Franchise Sector Research Articles

Food Franchise Business in Indonesia

This research analyzes market trends and key factors that influence the success of the franchise industry in Indonesia. Through a descriptive and exploratory approach, data was obtained from surveys, interviews, case studies, and document analysis. Market trends show diversification of the franchise sector and a shift in consumer preferences towards value-added brands. However, regulatory, technological, and fierce competition challenges also arise. Success factors for franchise businesses include a robust business model, strategic location, competent management, and smooth operations. Business models and management strategies support each other to achieve success. The government's role in developing the franchise industry includes clear regulations, training, and promotion. Popular food and beverage franchises in Indonesia, such as Ayam Sabana, Kebab Baba Rafi, and Tahu Jeletot Taisi, offer promising business opportunities with affordable start-up capital. Support from the management team and a proven business concept help strengthen the franchise's position in the competitive market.

Analyzing the Correlation of Government Support Efforts to Franchise in MEA for Indonesia's Economic Progress

There are lots of very diverse new businesses that offer different types of products and services, such as modern food and beverage businesses. The franchise business concept makes it possible for someone who has material capital but lacks experience in building their own business to have a profitable business, especially if you buy a franchise from a well-known brand. The purpose of this study is to analyze the correlation of franchise with the input of labor support in dealing with the MEA and to analyze the role of the government in franchise support in the substance of the MEA. regarding the franchise in facing MEA and how the government contributes in it. The industry contribution to the franchise sector is very large because it can absorb a lot of labor, with a large number of workers absorbed increasing economic growth in Indonesia, franchises are able to survive the monetary crisis because franchises produce products that are directly consumed, not depending on capital from banks, to produce goods selectively based on consumption needs, franchise generally comes from termination of employment.

RESILIENCE OF FRANCHISE SYSTEMS IN THE UNITED STATES AND POLAND TO SHOCKS ON THE EXAMPLE OF THE COVID-19 PERIOD

The article deals with the issue of franchise as a distribution system. Participation in such systems brings many benefits, both for franchisors and franchisees. Still, the uneven bargaining power of the parties is significant, and effective actions require mutual trust and a certain autonomy of the parties. The work aims to determine how franchise systems reacted to the crisis caused by, among others, COVID-19 and whether food industry systems were characterized by higher resistance to shocks. The assessment was made based on data from the USA and Poland on the franchise according to the International Franchise Association and Profit System Sp. z o.o. for the years 2007-2021, and subject to availability for a longer period. It found that the franchise sector shrank by around 10% during the pandemic, but after two years, the level of turnover and employment returned to pre-crisis levels. In the USA, food distribution and restaurant systems were more resilient to the lockdown crisis and quickly recovered to their previous turnover and employment levels. In Poland, the gastronomy brand industries accounted for as much as 35% of the systems, and grocery and industrial stores accounted for another 29%. The franchise industry turned out to be resistant to crises, and the high share of food distribution indicates that franchise systems are an effective solution in the food trade, mainly due to an efficiently organized supply chain and lower distribution costs.

The choice of destination country of international franchise networks: the case of Mexican franchisors

PurposeThis article examines the influence of market opportunity, risk, and distance on the choice of destination country for Mexican franchises.Design/methodology/approachThe research hypotheses are developed under the theoretical approaches of institutional theory, agency theory, and transaction costs theory and were contrasted on the data obtained from 52 Mexican international franchisors operating in 37 countries as of 2016. This study uses linear regression with ordinary minimums using the STATA 13.1 software.FindingsThe results reveal that a larger market size, a greater level of economic freedom, and a smaller geographic distance are determining factors in the choice of destination country. No statistical significance was found in the variables GDP per capita, level of democracy and cultural distance.Originality/valueThis research contributes to the theoretical and practical field. On the theoretical side, this study integrates institutional theory, agency theory, and transaction cost theory to evaluate the factors of the destination country that influence the internationalization process of the franchise. Another contribution of this study is to apply theories and models of developed economies to the process of internationalization of franchises in an emerging economy. Additionally, this study is based on a model that considers the distance, opportunities and risks that are considered by Mexican franchisors in the selection of the international markets in which they maintain operations. This study contains important practical implications that can serve as relevant information for decision-making in the franchise sector and its internationalization. This data is valuable for new models of Mexican franchises that decide to start their internationalization process.

Vietnam’s Franchising Law: Critical Assessment and Comparisons with the Legal Framework of Franchising in the Republic of Korea and Thailand

Franchising occurred in Vietnam during the implementation of government policy for economic reform and openness in the mid-1990s. The Vietnam-specific franchise law was passed in January 2006 to create a stable growth in the franchise sector in Vietnam. The legal framework in Vietnam generally follows international legal frameworks. However, the legal framework of franchising businesses is still uncertain. This paper explores Vietnam’s franchising law and displays a comparison to the legal framework of Thai franchising law and the Republic of Korea franchising law. The paper concludes that while Vietnam’s franchising law generally conforms to international standards, some legal issues should be addressed for further development of the Vietnamese franchising sector.

It takes two to tango: A taxonomy of franchise success determinants

PurposeThe authors conduct a structured analysis of the literature on the determinants of economic and financial franchise performance and develop an integrative framework that unifies the literature from franchisor as well as franchisee perspectives.Design/methodology/approach53 relevant research articles on economic and financial franchise success published between 1976 and 2020 were identified. After providing an overview of the empirical methods and theoretical perspectives found in the literature, an original classification system of franchise success determinants was developed.FindingsMore than 50 different variables impacting economic or financial franchise success were identified and grouped into ten distinct categories. The most impactful categories are the franchise relationship, franchisee characteristics and capabilities, franchisor variables and the franchise environment. The study’s integrative framework illustrates not only the impact of these factors on franchise success, but also reveals which areas require more attention.Research limitations/implicationsAs the study focused on understanding the determinants of franchise success, any measures related to franchise failure were excluded. Also, the role of venture capital and stock market listing as growth strategies in the franchise sector were excluded.Practical implicationsThe study’s framework shows how the management of franchise success is complex and that franchise relationship, franchisee and franchisor variables as well as the franchise context need to be taken into account. It illustrates that there is a hierarchy with which these determinants should be prioritized.Originality/valueThe article proposes the first systematic review of the literature on the determinants of economic and financial franchise success. The contribution offers both, researchers and practitioners, new and useful insights for future knowledge development in the field.

Role of Functional Company Characteristics on Food Franchisee Behavior

ABSTRACT Purpose Due to increasing competition, creating and enhancing franchisee patronage behaviors are critical elements in the food franchise industry. Franchise brand-related characteristics are known to influence franchisees’ evaluations. Thus, this paper examines the antecedents of franchisees’ perceived value, which leads to positive behaviors in the food franchise sector. Design/methodology/approach A research model is proposed to describe relationships among different types of functional company characteristics (i.e. quality, innovation, and price) on perceived value and behavioral intentions, and impact of operational involvement in the context of franchisees. A quantitative approach was leveraged to collect 266 usable online questionnaires, together with SmartPLS to analyze the measurement model and proposed hypotheses. Findings Results show that perceived quality on the part of franchisees is the most significant determinant of perceived value, followed by perceived innovation and price. Also, the impact of perceived value on franchisees’ intentions – including continuous and word-of-mouth intentions – is supported. Last, the role of operational involvement (i.e. duration and number of food franchise operations) in perceived value is examined. Originality/value To add to the limited research in the behaviors of franchisees, this study provides useful insights to achieve sustainable growth in the franchise brand context.

New Evidence on Employee Noncompete, No Poach, and No Hire Agreements in the Franchise Sector

New Evidence on Employee Noncompete, No Poach, and No Hire Agreements in the Franchise Sector

Crisis Management in the Brazilian Franchising Sector During the Covid-19 Pandemic

Objective: The objective of the article is to analyse the effects of the Covid-19 pandemic on the Brazilian franchise sector and to identify the main strategies adopted by companies to mitigate the negative impacts of the crisis.Method: The empirical research, using qualitative exploratory methods, was based on three in-depth interviews with franchising sector stakeholders, in addition to the thematic analysis of six webinars promoted by the ABF from April 15 to 28, 2020.Findings: Findings show that franchise chains had to rethink their relationships with various stakeholders such as customers, employees, suppliers, and the government. Besides, franchisors developed alternative sales channels such as websites, social networks, among others. Additionally, what sustained those companies during the crisis was their connection with their purpose.Relevance: This study presents contributions to other companies in a similar situation by exploring the actions taken by the franchise chains during the crisis and identifying the best practices and paths taken.Contribution: This article contributes to investigations on the effects of the Covid-19 public health crisis in the franchising sector, one of the most relevant economic sectors.

Theory and Evidence on Employer Collusion in the Franchise Sector

In this paper we study the role of covenants in franchise contracts that restrict the recruitment and hiring of employees from other units within the same franchise chain in suppressing competition for workers. Based on an analysis of 2016 Franchise Disclosure Documents, we find that of workers are included in a surprising 58 percent of major franchisors' contracts, including McDonald's, Burger King, Jiffy Lube and H&R Block. The implications of these no-poaching agreements for models of oligopsony are also discussed. No-poaching agreements are more common for franchises in low-wage and high-turnover industries.

Franchising and country development: evidence from 49 countries

PurposeAlthough previous research has examined the role of franchising for the economic development of countries, no empirical study to date has investigated the importance of franchising for social, infrastructural, and institutional development. The authors address this research gap by applying research results from the field of sustainable entrepreneurship and highlight that franchising has a positive impact on economic, social, institutional and infrastructural development.Design/methodology/approachThis study uses a fixed-effects model on a panel dataset for 2006–2015 from 49 countries to test the hypothesis that franchising positively influences various dimensions of country development such as economic social institutional and infrastructural development.FindingsThe findings highlight that franchising has a positive impact on the economic, social, infrastructural, and institutional development of a country. Specifically, the results show that the earlier and the more franchising systems enter a country, the stronger the positive impact of franchising on the country's economic, social, institutional, and infrastructural development.Research limitations/implicationsThis study has several limitations that provide directions for further research. First, the empirical investigation is limited by the characteristics of the data, which are composed of information from 49 countries (covering a period of 10 years). Because franchising is not recognized as a form of entrepreneurial governance in many emerging and developing countries, the available information is mainly provided by the franchise associations in the various countries. Hence, there is a need to collect additional data in each country and to include additional countries. Second, although the authors included developed and developing countries in the analysis, the authors could not differentiate between developed and developing countries when testing the hypotheses, because the database was not sufficiently complete. Third, future studies should analyze the causality issue between franchising and development more closely. The role of franchising in development may be changing depending on different unobserved country factors, economic sector characteristics, or development stages.Practical implicationsWhat are the practical implications of this study for the role of franchising in the development of emerging and developing economies? Because public policy in emerging and developing countries suffers from a lack of financial resources to improve the social, infrastructural and institutional environment, entrepreneurs, such as franchisors who expand into these countries, play an important role for these countries' development. In addition to their entrepreneurial role of exploring and exploiting profit opportunities, they are social, institutional, and political entrepreneurs who may positively influence country development (Schaltegger and Wagner, 2011; Shepard and Patzelt, 2011). Specifically, the findings highlight that countries with an older franchise sector (more years of franchise experience) may realize first-mover advantages and hence larger positive spillover effects on their economic, social, institutional and infrastructural development than countries with a younger franchise sector. Hence, governments of emerging and developing countries have the opportunity and responsibility to reduce potential market entry barriers and provide additional incentives for franchise systems in order to trigger these positive spillover effects. The authors expect that the spillover effects from the franchise sector on the economic, institutional, social and infrastructural development of a country are stronger in emerging and developing countries than in developed countries.Originality/valuePrevious research has focused on the impact of franchising on the economic development of a country, such as its growth of gross domestic product (GDP), employment, business skills, innovation and technology transfer. This study extends the existing literature by going beyond the impact of franchising on economic development: the results show that franchising as an entrepreneurial activity offers opportunities for economic, social, institutional, and infrastructural development, all of which are particularly important for emerging and developing economies. The findings of this study contribute to the international franchise and development economics literature by offering a better understanding of the impact of franchising on country development.

The Spatial Design Marketing Strategy of Global Franchises That Take into Consideration the Characteristics of Modern Consumers—A Study Involving the Global Coffee Companies of Starbucks and Blue Bottle

Coffee shops are evolving into spaces that offer diverse experiences for consumers, with coffee acting as a medium. They are simple venues where people can drink coffee and enjoy and share their cultures with each other; moreover, coffee shops capture the consumers’ complex individuality and values. Considering this trend, it is worth looking at the coffee shop in connection with spatial design marketing, as a place that has endless potential to effectively express the needs of modern consumers through spatial identity and story. Accordingly, this study is focused on global coffee franchises because a single brand can control factors other than spatial design, such as coffee price, quality, brand identity, and service. This study looks at global coffee franchises from the spatial design marketing perspective, to examine the value and importance of a space as not only one of the elements of spatial design, but also as a marketing agent. To this end, spatial design marketing will be presented for Starbucks and Blue Bottle, which are the front-runners of the global coffee franchise sector. This study also explores the meaning of directional space, within the global coffee franchises, a meaning that will be transformative in the future. This study is significant in that it derived three spatial marketing characteristics and six strategies that can enhance the spatial value of coffee shops and the experiential value of consumers. This was accomplished through an approach focused on Starbucks and Blue Bottle, the most representative global coffee franchises. Moreover, the presented spatial design marketing strategies are not only applicable to coffee franchises but also to various commercial spatial design fields, and are expected to be used as a business methodology that can satisfy the needs of modern consumers and increase the unique value of their brand.

The impact of pre-contract disclosure on M&A performance in franchising

The franchise sector represents a unique opportunity to investigate pre-contract disclosure by target firms in mergers and acquisitions (M&As) due to the legal framework within which franchises operate. This study examines the role of Franchise Disclosure Documents (FDDs) as in-depth resources in cases in which franchise firms are M&A targets. Data were collected from 517 M&As in the US over a 20 year period (1999–2018) in the restaurant industry. The results show that franchise disclosures’ effect on alleviating ex-ante information asymmetry is significant when a higher level of information asymmetry between the parties exists, i.e., when they are farther apart geographically, or if their initial business sector is different from that of the target firm. The study’s implications regarding proprietary information disclosure for franchisors that may represent likely M&A targets are discussed.

U.S. Franchise Regulation as a Paradigm for the European Union

The protection afforded to franchisees differs widely across the world. Nations with economically strong franchise sectors typically regulate the contract’s bargaining phase and post-formation. Responding to the European Parliament’s call for a review of regulations governing Europe’s underperforming retail franchise sector, we propose reforms to counter the structural and economic inequality between franchise parties. Drawing on lessons from comparatively successful federal frameworks, we present a regulatory trifecta of mandatory disclosures to prospective franchisees, required express or implied contractual obligations and rights for both franchisors and franchisees, and compulsory adherence to certain protections of franchisees throughout the franchise relationship.

El contrato de franquicia en la Propuesta de Anteproyecto de Ley de Código Mercantil tras el Dictamen del Consejo de Estado

El presente trabajo aborda el análisis del contrato de franquicia a la luz de la regulación prevista para los contratos de distribución en los artículos 545-1 y ss. de la Propuesta de Anteproyecto de Ley de Código Mercantil tras el Dictamen del Consejo de Estado. Pese a su gran importancia, nuestro ordenamiento jurídico carece actualmente de un régimen legal que regule un marco jurídico propio del contrato de franquicia, teniendo por tanto dicho contrato la consideración de atípico. No obstante, si bien la Ley 7/1996, de 15 de enero, de Ordenación del Comercio Minorista y el Real Decreto 201/2010, de 26 de febrero, por el que se regula el ejercicio de la actividad comercial en régimen de franquicia y la comunicación de datos al registro de franquiciadores, regulan algunos aspectos del contrato de franquicia en España, dichas regulaciones resultan del todo insuficientes, de tal manera que a día de hoy el contrato de franquicia continúa teniendo al Código Civil y al Código de Comercio como principales referencias normativas. De esta manera, la regulación del contrato de franquicia prevista en la Propuesta de Anteproyecto de Ley de Código Mercantil tras el Dictamen del Consejo de Estado, pese a no ser el primer intento de regular el contrato de franquicia, de finalmente materializarse constituirá un importante avance en la regulación de dicha figura contractual en nuestro ordenamiento jurídico, aportando mayor seguridad jurídica al sector de la franquicia en España.This paper analyzes the franchise agreement in light of the regulation provided for distribution agreements in articles 545-1 et seq. of the Proposal of the Draft Law of the Commercial Code issued after the Opinion of the Spanish State Council. Despite its great importance, our legal system currently lacks a legal regime that regulates a legal framework of the franchise agreement, therefore, said agreement is considered as atypical. However, although Law 7/1996, of January 15, on Retail Trade and Royal Decree 201/2010, of February 26, which regulates the exercise of commercial activity under the franchise regime and the communication of data to the franchisor registry, regulate some aspects of the franchise agreement in Spain, these regulations are completely insufficient, therefore to this day the franchise agreement continues to have the Spanish Civil Code and the Spanish Commercial Code as its main legal references. Thus, the proposed regulation of the franchise agreement provided for in the Proposal of the Draft Law of the Commercial Code issued after the Opinion of the Spanish State Council, despite not being the first attempt to regulate the franchise agreement, if it finally occurs will constitute an important step forward in the regulation of such agreement in our legal system, providing greater legal certainty for the franchise sector in Spain.

Collaboration, communication, support, and relationships in the context of e-commerce within the franchising sector

ABSTRACT This research aims to investigate how ecommerce influences elements of the franchising sector that have adopted an ecommerce strategy. A multiple case-study approach was selected to gain a comprehensive understanding of franchise organisations following implementation in their traditional service or retail businesses. The findings covered, but were not limited to, (a) franchise relationships, (b) franchisor leadership, (c) communication at the franchise network level, (d) collaboration with franchisees, and (e) training and support. The paper offers meaningful outcomes including (a) a framework for franchisee communication and participation, and (b) a model for franchisee acceptance and readiness for change, as well as effective communication in the franchise network. Finally, from the interviews conducted with franchise practitioners, certain practical recommendations have been made that will serve the franchise sector.

The bright side and dark side of trust: The mediating effect of franchisor trust on performance.

Previous literature has not examined the dual role of trust in franchise relationships. We extend the franchise and relational governance literature by showing that trust has both a “bright side” and a “dark side” in franchisor–franchisee relationships. Based on transaction cost and knowledge‐based reasoning, we argue that intangible knowledge assets and environmental uncertainty have an indirect effect on performance via trust, due to its relational risk and knowledge exchange effect. Using data from the franchise sector in Germany, we show that trust positively mediates the impact of intangible knowledge assets and negatively mediates the impact of environmental uncertainty on franchisor performance. The first effect refers to the “bright side” of trust showing that intangible brand name assets increase trust which, in turn, has a positive effect on performance. Conversely, the second effect refers to the “dark side” of trust highlighting that environmental uncertainty diminishes trust resulting in a negative effect on performance.

Determinants, Transactional Alignment, and Performance Outcomes of Franchise Contract Length

Purpose: In this paper, I explore the determinants, transactional alignment and performance outcomes of franchise contract length using transaction costs and resource-based theories. Design/methodology/approach: I hypothesize that franchisors choose contract length according to transaction cost theory (TCT) and resource-based theory (RBT) arguments. TCT explains the safeguarding function of contracts: the franchisors will offer longer contracts when franchisees’ specific investments are high and environmental uncertainty is low. RBT highlights the knowledge leverage function of contracts: the franchisors will offer longer contracts when the brand name and intangible knowledge assets are high. Franchise companies that design contract length aligned with transactional attributes will perform better. I test the misalignment hypothesis and comparative performance of franchise contracts by estimating two-stage least-squares regression and Heckman two-stage procedure that control for endogeneity and self-selection. Findings: Empirical data from the German franchise sector support the hypotheses. In addition to the safeguarding function, franchise contracts have an important knowledge leverage function. Longer contracts perform better due to the development of relational strategic assets and stronger commitment. Research limitations/implications: Franchisors must offer longer contracts when specific investments of franchisees, brand name, intangible knowledge assets are high, and environmental uncertainty is low. Franchisors should invest in the development of relational strategic assets and offer longer contracts for the benefit of superior performance. Originality/value: The study addresses the significant question of transactional alignment and comparative performance of franchise contracts. It empirically confirms the importance of resource-based theory in explaining contractual choices and performance.

Contractual restraints and performance in franchise networks

Contractual control in franchising is exercised by using the following clauses: exclusive dealing, exclusive territory, tying arrangement, resale price maintenance, real option, lease control, alienation and non-competition covenants. Previous research has not explained the performance consequences of these contractual restraints in franchise contracting. This study examines - from a franchisor perspective - the impact of individual (disaggregated) and bundled (aggregated) contractual restraints on franchise system performance. In line with transaction cost theory predictions, the aggregated approach shows that bundling of contractual restraints increase franchise system performance (i.e. profitability and efficiency). The results of seemingly unrelated regression analyses based on data from the German and Swiss franchise sector provide support for most of the hypotheses. Overall, this study contributes to the franchising and marketing channel literature by presenting a new approach to analyze the performance consequences of a bundle of contractual restraints in franchise contracting.

Determinants, transactional alignment, and performance outcomes of franchise contract length

PurposeThe purpose of this paper is to explore the determinants, transactional alignment and performance outcomes of franchise contract length using transaction costs theory (TCT) and resource-based theory (RBT).Design/methodology/approachThe author hypothesizes that franchisors choose contract length according to TCT and RBT arguments. TCT explains the safeguarding function of contracts: the franchisors will offer longer contracts when franchisees’ specific investments are high and environmental uncertainty is low. RBT highlights the knowledge leverage function of contracts: the franchisors will offer longer contracts when the brand name and intangible knowledge assets are high. Franchise companies that design contract length aligned with transactional attributes will perform better. The author tests the misalignment hypothesis and comparative performance of franchise contracts by estimating two-stage least squares regression and Heckman two-stage procedure that control for endogeneity and self-selection.FindingsEmpirical data from the German franchise sector support the hypotheses. In addition to the safeguarding function, franchise contracts have an important knowledge leverage function. Longer contracts perform better due to the development of relational strategic assets and stronger commitment.Research limitations/implicationsFranchisors must offer longer contracts when specific investments of franchisees, brand name, intangible knowledge assets are high, and environmental uncertainty is low. Franchisors should invest in the development of relational strategic assets and offer longer contracts for the benefit of superior performance.Originality/valueThe study addresses the significant question of transactional alignment and comparative performance of franchise contracts. It empirically confirms the importance of RBT in explaining contractual choices and performance.