Prospective Franchisees Research Articles

FranchiseGlobal.com: Digital Media Strategy in the Development of Franchise Industry and Business Opportunities in Indonesia

The franchise and business opportunity industry in Indonesia has experienced significant growth, particularly with the emergence of digital media platforms that facilitate connections between franchisors and prospective franchisees. FranchiseGlobal.com stands as a key online media platform playing a pivotal role in this industry. This study aims to analyze the digital media strategies employed by FranchiseGlobal.com in advancing the franchise and business opportunity sector in Indonesia. The research adopts a descriptive analysis with a case study approach, focusing on FranchiseGlobal.com's business model, digital marketing strategies, and its role in supporting franchise expansion. The findings reveal that FranchiseGlobal.com has effectively utilized digital media to enhance franchise visibility through services such as advertising, content distribution, and online business matching. The study concludes that an effective digital strategy can significantly contribute to the growth of the franchise industry in Indonesia, particularly by leveraging online platforms that reach a broad and targeted audience.

Contractual provisions, governance, and maintaining sales leadership: Evidence from franchise systems

Annual sales revenue is one of the most critical indicators of franchise performance not only for the business stakeholders but also for prospective franchisees who are exploring their investment opportunities. Accordingly, Franchise Times ranks and reports the 200 top franchisors annually based on sales performance. Historically, some franchisors have successfully maintained their position among top-ranking firms for years in this credible ranking. Understanding factors associated with such achievement is pivotal for the success and improvement of franchise firms. Despite its importance, the impact of franchise contract provisions on maintaining their sales leadership remains unexplored. In this research, we examine various contract provisions, including cost structure, incentives, and governance, among top franchise firms over time to shed light on factors affecting their sales leadership and continued presence among top-ranking firms. Using the survival analysis, we empirically address this gap by analyzing an unbalanced panel dataset of 153 franchise firms from 2013 to 2020 (1172 firm-year observations). We find that franchisors with contract provisions specifying higher royalty rates, financing support for franchisees, multi-unit or master-franchise-only options, and a primary focus on franchising for expansion are more likely to maintain sales leadership within the industry.

Management Information System Implementation Doyan Drinks Using K-Means

Technological developments are currently very influential in business collaboration, to be precise in Doyan's drink, Doyan is a local beverage brand that has difficulty determining franchise partnerships to determine the type of package in the strategy of location, area, and facilities of prospective franchisees, by implementing a Management Information System on Doyan can determine the type of franchise based on the required criteria, this study uses the Waterfal method in designing management information systems and uses the K-Means algorithm in determining the type of franchise that suits the needs of the candidate. K-Means functions to cluster the franchise type criteria data that will produce the closest value so that the output can choose and determine the more appropriate type of franchise package, and the store can manage product sales, stock, and attendance at all franchise branches

Franchising: a signaling perspective

PurposeThis paper aims to outline different signals that franchisors can use to communicate their value proposition to prospective franchisees. It also tests whether these signals can enable franchisors to charge a premium from their franchisees.Design/methodology/approachThis paper uses a mixed-methods approach to arrive at the findings. It uses a combination of open-ended survey and archival data to arrive at the findings.FindingsFranchisees consider franchisor’s characteristics such as its “capability,” “support offered” and “franchisee membership criteria” significant while buying into their franchises. The results suggest that franchisors can leverage some of their capability signals to obtain a higher franchise fee if they use the right signals as desired by franchisees.Research limitations/implicationsSignals identified in this study are specific to this study. The relationship between the signals and franchise fee is applicable for high-performing franchises operating in the American context only. Future research can address this limitation by collecting more data, testing additional signals and using alternative methods to verify the findings.Practical implicationsFranchisors can take cues from the evaluative criteria used by franchisees to design their signaling strategies. Franchisors can leverage some of their capabilities to extract higher fees from their franchisees. Prospective franchisees should engage in due diligence before purchasing a franchise unit and avoid franchises with higher support fees and loose franchisee recruitment criteria.Originality/valueThis study contributes to research on the evaluative criteria used by franchisees. It contributes to the signaling theory by offering insights into the performance outcomes of signals in the franchising context. It also contributes to our understanding of franchising by adopting a mixed-methods approach that includes information about franchisors and franchisees.

Evaluasi Strategi SERVO Analysis Terhadap Kinerja CV. Rafiza Chicken Indonesia

This study aims to identify business development strategies and evaluate business development strategies using analysis. and identify the achievement of the concept of fit in the CV business development strategy. Rafiza Chicken Group Indonesia. This research belongs to the type of descriptive research. The object of research is business development strategy and evaluation of CV's business development strategy. Rafiza Chicken Group Indonesia. This study uses purposive sampling of top management, Then followed by the snowball sampling technique. The type of research data is qualitative data, which is collected through interviews, observations, and document analysis. This study uses the SERVO analysis approach to evaluate the company's business strategy, and how to implement the company's strategy. SERVO Analysis itself has 5 components, namely Strategy, Environment, Resource, Value, and Organization. Test the validity of the data using source triangulation, while data analysis using qualitative data analysis. From the results of the evaluation of business strategy on the CV. Rafiza Chicken Indonesia, it is concluded that CV. Rafiza Chicken Indonesia uses a differentiation strategy and customer behavior oriented, where through the uniqueness and differences of products that follow market tastes (consumers and prospective franchisees) with competing products, the company produces products that are unique and always different, and have many variants. The strategy in the CV. Rafiza Chicken Indonesia is in accordance with the existing local fried chicken industry, and its implementation is also correct. But judging from the company's vision and goals, in developing and expanding the market to all other corners of Indonesia, the company has obstacles that can hinder CV's vision. Rafiza Chicken Indonesia. Based on the results of SERVO analysis, it was found that the company experienced obstacles in terms of resources and organization.

Legal Comparisons Regarding the Content of Franchise Prospectus in Legal System of United States of America, Australia, Indonesia For Legal Protection of Frait Recipients in Indonesia

The prospectus document is given as a consideration for the franchisee whether they want to participate in operating the franchise or not. Apart from being used as a medium to find out information about franchises, this prospectus is also a form of legal protection for franchisees. Article 7 of the Government Regulation on franchising regulates clauses that must be included in the prospectus. The regulations governing minimal clauses in this prospectus are quite minimal. Compared to the United States, which is the originating country for franchising and Australia, which follows the United States in regulating its franchises, Indonesia is still far behind in the preparation of its prospectus documents. The method used is the legal comparative research method because it is used to compare regulations in a country with other countries. The research results show that each prospectus minimum clause in Indonesia has its own objectives in terms of protecting prospective franchisees and franchisees. There are differences between the clauses that must be listed in the prospectus in the United States, Australia and Indonesia, where there are clauses that are regulated in the United States and Australia which are not regulated in the minimum clause of the prospectus in Indonesia, although there are differences, but there are also clauses that are the same regulated in the three countries, it's just that the explanation of the provisions has differences. Regarding whether Indonesia's prospectus is capable of, Indonesia's minimum clause has not been able to provide protection for franchisees in Indonesia.

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.

Contractual Discrimination in Franchise Relationships

• Franchisors strategically modify contracts for new franchisees (contractual discrimination). • Positive discrimination reduces existing franchisees perceptions of equity. • Reduced perception of equity increases freeriding and hurts performance. • Greater number of existing franchisees worsens franchisor performance. • Negative discrimination reduces freeriding, increases performance only for more franchisees. Franchisors often modify the contract terms offered to prospective (new) franchisees – to incentivize growth in the number of franchisees, to access capital, or to improve their financial performance. We argue that changes in contract terms offered to new franchisees (contractual discrimination across franchisees) can alter existing franchisees’ perceived equity in their relationship with the franchisor, and affect their freeriding. Specifically, we hypothesize, and show, that positive (negative) discrimination towards new franchisees reduces (maintains) existing franchisees’ perceived equity in their relationship with the franchisor, motivating existing franchisees to increase (eschew) freeriding – with impact on franchisors’ performance. To do so, we first take advantage of an exogenous event (the great recession of 2007-09) to study how 120 restaurant franchisors changed their contract terms to new franchisees and how that affected their post-recession net income (Study 1). We show that changes in contracts for new franchisees impact franchisors’ post-crisis performance, as a function of the number of existing franchisees. Second, with two experiments (Studies 2 and 3) with entrepreneurs and franchisees, we document that the observed changes in performance occur because contractual discrimination affects existing franchisees’ perceived equity and their intentions to free-ride. Thus, we contribute to the literature on equity in franchising relationships, on contract evolution in franchising, and its impact on financial performance.

Saudi Arabia: An Overview of its Commercial Franchise Law

As of 22 October 2019, the Kingdom of Saudi Arabia has published its Royal Decree No. M/22 dated 9/2/1441 (corresponding to 8 Oct 2019) for Law on Commercial Franchise System (CFL’19). If the Franchisor has made representations (or intends to make representations) to Franchisee, as to information on historical or anticipated financial performance of Franchise business owned by the Franchisor, then CFL’19 makes it mandatory for the Franchisor to include such information (on historical or anticipated financial performance) in the Disclosure Document - as required/specified under the Implementing Regulations of CFL’19. This article provides an overview of CFL’19, that aims for: (a) encouragement of franchise activities in KSA, (b) development of a legal framework to regulate relationship between Franchisor and Franchisee, (c) to afford certain protections to the Franchisee especially when a Franchise Agreement is terminated, (d) to ensure disclosure of rights, obligations and risks related to Franchise opportunities to assist prospective Franchisees in making informed investment decisions, and (e) to continuously improve the quality of goods and services offered in the Kingdom of Saudi Arabia.

An Examination of the Persistent Effects of Franchising Strategy on Large Chains

In the US economy, retail chains are extremely important since they account for a very high share of GDP relative to manufacturing sector. Retail is dominated by large franchised chains, particularly in the restaurant industry. A proven business format comprising a differentiated menu, exterior and interior design of the outlet, logos, etc., draws the interest of many prospective franchisees simultaneously, especially to large chains because it reduces their risk. Theoretical arguments are built, supported in relevant research, to present three hypotheses. Together, they form a theory of how franchising helps large chains despite abating of resource scarcity and escalation of threat from agency problems. Developing such a theory is important because extant research does not adequately address the boundary condition of large chains, even though many of them have been becoming from large to mega for many years. This theory is tested in a longitudinal sample from Quick Service Restaurant magazine, which has been publishing a list of top 50 restaurant chains for many years. All of three hypotheses are strongly supported. The paper closes with discussion of results and their implications for practice and research.

Are Disclosures Readable? An Empirical Test

A major goal of federal disclosure laws is to ensure that pre-contractual disclosure documents are readable, i.e., easily understood by the average disclosee. Focusing as a case study on 523 U.S. disclosures in the franchise industry, this Article empirically indicates that disclosures are often difficult to read. Using the Gunning Fog linguistics readability index, this article indicates, inter alia, that prospective franchisees need, on average, more than 20 years of education to understand a franchise disclosure document on the first reading. This result undermines the readability goal of the federal franchise disclosure law since the highest level of education that most franchisees have completed is community college, which is normally the equivalent of 14 years of education. The results of our study also show a significant positive relationship between the franchise's size and age, and the readability of their disclosures. The empirical results of this study have significant implications, not only for the franchise industry, but also for the institutional design and enforcement of federal disclosure regulations.

Quality signaling through ex-ante voluntary information disclosure in entrepreneurial networks: evidence from franchising

This paper examines antecedents of ex-ante voluntary information disclosures for standardized contracts in entrepreneurial networks. Entrepreneurs (e.g., franchisors) may make such disclosures to prospective business partners in order to signal profitability of partnering, attract financial and managerial resources, and develop their entrepreneurial networks. In practice, only a fraction of franchisors make financial performance representations (FPRs), an ex-ante voluntary information disclosure to prospective franchisees. We address gaps in the signaling, voluntary information disclosure, franchising, entrepreneurship, and small- and medium-enterprise (SME) literatures. We draw on signaling theory to develop a theoretical framework and investigate factors that influence a franchisor’s disclosure decision. We evaluate hypotheses from our theoretical framework through econometric analyses of multi-sector panel data for the US franchising industry. We estimate a logit model and use lagged independent variables to address our dichotomous independent variable and potential endogeneity, respectively. Our results support the view that firms signal their quality through FPRs to attract potential business partners and expand their entrepreneurial networks. Beyond the extant literature, we find that rigorous partner qualification is another driver of voluntary information disclosure in franchising. Our findings also provide empirical support for the complementary role played by multiple quality signaling mechanisms used by franchisors and yield public policy implications for franchising.

Quality Signaling Through Ex-Ante Voluntary Information Disclosure in Entrepreneurial Networks: Evidence from Franchising

This paper examines antecedents of ex-ante voluntary information disclosures for standardized contracts in entrepreneurial networks. Entrepreneurs (e.g., franchisors) may make such disclosures to prospective business partners in order to signal profitability of partnering, attract financial and managerial resources and develop their entrepreneurial networks. In practice, only a fraction of franchisors make financial performance representations (FPR), an ex-ante voluntary information disclosure to prospective franchisees. We address gaps in the signaling, voluntary information disclosure, franchising, entrepreneurship and small and medium enterprises (SME) literature. We draw on signaling theory to develop a theoretical framework and investigate factors that influence a franchisor’s disclosure decision. We evaluate hypotheses from our theoretical framework through econometric analyses of multi-sector panel data for the U.S. franchising industry. We estimate a logit model and use lagged independent variables to address our dichotomous independent variable and potential endogeneity respectively. Our results support the view that firms signal their quality through FPRs to attract potential business partners and expand their entrepreneurial networks. Beyond the extant literature, we find that rigorous partner qualification mechanism is another driver of voluntary information disclosure in franchising. Our findings also provide empirical support for the complementary role played by multiple quality signaling mechanisms used by franchisors and yield public policy implications for franchising.

Are Disclosures Readable? An Empirical Test

A major goal of federal disclosure laws is to ensure that pre-contractual disclosure documents are readable, i.e., easily understood by the average disclosee. Focusing as a case study on 523 U.S. disclosures in the franchise industry, this Article empirically indicates that disclosures are often difficult to read. Using the Gunning Fog linguistics readability index, this article indicates, inter alia, that prospective franchisees need, on average, more than 20 years of education to understand a franchise disclosure document on the first reading. This result undermines the readability goal of the federal franchise disclosure law since the highest level of education that most franchisees have completed is community college, which is normally the equivalent of 14 years of education. The results of our study also show a significant positive relationship between the franchise's size and age, and the readability of their disclosures. The empirical results of this study have significant implications, not only for the franchise industry, but also for the institutional design and enforcement of federal disclosure regulations.

Opportunity identification and evaluation in franchisee business start-ups

Purpose The purpose of this paper is to examine franchisees’ business start-ups from an entrepreneurial perspective, adopting a process representative of entrepreneurship to examine opportunity identification and evaluation by franchisees and to analyse factors that influence this process. Design/methodology/approach A qualitative study was employed and data collected using semi-structured interviews with a sample of service industry franchisees in Macau. Findings The study identifies that social networks play a key role in opportunity identification and that franchisees’ goals influence the criteria used and information search activities undertaken while evaluating franchise opportunities. Research limitations/implications The study makes two contributions to franchise literature. It identifies that social networks can serve as substitutes for lack of prior knowledge in franchise opportunity identification. It also identifies the interrelated nature of franchisees’ goals based on the activities and criteria used to evaluate franchise opportunities, and the importance of relational criteria when franchisees lack prior industry knowledge. It therefore also contributes to franchise/entrepreneurship literature by identifying the interrelated nature of the factors contributing to the dynamics of franchise chain growth. Practical implications Franchisors should explore how to better use franchisees’ social networks and identify the longer term goals of prospective franchisees to support market penetration and franchise chain growth. Franchisees are advised to use independent information sources to evaluate franchise opportunities using goal-informed objectives and demand and relational criteria. Originality/value The study presents a more comprehensive understanding of franchisees’ decision-making process when joining franchise chains by identifying the activities undertaken and criteria used to identify and evaluate franchise opportunities.

Contract intention of prospective franchisees based on selection attributes and brand assets of a franchise

본 연구의 목적은 예비창업희망자들을 위한 프랜차이즈 선택속성 요인의 주요 속성에 대해 파악하고 이러한 속성들과 프랜차이즈 기업의 브랜드자산을 선행변수로 설정하여 프랜차이즈 기업에 대한 신뢰요인을 매개변수로 최종목적 변수인 계약의도 간의 인과관계를 규명하여 실무적인 시사점과 마케팅 자료를 제시하는 것이다. 본 연구의 목적과 연구모형 검증을 위한 표본으로 2015 대구 프랜차이즈 창업박람회를 방문한 일반인을 대상으로 선정하였다. 대구 엑스코에서 2015년 7월 3일에서 7월 5일까지 개최된 본 박람회에서 방문객을 대상으로 총 500부의 설문지를 배포하였으며, 회수된 설문지 중에서 불성실하다고 판단되거나 조사내용과 일치하지 않는 표시가 있는 설문지 50부를 제외하고 나머지 450부를 실제 분석에 사용하였다. 이러한 개념의 정립을 바탕으로 프랜차이즈 선택속성과 브랜드자산이 신뢰 및 계약의도에 미치는 영향을 구체적이고, 구조적으로 파악하며, 본 연구의 결과를 토대로 치열한 경쟁상황에 처한 외식프랜차이즈 가맹본부의 경쟁력 강화를 위한 차별화된 경영전략의 마케팅 자료를 제시 하고자 한다.

Online Marketing Channel in Selling Franchise Business in Indonesia

In Indonesia, as well as in the United States, franchise system is used as business expansion strategy for Small Medium Enterprises. In the year 2012, there are 1.700 franchise-format companies. It means that the franchise-format business has significant impact to Indonesia economic. Recently, franchisors are looking the appropriate marketing channels in order to increase their number of outlets. This paper data based on a survey in Jakarta on a 3-days December 2013 Franchise and Business Opportunities Expo with 82 respondents of franchise exhibition visitors (prospective franchisees) and 27 franchise exhibitors (franchisors). Half of this exhibition was followed by some franchisors and the others exhibitors sold products non-business opportunity. By using t-test and qualitative comparison, will be compared the answer from franchisors and franchisees. The objective of this paper is to see the ways of online marketing channel offer by franchisors are absorbed or not by prospective franchisees or investors.

가맹본부의 재무성과주장에 대한 규제 : 핵심쟁점과 개선방향

Franchise performance information including potential sales, income, or profits is very important for both prospective franchisees and franchisors. Prospective franchisees want financial performance information when deciding whether or not to purchase a particular franchise. Franchisors use financial performance information as a powerful selling tool for recruiting prospective franchisees who need for information about the possible financial results of their investment. Financial performance representations(FPR) that state fraudulent or exaggerated information result in franchisees’ loss of their investments. In Korea, the number of disputes in which franchisees ask for contract termination due to the franchisor’s provision of fraudulent or exaggerated information has increased continuously during the past decade. For this reason, the Korea Fair Trade Commission(KFTC) recently prohibited the use of those deceptive and misleading practices conducted by the franchisors. The Franchise Transaction Law amended on August 2013 requires Korean franchisors with more than 100 franchisees or franchisors who are not classified as small and medium companies to provide prospective or current franchisees with the Sales Projection Document(SPD). Most franchisors and their representatives such as Korea Franchise Association are reluctant to comply with the Amended Law whereas franchisees and civil right groups are welcoming it. This study addresses the problems of KFTC’s current regulations on financial performance representations including mandatory provision of SPD, a form of FPR. For this, the authors review the history of FTC Franchise Rule regulations on FPR and contrast the opposing arguments related to the mandatory disclosure of FPR. The debate concerning the mandatory disclosure of FPR falls into one fundamental issue: Should the franchisor make a financial performance representation or should the prospective franchisee gather relevant information for their own success. With respect to the adequacy of the mandatory disclosure of FPR, this study also discusses the franchisor‘s use of integration clauses. The FTC Rule prohibits franchisors from disclaiming liability for statements authorized by franchisors in their disclosure documents. By prohibiting this practice, FTC preserves the integrity of the material information in the disclosure document, thus preventing deception. It is still controversial whether franchisors can use an integration clause that purports to disclaim their legal responsibilities. Reviewing the benefits and the costs of mandatory disclosure of FPR and the judicial decisions regarding the franchisor’s use of integration clause, the authors suggest several directions for further development in governmental regulations on FPR. These suggestions would contribute to the development of fair and undeceptive practices in franchise industry by enhancing the reasonableness of the current regulation on FPR and by lessening the franchisors’ reluctance to comply with the law.

Spanish Legal System on Disclosure in Franchise Networks: Problems and Proposals for an Improved Regulation

Spanish law obliges franchisors to be transparent in their dealings with potential franchisees in two ways: by imposing upon them the duty to provide certain pre-contractual information and by requiring them to register in the Franchisor Registry. This paper will give the reader an overview of the concept of Franchise and the legal framework within which it must be understood. It will go on to explain the conditions and the administrative requirements that franchisors must comply with as a consequence of the introduction of the Franchisor Registry. And, finally, will consider the pre-contractual obligation of franchisors to disclose information to prospective franchisees and conclude with a brief critical analysis of how these questions are regulated in Spanish law.

Barriers to Franchising in Saudi Arabia

Franchising has rapidly grown in Saudi Arabia since 2005, yet a small number of the large companies dominate the market with mostly foreign brands. Therefore, the aim of this study is to investigate the barriers that Saudi small and medium enterprises and startups face when striving to become franchisors or franchisees. These barriers are investigated through the use of semi-structured interviews with people who belong to the franchise community either as administrators, franchise committee members, franchise developers, franchisees–franchisors, or prospective franchisees and franchisors. The results of this study show that there are several barriers standing against using franchising as a mode of expansion and investment by small and medium enterprises and startups, such as lack of legal, financial, institutional, marketing, development, and educational services support, and other key factors related to international franchisors' preferences and domestic franchising.