• Title/Summary/Keyword: franchising industry

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A study on the developmental ideas of Franchising industry in Korea (프랜차이즈 산업의 발전방안)

  • Son, Yong-Seung;Han, Chul-Yong;Ahn, Kwan-Young
    • Asia-Pacific Journal of Business Venturing and Entrepreneurship
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    • v.7 no.2
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    • pp.177-187
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    • 2012
  • Franchising has long been an effective form of distribution that is used primarily by manufacturers whose product lines are especially suited exclusive or highly selective distribution. By IFA(International Franchise Association), franchising is defined as a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising, and management in return for a consideration from the franchisee. Thus franchising is a method for the owner(franchisor) of product, service, or method to obtain retail or wholesale distribution through licensed, affiliated dealers(franchisees). With rapid increase of franchising industry globally, franchising industry is very rapidly increasing especially in the sector of outdoor restaurant industry in Korea. But there are many problems to be settled for promoting this industry. For example, the industry is too much lean outdoor restaurant industry. With franchisors' short history and lack of management capacity, shortage of distribution infrastructure, smaller size of franchising system, and low trust between franchisor and franchisee, and so on, the industry has many barriers to overcome for promoting it. Here we are suggesting that taxation benefaction, monetary support for the starting franchisee, establishment of fair trade principle, promoting information system and professional human resource should be needed.

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Organizational Factors Facilitating the Internationalization of Korean Franchising Companies (해외진출 국내 프랜차이즈기업의 조직특성)

  • Lim, Young-Kun;Lee, Dong-Whuy;Kim, Hee-Jung
    • Journal of Global Scholars of Marketing Science
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    • v.19 no.2
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    • pp.40-52
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    • 2009
  • Franchising is one of the fastest growing types of business. It is already popular and well-known in the U.S., and has been growing in many other countries including Korea. Furthermore, many Korean franchising companies have expanded their business overseas actively. According to the data by the Ministry of Industry and Resource, 82 companies out of a sample of 500 franchising companies are already operating in many foreign countries and 48% of them have started their foreign business since 2006. This clearly indicates the fast growing current trend of foreign operation by Korean franchising companies. In spite of the fast growing trend of foreign expansion in the industry, academic research on internationalization of franchising companies is extremely difficult to find. Accordingly, academic research on the issue is necessary and urgent in Korea. Among the various research questions on internationalization of franchising business, this study intends to investigate the difference in organizational factors between the franchising companies doing foreign operation and those doing business only domestically. More specifically, this research has the following purposes. First, considering the lack of theoretical basis of previous studies, resource-based theory and agency theory are employed as the theoretical bases. Second, this study explains the difference in internationalization based on organizational factors such as company size, history and growth rate. Third, the five hypotheses regarding the difference in organizational factors are presented and tested empirically, which is the first attempt in the area of this topic. Finally, the study attempts to clarify the conflicting implications among theories regarding some organizational factos such as growth rate. As the theoretical background, resource-based theory and agency theory are discussed. According to resource-based theory, a firm can grow continuously when it has competence and resource, and also the ability to develop them. The competence and resource can include capital, human resource, management skill, market information, ability to manage risk, etc. Meanwhile, agency theory views the relationship between franchisor and franchisee as an agency relationship. In agency theory, bonding capability and monitoring capability are the two key factors which promote internationalization of franchising companies. Based on the two theories, a conceptual model is designed. The model consists of two groups of variables. One is organizational factors including size, history, growth rate, price bonding and geographic dispersion. The other is whether a franchising company is operating overseas or not. We developed the following five research hypotheses basically describing the relationship between organizational factors and internationalization of franchising companies. H1: The size of franchising companies operating overseas is larger than that of franchising companies operating domestically. H2: The history of franchising companies operating overseas is longer than that of franchising companies operating domestically. H3: The growth rate of franchising companies operating overseas is higher than that of franchising companies operating domestically. H4: The price bonding of franchising companies operating overseas is higher than that of franchising companies operating domestically. H5: The geographic dispersion of franchising companies operating overseas is wider than that of franchising companies operating domestically. Data for the analyses are obtained from 2005 Korea Franchise Survey data co-generated by Ministry of Industry and Resource, GS1 Korea, and Korea Franchise Association. Out of 2,804 population companies, 2,489 companies are excluded for various reasons and 315 companies are selected as the final sample. Prior to hypotheses tests, validity and reliability of the measures of size, history, growth rate and price bonding are examined for further analyses. Geographic dispersion is not validated since it is measured using nominal data. A series of independent sample T-tests is used to find out whether there exists any significant difference between the companies internationalized and those operating only domestically for each organizational factor. Among the five factors, size and geographic dispersion show significant difference, growth rate and price bonding do not reveal any difference and, finally, history factor shows conflicting results in the difference depending on how to measure it.

    shows the summary statistics for hypotheses testing. In conclusion, the results show that the size and history, which are the key variables in resource-based theory, have a significant relationship with internationalization and that geographic area, which belongs to agency theory, also has a strong relationship with internationalization. The results support the findings of extant research and, therefore, prove the usefulness of resource-based theory and agency theory in explaining internationalization of franchising companies. However, growth rate and price-bonding do not show a clear difference between the two types of companies. Accordingly, these two factors need further attention in the future research. Although this study shows meaningful findings theoretically and practically, it has several limitations. First, only organizational factors are considered even if there are various environmental factors influencing franchising firm's internationalization. Second, only being internationalized or not is considered. That is, modes of entry and the size of foreign operations are not included in the study. Third, internationalization strategy is often determined based on the desire for business expansion and higher profitability and egoistical reasons of the CEOs. However, this type of factors belonging to behavioral science is not discussed in the study. Finally, organizational ecology perspective is usefully applicable in explaining the survival and performance of internationally operating companies. Accordingly, research propositions based on this perspective need to be developed and tested.

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  • Fostering Franchising Intention of SMEs in Vietnam: A Motivation-Opportunity-Ability Perspective

    • TRUONG-THI, Ninh Thuy
      • The Journal of Asian Finance, Economics and Business
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      • v.9 no.4
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      • pp.99-107
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      • 2022
    • Franchising is one of the most interesting areas of management research, attracting researchers and practitioners from all over the world. Many factors that drive franchising intention have been identified by previous researchers. They also demonstrated that there are numerous research gaps in this subject that must be filled. The primary goal of this study is to identify and test new factors of franchising intent. Finally, to clarify the role of these components, this study used the Motivation - Opportunity - Ability paradigm. To test the hypothesis, SmartPLS software was used to evaluate a total of 252 valid questionnaires collected from small and medium businesses in Hanoi, Vietnam. The findings revealed that franchisee motivation, franchisor support, and asset specificity have a positive impact on franchising intention. In whatever case, the opportunity has the greatest impact on participation intentions. In terms of the impact level on SMEs' intentions in the franchise system, ability comes in second. Furthermore, the moderating influence of franchisee asset specialization in the relationship between opportunity and franchising intention is confirmed by this study. This study examines the theoretical and practical contributions, as well as their limitations, and suggests some future research on the subject.

    A Study on Conversion Franchising Strategy : The Case of Nadle-Gagae (컨버전 프랜차이징 전략에 관한 연구 - 나들가게 사례를 중심으로 -)

    • Seo, MIn-Gyo;No, Yong-Sook;Lee, Young-Chul
      • The Korean Journal of Franchise Management
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      • v.2 no.1
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      • pp.74-99
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      • 2011
    • This study aims to introduce conversion franchising strategy by utilizing the case of Nadle-Gagae. The case study of Nadle-Gagae shows that conversion franchising to Nadel-Gagae increases sales, the number of customer visits or visiting rates, and the level of satisfaction of store-owner and customer. This implies that conversion franchising benefits conversion franchising company, store-owner, and customer; it can be conducted as a competitive edge or strategy. However, it is limited to conclude that conversion franchising strategy will apply to all general franchising companies by only analysizing the case of Nadle-Gagae, because the business was initiated by government agency or governmental policy. Therefore, the franchising management should consider more conditions or circumstances related to franchising industry.

    Research Framework for International Franchising (국제프랜차이징 연구요소 및 연구방향)

    • Kim, Ju-Young;Lim, Young-Kyun;Shim, Jae-Duck
      • Journal of Global Scholars of Marketing Science
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      • v.18 no.4
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      • pp.61-118
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      • 2008
    • The purpose of this research is to construct research framework for international franchising based on existing literature and to identify research components in the framework. Franchise can be defined as management styles that allow franchisee use various management assets of franchisor in order to make or sell product or service. It can be divided into product distribution franchise that is designed to sell products and business format franchise that is designed for running it as business whatever its form is. International franchising can be defined as a way of internationalization of franchisor to foreign country by providing its business format or package to franchisee of host country. International franchising is growing fast for last four decades but academic research on this is quite limited. Especially in Korea, research about international franchising is carried out on by case study format with single case or empirical study format with survey based on domestic franchise theory. Therefore, this paper tries to review existing literature on international franchising research, providing research framework, and then stimulating new research on this field. International franchising research components include motives and environmental factors for decision of expanding to international franchising, entrance modes and development plan for international franchising, contracts and management strategy of international franchising, and various performance measures from different perspectives. First, motives of international franchising are fee collection from franchisee. Also it provides easier way to expanding to foreign country. The other motives including increase total sales volume, occupying better strategic position, getting quality resources, and improving efficiency. Environmental factors that facilitating international franchising encompasses economic condition, trend, and legal or political factors in host and/or home countries. In addition, control power and risk management capability of franchisor plays critical role in successful franchising contract. Final decision to enter foreign country via franchising is determined by numerous factors like history, size, growth, competitiveness, management system, bonding capability, industry characteristics of franchisor. After deciding to enter into foreign country, franchisor needs to set entrance modes of international franchising. Within contractual mode, there are master franchising and area developing franchising, licensing, direct franchising, and joint venture. Theories about entrance mode selection contain concepts of efficiency, knowledge-based approach, competence-based approach, agent theory, and governance cost. The next step after entrance decision is operation strategy. Operation strategy starts with selecting a target city and a target country for franchising. In order to finding, screening targets, franchisor needs to collect information about candidates. Critical information includes brand patent, commercial laws, regulations, market conditions, country risk, and industry analysis. After selecting a target city in target country, franchisor needs to select franchisee, in other word, partner. The first important criteria for selecting partners are financial credibility and capability, possession of real estate. And cultural similarity and knowledge about franchisor and/or home country are also recognized as critical criteria. The most important element in operating strategy is legal document between franchisor and franchisee with home and host countries. Terms and conditions in legal documents give objective information about characteristics of franchising agreement for academic research. Legal documents have definitions of terminology, territory and exclusivity, agreement of term, initial fee, continuing fees, clearing currency, and rights about sub-franchising. Also, legal documents could have terms about softer elements like training program and operation manual. And harder elements like law competent court and terms of expiration. Next element in operating strategy is about product and service. Especially for business format franchising, product/service deliverable, benefit communicators, system identifiers (architectural features), and format facilitators are listed for product/service strategic elements. Another important decision on product/service is standardization vs. customization. The rationale behind standardization is cost reduction, efficiency, consistency, image congruence, brand awareness, and competitiveness on price. Also standardization enables large scale R&D and innovative change in management style. Another element in operating strategy is control management. The simple way to control franchise contract is relying on legal terms, contractual control system. There are other control systems, administrative control system and ethical control system. Contractual control system is a coercive source of power, but franchisor usually doesn't want to use legal power since it doesn't help to build up positive relationship. Instead, self-regulation is widely used. Administrative control system uses control mechanism from ordinary work relationship. Its main component is supporting activities to franchisee and communication method. For example, franchisor provides advertising, training, manual, and delivery, then franchisee follows franchisor's direction. Another component is building franchisor's brand power. The last research element is performance factor of international franchising. Performance elements can be divided into franchisor's performance and franchisee's performance. The conceptual performance measures of franchisor are simple but not easy to obtain objectively. They are profit, sale, cost, experience, and brand power. The performance measures of franchisee are mostly about benefits of host country. They contain small business development, promotion of employment, introduction of new business model, and level up technology status. There are indirect benefits, like increase of tax, refinement of corporate citizenship, regional economic clustering, and improvement of international balance. In addition to those, host country gets socio-cultural change other than economic effects. It includes demographic change, social trend, customer value change, social communication, and social globalization. Sometimes it is called as westernization or McDonaldization of society. In addition, the paper reviews on theories that have been frequently applied to international franchising research, such as agent theory, resource-based view, transaction cost theory, organizational learning theory, and international expansion theories. Resource based theory is used in strategic decision based on resources, like decision about entrance and cooperation depending on resources of franchisee and franchisor. Transaction cost theory can be applied in determination of mutual trust or satisfaction of franchising players. Agent theory tries to explain strategic decision for reducing problem caused by utilizing agent, for example research on control system in franchising agreements. Organizational Learning theory is relatively new in franchising research. It assumes organization tries to maximize performance and learning of organization. In addition, Internalization theory advocates strategic decision of direct investment for removing inefficiency of market transaction and is applied in research on terms of contract. And oligopolistic competition theory is used to explain various entry modes for international expansion. Competency theory support strategic decision of utilizing key competitive advantage. Furthermore, research methodologies including qualitative and quantitative methodologies are suggested for more rigorous international franchising research. Quantitative research needs more real data other than survey data which is usually respondent's judgment. In order to verify theory more rigorously, research based on real data is essential. However, real quantitative data is quite hard to get. The qualitative research other than single case study is also highly recommended. Since international franchising has limited number of applications, scientific research based on grounded theory and ethnography study can be used. Scientific case study is differentiated with single case study on its data collection method and analysis method. The key concept is triangulation in measurement, logical coding and comparison. Finally, it provides overall research direction for international franchising after summarizing research trend in Korea. International franchising research in Korea has two different types, one is for studying Korean franchisor going overseas and the other is for Korean franchisee of foreign franchisor. Among research on Korean franchisor, two common patterns are observed. First of all, they usually deal with success story of one franchisor. The other common pattern is that they focus on same industry and country. Therefore, international franchise research needs to extend their focus to broader subjects with scientific research methodology as well as development of new theory.

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    A Study on Determinants Influencing Satisfaction with Franchising System in Foodservice Industry (외식프랜차이즈 가맹점의 가맹본부에 대한 만족도 결정요인에 관한 연구)

    • Lim, Hyun-Cheol
      • Culinary science and hospitality research
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      • v.10 no.4
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      • pp.96-117
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      • 2004
    • The purpose of this study was to find relationship of satisfaction factors between franchisor and franchisee, and to examine the effects on satisfaction with franchisee in foodservice industry. Through the prior study, instrumental and relational factors were adapted as independent variables, and satisfaction variables were selected as dependent variables. The survey was administered to 346 franchisor possessing over 30 franchisees at Dae-gu metropolitan area, and analyzed by SPSS 10.0. The results of analysis were examined through the multiple regression analysis.

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    Franchising Practices in Selected Markets around the World: A Review

    • ADEIZA, Adams
      • The Korean Journal of Franchise Management
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      • v.10 no.2
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      • pp.7-18
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      • 2019
    • Purpose - This paper attempts to provide an understanding of practice of franchising in eight countries - USA, UK, Australia, Brazil, China, Malaysia, South Africa and Nigeria. The bases of the review are: number of systems and outlets, employment generation, annual turnover, GDP contribution, legal and regulatory frameworks and country-specific franchise business practice nuances. Research design, data and methodology - the paper is descriptive, highlighting elements of the business practice that distinguish one country from another. Documentary data - mainly industry publications supplemented by empirical literature - was used for the review. Result - Although there are commonalities in the technical design and implementation of franchise business practice - especially the business model type - differences exist in terms of legal and regulatory frameworks guiding the industry across the eight countries studied. Conclusion - There are no two countries that have the same franchise practices. Franchise markets in the developed, and to some extent, the emerging economies have saturated. Franchise markets in African countries are at infant stage and thus, these countries are strategizing to attract foreign brands into their domains.

    The Impact of Corporate Entrepreneurship on Employee Commitment and Performance: Evidence from the Korean Food Franchising Sector (조직 기업가 정신이 구성원의 조직몰입과 성과에 미치는 영향: 한국 외식 프랜차이즈 산업)

    • Park, Hee-Hyun;Lew, Yong-Kyu
      • The Korean Journal of Franchise Management
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      • v.7 no.2
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      • pp.5-14
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      • 2016
    • Purpose - Competitive industry structure and recent economic depression challenge a survival of Korean small- and medium-sized food franchising companies (SMFCs), albeit the explosive growth of the Korean food service industry for last few decades. Against this backdrop, it examines how these SMFCs overcome liabilities of smallness and resource scarcity to strengthen competitive advantage in the market. To tackle this, in this article we focus on corporate entrepreneurship and human resources as a knowledge-based asset for these SMFCs. Furthermore, the ratio of employee turnover is high in SMFCs. We view that such brain-drain may result in poor performance of the Korean SMFCs. As such, we pay attention to the role of organizational commitment to an organization as a solution for enhancing individual-level employees' loyalty toward their organization. Research design, data, and methodology - Our research question is to what extent corporate entrepreneurship (i.e., innovative organizational culture, organizational autonomy, and administrative innovation) affects an individual-level attitude toward the organization and, in turn, employee creativity and satisfaction in the Korean SMFCs context. We collected data from employees in SMFCs for three months. A total of 126 valid questionnaires were collected, and analyzed the data using partial least squares path modeling. Results - The reliable and valid measurement model feed into testing the structural model. Our findings suggest that innovative organizational culture and organizational autonomy positively affect employee commitment. Particularly, organizational autonomy has a greater effect than innovative culture on employee commitment. However, the relationship between administrative innovation and employee commitment is not significant. We also find that employee commitment positively affects both employee creativity and satisfaction. Conclusions - Our contribution to the existing franchising business and management literature is twofold. First, the conceptual model includes three antecedents in the organizational entrepreneurship dimension to organizational commitment. Second, we conceptualize organizational commitment as employee commitment, and validate its impact on employee creativity and job satisfaction at an individual performance level. Overall, this article suggests that it is critically important for the Korean SMFCs to develop corporate entrepreneurship in order to facilitate employees' positive attitudes toward their organizations.

    First Mover Advantage Based on Franchising in the Foodservice Industry (외식산업에서 프랜차이징을 통한 선발자 우위에 관한 연구)

    • Chung, Dae-Yong;Eom, Tae-Yeung
      • Journal of the East Asian Society of Dietary Life
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      • v.20 no.1
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      • pp.166-174
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      • 2010
    • It is widely accepted that there are first mover advantages in various existing industries. However, few studies have been conducted to evaluate the first mover advantages shown in the foodservice industry, whether first movers practically have first mover advantages, and what effects these advantages have on foodservice enterprises. Specifically this study was designed to identify the relationship between first mover advantages and business performance in the foodservice industry. To accomplish this, questionnaires were sent to and collected from selected first movers consisting of 70 foodservice franchised enterprises. SPSS 15.0 was then employed to conduct factor analysis, reliability analysis, correlation analysis, and regression analysis. The analyses revealed that the franchised foodservice enterprises could provide several strategies that enabled them to grow quickly and to establish more shops in their market. In addition, having a greater number of shops resulted in greater advantages when compared to their competitors. Moreover, the advantages of first movers had a significant effect on their business performance. Taken together, these findings imply that if foodservice enterprises franchise their business as early as possible, they can more easily preoccupy their market and enjoy more first mover advantages. This study is meaningful and differentiated from existing studies in that it investigated first mover advantages of the foodservice enterprises in the appropriate industry.

    Effects of Environmental Uncertainty on Transaction and Industry Characteristics in the Franchising Markets (환경불확실성이 프랜차이즈 시스템의 거래특성과 산업특성 및 성과에 미치는 영향)

    • Han, Sang-Lin;Baek, Mi-Young
      • Journal of Distribution Research
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      • v.13 no.3
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      • pp.55-77
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      • 2008
    • The purpose of this research is to understand the effects of environmental uncertainty on transaction characteristics, industry factors, and performance in Korean franchising markets. This research tried to investigate both the characteristics of B-to-C service factors and B-to-B industry factors of franchising industry from the perspectives of CLalt, trust, communication, and other important variables. Hypothetical research model was proposed and, by using SPSS and AMOS, research hypotheses and structural equation models were empirically tested and supported. The results showed that environmental uncertainty has negative effects on relationship characteristics and industry characteristics of franchise. Trust showed positive impact on the performance. Managerial implications and limitations of the study results were also discussed. Future research direction was suggested.

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