in a franchise system, it is important to build trust in order to successfully manage franchisees. Trust built between franchisor and the franchisee has a dominating effect based on relationship even on domains not specified on the contract. Also, it is very important in that it decreases frequently occurring conflicts caused by disagreement of interests and unfair relationship of power, and effectuates compliance of franchisees. Such result is a meaningful theoretical and practical contribution in that it has for the first time domestically investigated the mechanism of relationship leading from conflict and trust to compliance of franchisees by methods of theoretical discussion and empirical analysis.

• Journal of Regulation Studies
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• v.27 no.1
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• pp.153-188
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• 2018

This paper reviews the literature regarding exclusive territory restraint and encroachment and compares the development of related policies in the United States, the European Union, and South Korea. Furthermore, using coffee franchise industry data in South Korea, this paper analyzes the effects of the exclusive territory restraint on entry and exit of coffee shops. The results show that the growth rates of regulated brands' entry have stagnated during the implementation period of the KFTC's Franchising Best Practice Code. Moreover, the exit rates of coffee shops in two years after its entry decreased under the Best Practice Code and the revised Franchise Law.

• Asia-Pacific Journal of Business Venturing and Entrepreneurship
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• v.15 no.4
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• pp.245-261
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• 2020

The aim of this study is to investigate the correlation between the support activities provided by the franchiser and how they affect the intention of the contract renewal and business performances made by franchisees, developing dynamic trust between these transactional partners. Various supportive activities between franchiser and franchisees were divided into financial and non-financial activities and dynamic trust into Transitional-based trust, Calculative-based trust, Relational-based trust, and Balanced-based trust. These trust types, which are variable and adjustable based on the opportunistic behaviors of business parties, were applied to define the impact of the support activities on the contract renewal intention and the performances. This study was developed around domestic franchisees. An investigator visited business owners and manager level-employees, explained the purpose of the survey prior to the response, and the answers were directly written by hands. A total of 348 copies were used for the analysis. As the results of the analysis, first, financial support activities were found to have a positive(+) effect on transitional-based trust, calculative-based trust, and balanced-based trust. On the other hand, non-financial support activities were found to have a positive(+) effect on calculative-based trust, relational-based trust, and balanced-based trust, and there was no significant relationship on transitional-based trust. Second, the dynamic trust had a statistically significant positive(+) effect on inducing the contract renewal. Lastly, in the relationship between the dynamic trust and its impact on business performances, only transitional-based trust, and relational-based trust were found to have a positive(+) effect on the financial performances. In addition, relational-based trust showed a meaningful positive(+) relationship on the non-financial performances, and non-financial performace showed a meaningful positive(+) relationship on the re-contract intention. From the results, it can be concluded that the financial and non-financial activities for a win-win partnership between franchiser and franchisees are essential in not only forming dynamic trust but also boosting business performances as well as maintaining the business relationship. Thus, it suggests that building a win-win partnership can be promoted more efficiently by specifying activities best suitable for a particular relationship. In addition, a specific set of activities could be presented for establishing the level of trust that is formed in situations that vary depending on transaction risks and interdependency arising from having the transactional relationship based on the contract as the franchise industry features. Eventually, it is expected that this study can provide a way to promote the qualitative improvement of the franchise industry by identifying factors essential to establishing a sustainable win-win system and relationships that can improve the business performance of franchisees.

• Journal of Distribution Science
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• v.9 no.2
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• pp.49-59
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• 2011

A franchise can be said to be the main method of distribution and marketing. It appears to be the future of the retail industry and is one of the world's fastest growing businesses sectors, as many policy reports and research results have acknowledged. Korea's franchise industry began in the 1970s, spread out into many areas (including food services, retail, and the service industry), and has grown by over 10% each year ever since. The industry's influence on the national economy becomes ever greater. Although the size of the franchise industry is expected to grow as it spreads and as the government expands its support, it has not yet attracted much academic interest. Research has so far been very fragmented. The main interest has been the relationship and conflicts between the head offices and the affiliates. No study has yet occurred on whether the concepts of satisfaction and intent to conclude a contract directly affect the success or failure of the affiliates. Few studies have empirically inquired into the demographic characteristics and abilities of the affiliates that significantly affect their results. Domestic franchise industries must prepare to leap from quantitative to qualitative growth. Most important is the need for affiliate headquarters and affiliates to build confidence between them. A friendly and reliable relationship between affiliate headquarters and affiliates will eliminate distrust from the franchise and maintain a healthy franchise system. This study suggests that current and prospective heads of affiliation should concentrate not on attracting affiliates but on investment and techniques of affiliate support. They should work on the reinforcement of brand power, the appropriate affiliate business environment, systematic education/training, taking burdens off the affiliate business persons, consolidating the relationship with the affiliate business persons, marketing mix factors (e.g. products, price conditions, logistics and shipping services, promotion, supervising and supervisor, operation procedures/processes, and material evidence); these all greatly affect the success or failure of the affiliate business. Supporting the affiliates is an important factor that enhances their results and satisfaction and consequently increases the positive recommendations to others and the ratio of recurrent conclusions of contracts, which ultimately generate the growth of the franchises. In addition, it is suggested that prospective franchise founders should make every effort to choose a good head office since the characteristics of the head office greatly influence the success of the affiliates. This study is significant in that it grasps the characteristics of the head office of affiliation and of the affiliates that influence affiliate results in ways not yet academically attempted.

• Journal of Distribution Research
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• v.13 no.2
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• pp.1-27
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• 2008

In a power-asymmetry relationship like franchise system, a high dependent franchisee must often rely on its powerful partner. Therefore, in order to build up 'win-win' systems, therefore channel members should increase trust and commitment each other to enhance the relationship quality to sustain long-term cooperative relationships. First of all, to increase the relationship quality in franchise system, franchisor should increase franchisee's perception of the powerful franchisor's justice. The point of this research, I established basic hypotheses and comparative hypotheses to examine franchisor's behavior what franchisee expected which influences on franchisee's attitude and behavior in power - asymmetry relationship in franchise system. For the purpose of the empirical testing, managers of franchisee in the food service industry of Korea had been selected and analyzed, and major findings in this study as follow: First, the relational norm between franchisor and franchisee increased both distributive justice and procedural justice, especially relational norm had more effect on procedural justice than distributive justice. Second, distributive justice increased both economic commitment and social commitment while procedural justice just increased social commitment only but economic commitment. So, on the relational commitment, distributive justice was more important element than procedural justice. On the other hand, procedural justice had indirect effect on economic commitment through distributive and social commitment.

• Journal of Distribution Science
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• v.4 no.2
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• pp.21-40
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• 2006

Small and middle sized Franchise system channels experience conflicts because of constant interaction between franchiser and franchisee. However, it is rarely that attempt has been made to identify causes of conflicts in distribution of franchise industry. The purpose of this study was to explore cause of conflicts from the franchisee. For the study, data were collected from the owner or the shop-manager with a contractor in franchise systems. By means of in-depth interviews with multiple informants, their statement was analyzed qualitatively. From analysis of the resulting data, the causes of conflicts were associated with two broad sets, attitudinal and structural differences between franchisers and franchisees. First, attitudinal sources of conflict were identified as perception of subordinated relationships between channel members, delayed announcement on order changes, difficulties in communication by doing irresponsible behavior, different expectations between channel members in market territory and lack of consistent-supporting. Second, structural sources of conflict involved unilateral decision on interior, payment method, unreasonable delivery issue, treat franchisee with discrimination by the sales, in controlling against free management. There are limitations on generalization due to the results based on interview, but this study will be a useful exploratory step before designing a large scale survey.

• Journal of Distribution Research
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• v.16 no.3
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• pp.33-75
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• 2011

The ownership structure of a franchise system is determined by the franchisor's strategic choice. A close look at the extant theories and perspectives in economics and management such as resource scarcity theory, agency theory, transaction cost analysis, and mixed ownership theory reveals that firms choose their ownership structure for the sake of economic efficiency, profit potentials, the chance of survival, and other strategic concerns. The present study, on the basis of strategic choice perspective, reviews the divergent theories of a franchise system's ownership structure and its determinants, thus providing a theoretical framework for comparing the contradictory arguments along the several critical dimensions. We also developed and tested the conflicting hypotheses regarding key determinants of ownership structure including firm's age, size, transaction-specific investments, uncertainty, and risk-sharing propensity. Using a FDD (Franchise Disclosure Document) data set of 543 Korean franchisors, we found that the years in business, the total number of employees, days of training, the inverse of the years of franchising, and the requirement of royalty payment have positive relationships with the proportion of company-owned outlets to total number of outlets. On the other hand, the proportion of company-owned outlets was found to have negative relationships with the total number of outlets and the extent of geographic dispersion of outlets, but to have no significant relationships with the initial investment required and the inverse of contract length. Based on the findings, we provide several theoretical and managerial implications for studying ownership structure of franchise systems.

• The Korean Journal of Franchise Management
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• v.3 no.1
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• pp.92-110
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• 2012

Due to the social problems including recent economic crisis and unemployment rate increase, the demand of business foundation market has been increased and, in the meantime, on the basis of the business foundation support policy of the government including youth foundation support policy and Small & Medium Business Administration foundation planning, business foundation market has been showing steady growth trend. With this enlargement of foundation market, as the accompanied increase of franchise market is expected, it is considered that the importance of more realistic and concrete research about franchise market be larger than before. This study considered brand image, main office support, foundation cost, information search activity as the advanced variable of effect on brand selection and established the cause of effect on brand selection by improving the existing advanced research, and its result is as follows. First, according to foundation business kind, age, sex, yes or no of marriage, there is some difference III the thought about brand image and foundation possibility. Second, Second, the most important factor of franchise contract intention is economical specificity. It is difficult to consider brand image, franchise support and information search activity as the property having a big effect on preliminary founder, and it was shown that the cost for franchise management(Consistency with initial foundation cost and self-capital, promotion cost, management fund, facility/equipment reinvestment, etc.) is an important property. Specially, it was shown that consistency with initial foundation cost and self-capital is the most important factor for preliminary founder.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.51
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• pp.465-495
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• 2011

Domestic franchised businesses have been showing relatively fast growth, but the growth is expected to slow down as in those developed countries. In face of this changing market environment, domestic franchisers will have to turn their eyes abroad to achieve sustainable growth. On the other hand, more international franchisors could pursue expanding into the Korean market due to economic or strategic reasons in their home countries. In general, enterprises are faced with several barriers when entering foreign markets by franchising their operation. Issues relating to such entry barriers can be broadly classified into legal and managerial. To begin, international franchising necessitates enterprises to handle various aspects of legal issues. There are no internationally unified rules for franchise agreements as in international goods purchase contracts. This forces franchisors to have deep knowledge of concerned regulations and practices of each of the individual target countries, in particular franchising practices which differ from those of their own countries in terms of rights and obligations of the involved parties. Having regard to this situation, this study reviewed the EU's PEL CAFDC and other domestic and overseas regulations governing franchising. From the results, several contractual obligations were derived that need to be taken into account when handling the issues around the international franchise agreement. In closing this paper mainly having in mind enterprises in various business lines seeking to expand into international franchising, some unmet needs are worth commenting. First, there is an urgent need to establish practical guidelines along with the model agreement addressing the issues of international franchising in the absence of any unified international rules. Second, to meet the first need above, it is needed that the relevant authorities conduct a comprehensive review of the existing franchising regulations available across overseas countries and, based on the results, embark on gathering good common elements in the existing franchising regulations in individual countries, ultimately developing the best possible guidelines and examples.

• Culinary science and hospitality research
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• v.15 no.4
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• pp.331-344
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• 2009

As per the results verified in this study for the effect, which is given to the intent for contract according to the franchisor's capacity and support factors per the founder's characteristics. Firstly, as for analysis of the effect given by the conditions of the founder to the capacity of the franchisor, the experience and the founder's self-confidence are attentively affected in the history of the franchisor among the capacity of the franchisor, and the experience and the specialized knowledge done in the number of the franchises, and the experienced, specialized knowledge and self-confidence of the founder done in the brand and the self-confidence of the founder done in the capacity of the franchisor. Secondly, as for the hypothesis, which the founder's conditions is the support of the franchisor, the experience, specialized knowledge and the founder's self-confidence attentively affected in the support for advertisement, and the capital and experience done in the educational support, and the capital and specialized knowledge and the founder's self-confidence done in the business manual and the founder's self-confidence done in the package. Thirdly, as for the effect given by the capacity of the franchisor to the intent for contract, the number of the franchises possessed the franchisor and brand are affected to the capacity of the franchisor, and fourthly, as for the hypothesis, which the support of the franchisor affects the intent for contract, the educational support, business manual and package purchase are attentively affected. Therefore, through this study, it can be known that the characteristics of the founder and the capacity and support of the franchisor are mutually related to the intent for contract.