Franchise System Research Articles

Sustainability Innovation Enabled by Digital Entrepreneurship in Franchise Organizations

In responding to United Nations' Sustainable Development Goals, using digital entrepreneurship to replicate proven sustainability innovation is an effective approach to scaling up the franchise systems to achieve the goals. The authors show a platform of sustainability innovation enabled by digital entrepreneurship in nurturing a trusted franchisor-franchisee relationship to grow the franchise system. The platform is a digital nervous system consisting of technology networks, social networks, value networks, and responsive networks. The platform is grounded in synergistically integrating the digital capability of developing and disseminating working knowledge globally and effective entrepreneurial solutions locally. Sustainability innovation through such a methodology is a win-win approach to both franchisor and franchisees. An exemplar illustration of how franchise systems help in the fight against COVID-19 is included.

Opodatkowanie podatkiem od towarów i usług, usług świadczonych w ramach systemów franczyzowych w świetle genezy, istoty i podstaw prawnych franchisingu

Franchising is a legal relationship originating in medieval Europe that has evolved over the years. The above evolution means that the interpretation of franchising requires constant changes. Carrying out a thorough analysis of the origin, essence and legal basis of franchising is therefore the key to understand this institution and its individual elements, in particular when analysing the taxation aspects of this legal relationship. Importantly, this legal relationship has not been defined in the EU or the national law, but there are legal provisions that define individual elements of franchising, such as know-how. This article, through a method of analysis and critical review of the literature as well as the dogmatic method, aims to present the origins and essence of franchise systems and the legal basis of franchising. As a consequence of the above analysis, an analysis of the taxation aspects of franchising was carried out in the field of taxation of goods and services. While achieving the purpose of the article, the author clearly indicates that services provided under a franchise relationship are subject to goods and services tax at a basic rate. The author also indicates the possibility of making an annual adjustment to the amount of input tax and describes the taxation of the services in question when importing services.

Features of Building Partnerships in Tourism Franchise System

Features of Building Partnerships in Tourism Franchise System

Entrepreneurial Resources as a Driver of Performance Differences in a Quick Service Restaurant Franchise System

This study explored performance differences between corporate-owned and operated and franchised outlets in the quick-service restaurant (QSR) industry. While studies have shown that there is a performance difference favouring franchisees, the reasons for this difference have not been explained. Using the Resource-Based View of the Firm, the operational differences between two ownership modes within the same franchise ecosystem were assessed. The study used qualitative data collected from twenty interviews with a broad range of stakeholders across a single South Africa quick-service restaurant brand that included company-owned and operated stores and franchised operations. The study identified a range of performance factors: franchisee motivation, franchisee empowerment and flexibility, manager focus, opportunity realisation, corporate rigidity and tactical restaurant management that contribute to enhancing the entrepreneurial resources and orientation that, along with strategic flexibility, provide franchisees with a performance advantage. This study has implications for those in the QSR sector and the hospitality industry in general, detailing what drives or hinders firm performance. This research has value for theoreticians in its novel application of the Resource-Based View of the Firm theory to a franchise-based entrepreneurial environment.

Transformation of business partnerships in modern conditions based on franchising tools

Currently, there is a trend in the world community to form partnerships focused on cooperation between various business structures which are aimed at achieving a synergistic effect in the fulfillment of common economic interests. Modern business partnerships can be implemented in a variety of forms by using specific methods and approaches. At the same time, it has been noted that business partnerships are subject to transformation under the influence of the emergence of new technologies, methods and tools, one of which is the franchising system of relations. Taking into account the existing international experience of using franchising as an effective tool for building partnerships, further research is needed to more accurately define, systematize and quantify the strategic advantages that participants receive when forming business partnerships in modern conditions. The purpose of the paper is to identify and summarize the strategic advantages received by participants in the formation of business partnerships based on the franchising system of relations. Historical and bibliographic methods have been used to substantiate the theoretical provisions of the article. The applied part of the article is implemented with the use of modern electronic services that allow assessing the effectiveness of using the franchise system. This article examines possible forms of business partnerships, indicating specific examples of companies from Russian and foreign practice (IKEA, Tesla Motors, ACI Plastics, Sibur, Arya Home, METRO and others); a comparative analysis of the application of franchising in Russia and a number of leading foreign countries (the USA, the UK, France, Germany, Japan, etc.) has been carried out. The article presents the calculated characteristics of the project efficiency of a business partnership on the example of the Russian franchise «PIONER AUTO». The results presented in the paper show that the purchase of the abovementioned franchise will pay off in 1.5 years with further profit. The authors highlight the current trends in the development of global franchising in the context of the coronavirus pandemic in 2020 and highlight the main trends in 2021. According to the conducted research, the authors propose a model of franchising business partnership, systematize possible benefits of participants in a franchise business partnership on the basis of an earlier assessment of the possible effect.

Is entrepreneurship an appropriate strategic posture for franchise systems? A configurational analysis

Cet article vise à identifier des configurations de réseaux de franchise selon leur posture stratégique et à les relier à la performance. A partir d’une analyse taxonomique, d’une ANOVA et d’une analyse de contingence sur un échantillon de 99 franchiseurs français, les résultats de l’étude mettent en évidence la coexistence de quatre configurations dénommées les “Pionniers”, les “Inventeurs”, les “Développeurs” et les “Protecteurs”. La connaissance de la spécificité de chaque configuration apporte des éléments de réponses théoriques et pratiques à la question suivante : comment les franchiseurs devraient-ils “aligner” le choix d’une stratégie, entrepreneuriale ou conservatrice, avec les caractéristiques organisationnelles et environnementales de leurs réseaux de franchise pour atteindre un niveau de performance élevé ?

How and Why Does Franchise Ownership Affect Human Resource Practices? Evidence from the US Hotel Industry

This study investigates the relationship between ownership form and human resource (HR) practices in a franchise system. Using data from a unique establishment-level survey of a US-based limited service hotel chain, the author examines how HR practices vary between franchisee- and company-owned hotels, and among franchisees with diverse ownership structures. Consistent with agency theory predictions of franchisee profit motives and free-riding behavior, franchisee-owned hotels are associated with lower investments in HR practices compared to company-owned hotels. The results of this study suggest that ownership structures influence HR investments.

Classification of Franchising and Specifics of Its Types in Business Operation

The development of business can stuck in a series of problems related with market expansion, recruiting of staff in the dealer network, setting interaction channels etc. These can be dealt with by new economic mechanisms like franchising that allows for increasing the effectiveness of small business. But each of its type has advantages and shortcomings, which, if misunderstood, can cause serious risks to the operation of each partner and business on the whole. The article’s objective is to investigate criteria for classification of franchising and business specifics of its types. 
 It is shown that franchising can take various types and forms in business operation, depending on the classification criteria. A detailed discussion of franchising types is given, classified by character of business operation, opportunities and intentions of franchisee, strategy for franchising business expansion, number of franchising enterprises owned by one franchisee, value of franchise, existence of intermediaries between franchiser and franchisee. It is argued that the above given classification allows one to position franchising types in business operation, choose the most appropriate type of franchising or a type of interactions with partners in creating a franchising enterprise, make projections for franchising-based businesses. 
 It is emphasized that franchising is not an all-purpose tool for addressing all the problems of small business; it has a great many shortcomings that may be caused by possible dishonesty of a franchiser or rooted in the very nature of franchising. Two groups of shortcomings specific to franchising are discussed in detail. Advantages of the franchising system are demonstrated by comparing statistical data about the firms operated on franchising terms and by traditional methods; by highlighting the significant role of a ready-made standardized business plan provided by a franchiser to a franchisee, which helps insure the latter from business risks; and easy access of an entrepreneur deciding to launch own business (i. e. a franchisee) to bank loans.

Modes of governance for market entry by international franchisors: factors affecting the choice

PurposeThis study aims to provide an empirical test of an existing theoretical model depicting the governance modes used by international franchisors when entering international markets.Design/methodology/approachUsing a unique panel data set of 222 market expansions by US firms over a seven-year period, this paper tests hypotheses regarding the factors affecting the franchisors’ choice of governance modes when entering foreign markets.FindingsFranchisors use governance modes with lower levels of control when faced with environmental uncertainties due to corruption, economic downturns and when the geographic distance is large. Moreover, the franchise system assets and its local market assets also affect the choice of governance modes.Practical implicationsFirms need to balance the costs of environmental uncertainty with the need to safeguard the firm’s capabilities and resources using governance modes with appropriate levels of control. This balance changes as the franchise company gains more experience in the local market and as once-emerging markets continue to develop.Originality/valueThis research identified additional governance modes used by franchisors compared to previous studies. Using multiple theoretical perspectives, the study supported significant portions of the Jell-Ojobor and Windsperger (2014) model of franchisor governance mode choice.

Dissolution of franchise relationships: Intention, behavior, and the role of uncertainty

Academic research has paid more attention to formation and management of business relationships than to their dissolution. For example, not much is known about the extent to which dissolution intentions are predictive of actual dissolution, and whether certainty with which these intentions are held influences the likelihood of relationship dissolution. To address these questions, authors collect data in two stages from a franchise system in Korea. They specify the judgment uncertainty and magnitude parameters (JUMP) model to tease apart the magnitude and uncertainty of intention from a single measure, and a duration analysis model to study translation of intentions into behavior. Results show that not only strong intentions to dissolve a relationship are more likely to result in actual dissolution but weak intentions also are more likely to lead to dissolution if the holder is doubtful and uncertain about the relationship. Ignoring uncertainty of dissolution intentions thus can seriously downplay their risk of translating into actual dissolution.

Relacionamentos na internacionalização de empresas franqueadoras brasileiras

Objetivo: Entender o papel do relacionamento entre franqueadores e franqueados e licenciados no processo de internacionalização, adotando como perspectiva teórica o modelo de Uppsala.Metodologia/abordagem: A metodologia utilizada foi de estudo de casos em três empresas franqueadoras internacionalizadas. Posteriormente, as informações foram comparadas com os modelos de Uppsala (1977, 2009), usando como suporte as literaturas de franquia e licenciamento.Originalidade /Relevância: Diversos artigos (Dant Grünhagen, 2014; Gomes, Carneiro e Secches, 2017; Isaac, Melo, Ogasavara e Rodrigues, 2018) apontaram que a temática relacional, especialmente no contexto internacional, é uma das áreas que requer mais estudos. O trabalho pretende ajudar a preencher essa lacuna com informações sob parcerias internacionais no licenciamento e sistema de franquia.Principais Resultados: Identificou-se que tais empresas utilizam seus conhecimentos e suas redes para expandir seus negócios e, frequentemente, absorver informações de parceiros locais para melhorar o conhecimento de mercado e adaptar seus produtos ou serviços. A expansão internacional das empresas franqueadoras estudadas pode ser explicada tanto pelo Modelo de Uppsala original (1977) quanto pelo Modelo de Uppsala revisitado (2009).Contribuições teóricas / metodológicas: O estudo visa contribuir do ponto de vista teórico ao aplicar o Modelo de Uppsala nas expansões internacionais por meio de modos contratuais, mostrando a importância da rede de relacionamento. Tanto o sistema de franquia quanto o licenciamento são utilizados para expansões de baixo custo, por isso a entrada na rede local é imprescindível. Com a expansão gradual e o uso de parcerias sólidas, nota-se que as empresas conseguem validar a estrutura de negócio e fazer adequações, especialmente culturais, ao seu modelo de negócio.

Effects of fairness on relationship quality and re-contract intention in food service franchise system: comparison between global and domestic franchise

PurposeThe purpose of this study is to examine the effects of fairness on relationship quality and re-contract intention in the foodservice franchise industry and this paper intends to delineate the implications of enhancing the mutual relationship between the franchisor and the franchisee in the future domestic foodservice franchise system.Design/methodology/approachTo prevent the lack of reliability and to pursue the internal consistency of the measurement model, this study adopted SPSS (Ver.20.0) and derived Cronbach’s alpha. Additionally, this study conducted a confirmatory factor analysis by using AMOS (Ver.20.0) program to assess the unidimensionality of measurements. Finally, structural equation modeling was used to test the hypothesized research framework.FindingsThe results showed that distributive fairness and informational fairness increase the relationship quality, which franchisees perceive under the franchise system. Among the relationship quality factor, only the trust has a considerable impact on the (performance) re-contract intention. The effect of fairness on relationship quality does not show a statistically considerable difference between the two groups (global franchise vs domestic franchise). However, in terms of a global franchise, distributive fairness has a significant impact on relationship quality, whereas domestic franchise, distributive fairness directly affects performance (re-contract intention).Research limitations/implicationsThis study provides readers with an effect of fairness in the franchise system. Results obtained in this study are useful for understanding the fairness and relationship quality in the franchise system.Practical implicationsRecently, as the foodservice franchise market is experiencing significant growth, government and franchise-related agencies are making considerable effort to improve the relationship between the franchisor and the franchisee and to offer a better system and policy concerning the protection of consumers. Government and franchise agencies should develop an adequate policy to improve the relationship between the franchisor and the franchisee by breaking away from the imprudent support.Originality/valueThis study investigates whether fairness in the franchise system has a significant effect on the relationship quality and the performance (re-contract intention) and provides implication about the mutual growth between franchisor and franchisee to the potential food service franchise in Korea.

가맹거래에 있어서 구속조건부 거래

가맹거래는 가맹본부와 가맹점사업자간의 계속적 계약으로서 그 특성상 양자간의 밀접한 유 대관계가 필요하다. 가맹본부는 가맹사업을 구상하고 상품이나 용역의 품질관리와 판매기법을 개발하는 반면, 가맹점사업자는 가맹본부가 상품 또는 용역에 대하여 제시하는 적절한 품질기준 의 준수와 가맹사업의 통일성 및 가맹본부의 명성을 유지하기 위한 노력을 기울여야 하기 때문 이다. 가맹사업거래의 경우 일반적으로 가맹본부의 지위가 가맹점사업자보다 우월하다고 인정 된다. 왜냐하면 가맹본부는 가맹점사업자에 비해 더 많은 자본, 인력, 거래관계, 체계, 정보 등을 가지고 있고, 가맹사업거래의 특성상 가맹본부가 설계한 사업구조에 가입한 가맹점사업자는 각 종 의무를 부담하기 때문이다. 이러한 양자간의 지위의 차이는 가맹본부가 가맹점사업자에게 구속조건부 거래를 취하기 쉬운 구조가 된다. 따라서 가맹사업법에서는 “가맹점사업자가 취급 하는 상품 또는 용역의 가격, 거래상대방, 거래지역이나 가맹점사업자의 사업활동을 부당하게 구속하거나 제한하는 행위”를 구속조건부 거래 행위로서 금지하고 있다. 가맹사업거래에서 구 속조건부 거래는 가맹사업거래의 경쟁을 촉진시키는 역할을 하기도 하고 경쟁을 저해하는 효과 를 나타내기도 한다. 따라서 어떠한 경우에 금지되어야 하고, 어떠한 경우에는 허용될 수 있는지 를 판단하는 기준을 제시하는 것이 중요하다. 본 논문에서는 구속조건부 거래의 유형인 가격의 구속, 거래상대방의 구속, 가맹점사업자의 상품 또는 용역의 판매제한, 영업지역의 준수강제 등의 위법성 판단기준을 공정거래법과 비교하면서 알아보기로 한다.

Conception of Franchise Agreement in Protecting the Legal Interests of Parties Based on Indonesian Civil Law

Franchising is an effective way to expand business networks and respond to modern challenges, because the system does not require direct investment, but involves cooperation with other parties. In other words, franchising is a form of partnership based on a mutually beneficial relationship (mutualistic symbiosis) between the franchisor and the franchisee. The success or failure of a business with a franchise system depends entirely on the ability of the franchisee business partner to develop and run the franchise business through the procedures, processes and rules set by the franchisor. In the franchise system, the franchisee is given the right to take advantage of the intellectual property rights and the operating system of the franchisor, whether the use of trademarks, service marks, copyrights on logos, industrial designs, patents or trade secrets. This research is a type of normative legal research. Normative legal research is research whose data comes from secondary data and since this research data is secondary data, it is included in the type of normative legal research. This type of research used in this writing is library research. Library research means research using written documents as data, and data sources used in this study include primary legal materials and secondary legal materials. Based on the research results, it is known that the provisions of Article 1338 of the Civil Code confirm that all agreements made legally are valid as laws for those who make them. An agreement cannot be withdrawn as long as both parties agree or for reasons that are stated by law to be sufficient for that. An agreement must be carried out in good faith. On the basis of the provisions contained in Article 1338 of the Civil Code, it will be known the principles of freedom of contract, namely that every person is free to enter into an agreement or is free to determine the contents of an agreement as long as it does not contradict the law and public order.

'Ugly Princess': Self-Enforcement in Franchising

An intriguing feature of franchising is the simultaneous use of company-owned and franchise units under the same brand name. Furthermore, there is a separation of the ownership and control arrangements in franchise units. The underlying mechanism is the self-enforcement that sustains the long-term franchise relation. We formally model this self-enforcement by taking franchisee's free-riding behavior and the franchisor's opportunistic termination into consideration. We nd that an initial investment with an associate ownership arrangement, that is, franchise arrangement, is an ideal hostage (ugly princess) for suppressing two-sided opportunistic behavior. By incorporating self-enforcement into the incentive design for a franchising system, we provide explanations for di erent governance structures in franchising as well as adjustments in response to legal constraints on franchise termination.

Franchising in Brazil: foreign entrants build a presence

Purpose The purpose of this paper is to provide an overview of the franchising sector in Brazil and highlight the opportunities and offer strategies for practitioners. It also points out some challenges and gives suggestions to overcome them and thrive in the Brazilian market through the franchising system. Design/methodology/approach This paper reviews both literature and practical sources providing primary data from interviews conducted with franchising experts from the Brazilian Franchising Association and a consultant company. Findings International franchisors willing to enter the Brazilian market might face some challenges, such as the language barrier, the complex tax system and the need for local adaptations. Foreign entrants should consider low control entry modes as master franchising and area development agreements, with local partners that know the Brazilian culture, business system and regulations. Originality/value Brazil presents a great market potential for international franchisors. It counts with an established franchising system and a stable regulatory environment. This paper provides relevant information about the characteristics, opportunities and challenges to operate in the Brazilian market, offering suggestions of strategies and several possibilities to explore different regions, locations and models across the country.

Nova Lei de Franquias e Arbitragem

Franchising is an important tool in the production, distribution and sale of services and goods. The present article aims at analyzing the main characteristics of franchise agreements, its classifications and practical repercussions. First, the different formats of franchise and arrangements by which it may be carried out will be presented in order to properly contextualize the analyzed subject. Next, the main new aspects of the legal framework which was applied to the franchise system for over two decades will be examined, with particular focus on choice of law, forum and arbitration. Once the most important foundations of the franchising system have been discussed, the case law concerning the use of arbitration as an alternative dispute resolution method will be addressed in the context of franchise agreements. Lastly, it will be possible to conclude that the new law ratifies the regularity of the use of arbitration in franchise-related subjects, removes unnecessary discussions before the judicial courts being, therefore, supportive to new deals.

The factors that determine franchising intensity: An analysis in an emerging economy

AbstractThis study evaluates the franchising intensity of Mexican franchise chains. Supported by the theory of agency and the theory of signals, the influence of the brand recognition and the pricing strategy on the franchising intensity of the chain was evaluated. The brand recognition was evaluated using four indicators: experience, size, MFA (Mexican Franchise Association) affiliation, and origin. The pricing strategy was evaluated with three indicators: initial investment, entry fee, and royalties. On a sample of the 397 franchise systems operating in Mexico in 2016, the multiple linear regression technique was used to evaluate the influence of the brand recognition and the pricing strategy of the chain on the franchising intensity of the chain. This research confirms that the factors associated with brand recognition and initial investment influence the franchising intensity of the Mexican chains.

Real options in franchise contracting: an application of transaction cost and real options theory

Previous research has not explained the use of real option clause in franchise contracting. The real option clause has two economic functions: To reduce transaction costs by mitigating opportunism risk and to increase strategic rents by exploiting the profit potential from future upside opportunities under uncertainty. We argue that franchisors will more likely use a real option clause (ROC) in franchise contracts under high behavioral uncertainty, high franchisors’ transaction-specific investments relative to franchisees’ and long contract duration. In addition, by combining transaction cost theory and real option theory, our study provides a new explanation for the impact of environmental uncertainty on the use of ROC in franchise networks by showing that there exists a U-shaped relationship between environmental uncertainty and the franchisor’s use of ROC. Overall, the data from German and Swiss franchise systems provide support of the research model.

Optimización de los mecanismos del sistema moderno de franquicias basado en la modificación de métodos de desarrollo económico.

The article is devoted to optimizing the working mechanisms of a modern franchise system based on the modification of multicomponent methods of economic equilibrium. In the theoretical part, the formation of an enterprise strategy in the field of franchising is considered, indicating a sequential set of steps necessary for the effective and successful implementation of the ideas included in the franchising project. The development of franchising in Russia is showed and it is noted that it is accompanied by the presence in the new economy of a number of negative factors, in terms of the work of economic mechanisms, as well as legal and social processes. In the research part of the article, the author set the task of modifying the franchise system to establish a certain level of economic equilibrium in it, based on the introduction of certain fines and incentives. In the course of the study, it was found that the franchisor in the franchise system is required to select the amount of fines and incentives in this way that optimal balance is achieved. To solve the problem of optimal equilibrium in a franchise system, it is necessary to bring it to problems that can be solved using linear programming methods. In conclusion, the article discusses the possibility of using franchising tools based on the use of rewards and fines for the successful development and conduct of business.