Pioneering Asian Franchise Brands: Pho24 in Vietnam

Pho24 is Vietnam's largest and most rapidly growing franchise system. In this research, a case study approach is used to study the franchising strategy employed by the organization to achieve rapid growth in Vietnam and internationally. Key people in the organization were interviewed, including the founder/franchiser, franchisees, and company employees. Data were collected over a 12-month period from the organization's operations in three countries: Vietnam, Australia, and Singapore. The findings indicate that cultural and legal contexts heavily influence the franchiser's philosophy. Traditional explanations of franchising, such as resource constraints theory and agency theory, only partially explain the motivations for franchising. An alternative hybrid model of franchising—an Asian partnership model of franchise brand management—is adopted to improve control and collaboration between the franchiser and franchisees.     

Real estate franchising: The case of Coldwell Banker expansion into China

This article discusses the Chinese real estate market, with special reference to Shanghai, and depicts an interview with Taiwan's largest real estate company, which bought the master international franchising rights of Coldwell Banker for China. As China's real estate market only recently opened to foreign investment, and since franchising in China is in its infancy, this article provides a unique examination of international franchising into a new product market area in the country. In addition, the article highlights some practices that could be adopted by professional service firms in their international expansion and discusses post-WTO implications to real estate franchising in China.     

Good Morning,Vietnam! Opportunities and Challenges in a Developing Franchise Sector

Until recently the development of franchising in Vietnam was hampered by a regulatory framework that did not recognize franchising as a discrete business relationship. The introduction of Vietnam's Franchise Law in 2005 provided, for the first time, a legal foundation for franchising, which was a necessary prerequisite for sector development. Although there are currently few business format franchise systems operating in Vietnam, there is an increasing presence of established international franchise systems and increasing numbers of local systems albeit at an early “product distribution” evolutionary stage. Moreover, the commercial environment for franchising is increasingly favorable: Vietnam is the fastest growing Asian economy after China and India and is experiencing strong gross domestic product growth and annual retail growth. This article addresses the development of franchising, and the challenges and opportunities for franchisers in Vietnam.     

Agency and institutional influences on franchising decisions

While the franchising literature has typically relied on agency theory, efficiency considerations may not fully explain decisions to expand through franchising or company ownership. In this study, I re-examine franchising decisions using insights from institutional theory. The key tenet of institutional theory is that decisions are influenced by isomorphic pressures arising from the environment. Economic rationales such as the achievement of efficiency are thought of as less pervasive concerns. I begin by investigating whether institutional theory explains variance in franchising decisions beyond what is explained by agency theory. Then, I explore the extent to which institutional considerations moderate the relationships between agency considerations and franchising decisions. Hypotheses are tested on a unique database of 132 French franchise chains. Empirical results suggest that successful competitors' use of franchising explains variance in the focal chain's use of franchising beyond what is explained by the importance of local managerial inputs and the threat of franchisee opportunism. In addition, the threat of franchise opportunism is less strongly related to the focal chain's use of franchising when successful competitors have a high proportion of franchised outlets. Overall, findings from this study suggest that researchers should supplement agency theory with institutional theory to adequately explain franchising decisions.     

“Conflict-performance assumption” or “performance-conflict assumption”: Insights from franchising

Franchising is an organizational governance form where relational and formal contracts complement each other and where franchisor and franchisees together may obtain better performance than working alone. Although relational contracts may adapt to changing environments, they are not as efficient in ambiguous settings. In franchised stores, liability for low performance is not always clear. Indeed, franchisor and franchisees work in close collaboration, and, therefore, this ambiguity on causes of low performance may lead to conflicts. The franchising literature, as far as we know, has addressed practitioners' concerns regarding performance on one side, and conflicts on the other side, but no study has exclusively focused on low performance and the emergence of conflicts. Our research contributes to the franchising literature by filling this relative gap and, contrary to “conflict-performance assumption” (Pearson, 1973; Duarte and Davies, 2003) held in the broader context of distribution channels, we consider low performance to be a cause, rather than a consequence, of franchisor/franchisee conflicts. This empirical study deals with franchising in France, the leading market in franchising in Europe and the third largest in the world. We used a qualitative approach based on 44 in-depth interviews with 27 franchisors and executives/high-level managers of franchise chains, as well as 17 franchisees from various industries to get a dual, and so more complete, assessment of franchising practitioners' views of performance-related conflicts. Our research findings show that franchisees, as independent small business owners, give priority to financial results compared to other goals and they are driven to continuously improve the performance of their store(s). When expectations are not met, franchisees sometimes blame franchisors because they are interdependent in their success and liability is not straightforward. As a collaborative team, franchisors and franchisees may benefit from minimizing conflicts and preventing them with the careful selection and management of franchisees that share franchisor's values and have internal locus of control.     

Deconstructing the Franchise as a Legal Entity: Practice and Research in International Franchise Law

This article canvasses practice and research in international franchising law. The franchisor law's key concepts are introduced. I then identify aspects of franchising practice that are poorly accommodated by the law. These aspects offer opportunities for productive research. I identify these aspects as follows: franchising law's reliance on contracts to regulate the relationship through all its phases, the risk that a “franchisee” is an employee, good faith, governance, and insolvency. I continue with suggestions as to why these challenges exist. The article concludes with emerging themes in franchise practice and research: e-commerce, natural disasters, sustainability, micro-franchising, and social franchising.     

Trust and the tendency towards multi-unit franchising: A relational governance view

Previous research mainly focused on the agency-theoretical explanation of multi-unit franchising (MUF). The aim of this study is to develop a relational governance perspective of MUF by investigating the role of knowledge-based trust and general trust in franchisor's choice between multi-unit and single-unit franchising. Our data from the German franchise sector indicate that knowledge-based trust positively influences and general trust negatively influences the franchisor's tendency towards multi-unit franchising.     

Brand equity heterogeneity among strategic groups in service franchising

Independent franchisees work cooperatively with service franchisors to strengthen the franchisor's brand name. However, agency theory predicts that franchisor inputs such as brand names and operational routines might be harmed by franchisees' free riding. In addition, previous literature has addressed the issues of strategic group emergence and performance differences between groups in recent decades. Thus, this study builds upon an emerging symbiotic view of franchising behind agency theory and incorporates a strategic groups level of analysis to investigate whether franchisees have strong incentives to maintain standards as franchisor seeking market penetration. By investigating potential brand equity differences among service franchisors for Taiwanese telecommunications service chains, this study found that different strategic groups exist in service franchising chains. From replication testing, the current results demonstrate that service franchising brand equity heterogeneities exist among franchisors within and across strategic groups. Therefore, this study broadens agency theory's explanation of service franchising.     

Deriving Meaning for Social Franchising From Commercial Franchising and Social Enterprise

Auntie Anne's Pretzels, the American Red Cross, and IKEA are franchises for a social benefit, but are they social franchises? There is a diversity of perceptions of what is meant by the term social franchising but no consensus on the precise meaning. Given that social franchising is a relatively new area of research and that a crucial first step in research on any topic is to define its parameters, this article derives a set of indicators for the phenomenon of social franchising by bringing together three strands of scholarship: social franchising, commercial franchising, and social enterprise.     

Franchising in African markets: Motivations and challenges from a Sub‐Saharan African country perspective

The purpose of this article is to explore and understand the motivations and challenges of franchising in an African economy. While interest in franchising is increasing in African markets, there is a paucity of research on franchising from the perspective of local African firms participating in these international relationships. The motivations and challenges of franchising from the perspective of African businesses have not been largely investigated so far. Using in‐depth interviews, we allow motivations and challenges at play to emerge. Convenient and snowball sampling techniques were used for choosing the unit of analysis, which resulted in four respondent firms. A thematic approach was adopted for analyzing the data from the field. Support services, brand name, and franchisor's experience are identified to be the motivations for franchising. Financial assistance from the franchisor, demand, and competition also play a key role in an African firm's decision to franchise. Legal constraints and infrastructure constraints were the key challenges faced by franchisees in Ghana. The findings of this study may hold for franchisees in other African markets. However, contextual differences may be considered in the application of these findings.     

Franchising at the Bottom of the Pyramid (BOP): an alternative distribution approach

Bottom of the Pyramid (BOP) markets provide distinct marketing challenges to firms either serving these markets or intending to enter these markets. BOP markets have often been criticised for having weak supporting infrastructure such as inefficient or non-existence of distribution systems which hinder firms' ability to distribute products to consumers. Franchising is one distribution strategy which firms can use to enhance distribution at the BOP. Using findings from research conducted in Zimbabwe, this article demonstrates how firms can use franchising as a distribution strategy to facilitate distribution of products to those at the BOP. Both consumers and firms derive benefits from the use of franchising. Firms face distinct challenges in using this strategy and need to re-invent the way they do business.     

吴伯超和他的仙踪林

<正>他是一名退伍军人,他将卖红茶作为自己一生的事业,他让一杯小小的红茶有了大大的学问,他创办了全球最大的泡沫红茶品牌——仙踪林。台湾的特色饮品"珍珠奶茶",在大陆可谓是家喻户晓。珍珠奶茶具有奶茶的香浓口感和粉圆的嚼劲,一经推     

Does franchising pay? Evidence from the restaurant industry

Franchising has taken a prominent position in service industries for several decades, but little is known about how franchising affects financial performance. Thus, we addressed the question of whether chains that franchise to some extent outperform those that are wholly owned. Then, among chains that franchise, we also addressed the question of whether more franchising is better – that is, whether the proportion of a chain's units that are franchised is associated with superior financial performance. To answer these questions, our study first compares the risk-adjusted performance of franchising vs. non-franchising restaurant firms. Second, it investigates the relationship between franchising propensity and firm financial performance. We considered five different measures of firm financial performance: the Sharpe ratio, the Treynor ratio, the Jensen index, the Sortino ratio, and the upside potential ratio. On comparison of franchising and wholly owned firms, all five measures indicated that franchising firms outperformed their non-franchising counterparts. When we focussed on just the franchising firms, however, the results were less clear. Among firms that franchise, the franchising–performance relationship was positive and significant only with respect to the Jensen index. Thus, we provide very robust evidence that franchising pays – that is, that some franchising is good – but among firms that franchise, it is unclear whether more franchising is better.     

Multi-unit franchising: Growth and management issues

Entrepreneurs in a number of retailing sectors have eschewed the creation of company-owned chains and have embraced franchising as a preferred method for growing their businesses. There have been two leading reasons proposed for this preference. First, that franchisees provide the financial capital necessary for expansion, and second that franchisees manage the outlets better than company employees would if the unit were company owned. Interestingly, although many entrepreneur/franchisors confirm the relevance of the capital acquisition argument in their decision-making, theoretical analysis has discounted its importance. Instead, researchers have focused on the incentives of employee store-managers to misrepresent their ability and their effort as the dominant impetus behind franchising. Misrepresentation by employees as to ability and effort imposes costs and inefficiencies on the entrepreneur's chain. Arguing that franchising solves these problems by having the stores managed by persons with claims to the profits, these researchers have, by and large, rejected the capital acquisition argument for franchising in favor of this incentive-based rationale.Within this view, multi-unit franchising presents a curious anomaly. Multi-unit franchising, either through the incremental expansion by the franchisee one unit at a time or through the rights to open multiple units contained in an area development agreement, creates a collection of mini-chains within the franchise system. These mini-chains are operated by employee store-managers. Of course, they are employees of the franchisee, but they are employees nonetheless, and as franchise researchers have traditionally argued regarding the entrepreneur's employees, they will have incentives to misrepresent their ability and effort. Moreover, multi-unit franchising is ubiquitous.If multi-unit franchising is at odds with the incentive rationale for franchising, and it has a positive association with the growth of franchise systems, it must be providing the entrepreneur with some other benefit. In this study, we argue that the benefit it provides is access to capital. Through a study of fast-food franchise systems, we demonstrate that the more a chain engages in multi-unit franchising (i.e., the greater the proportion of multi-unit franchisees it has), the faster it grows, even faster than franchise systems generally. Moreover, we show that the level of commitment franchisors feel toward continuing to franchise is negatively related to the average number of units per franchisee and negatively related to their ability to obtain financial capital elsewhere. In other words, although multi-unit franchising helps an entrepreneur grow his or her business by providing increased access to capital, store level incentive problems get increasingly troublesome as franchisees get more and more units. It would appear, therefore, that capital acquisition is a relevant reason for engaging in franchising after all.     

Meeting the Challenges for Franchising in Developing Countries: The Vietnamese Experience

While business format franchising is the industry standard for developed countries, it remains an aspiration for many developing countries. Despite the attraction for developing countries of systems, training, and support and despite the economic and regulatory infrastructure being in place for the development of business format franchising, a range of commercial and socio-cultural factors may conspire to prevent its full expression. This paper addresses franchising development in Vietnam, a developing country. It considers strategies to bridge the gap between Vietnamese franchise practice and franchising best practice. It proposes that in Vietnam's current state of development, the product and trade name model may be the appropriate starting point with a move to the business format model only when, and in places where, the socio-cultural, commercial, and economic factors and the legal environment can accommodate more sophisticated business format franchise arrangements.     

The Franchise Fulcrum: The Legal System's Contributions to Research about Power and Control in Business Format Franchising

Franchisors’ need for power over their franchisees and control of their brands underpins their apparent opportunism. Through Australian and United States examples, we identify how the legal system's levers facilitate examination of opportunism within franchising. We suggest that the balance of power and control within franchising is ever changing. We suggest that all legal systems provide rich and often overlooked data for business researchers investigating franchise relationships. They should be accessed to help franchising stakeholders frame research propositions and to understand and meet twenty-first century challenges such as those posed by Gen Y and online retailing.     

Contractibility,Strategy, and Network Dynamics: From Franchising to Licensing

The article examines the network dynamics from franchising to licensing due to the increase of contractibility of the franchiser's system-specific assets as determinant of the allocation of decision rights between the network partners. Based on the property rights approach, residual decision rights must be allocated according to the distribution of intangible knowledge assets between the franchiser and franchisee. Our analysis derives the following hypothesis: The more contractible the franchiser's system-specific assets, the higher is the tendency from franchising toward licensing. In addition, we investigate the impact of strategy change on the standardization (contractibility) of system-specific assets and the network governance. We argue that a change of strategy may increase the contractibility of system-specific know-how and consequently the tendency toward licensing. This study presents empirical evidence from company Getifix on the network dynamics from franchising to licensing.     

Case Study

ABSTRACT

This is a case study of one of the highest growth restaurant chains in overall system wide sales and unit growth in restaurant industry history as reported by The Nation's Restaurant News(2001). The inception of a small fledgling restaurant chain in Atlanta, Georgia to a multi-billion dollar company has changed the shape of restaurant industry growth and development. The practices of franchise growth and market penetration have allowed Applebee's International to record double digit profits over the last ten years. Future growth patterns, market saturation, and changing consumer preferences will be challenges that Applebee's will face in the future. This case study will outline Applebee's history and competitive strategies that have made the company successful. Further along in the case study an analysis of franchising in the restaurant industry and the franchising strategies Applebee's has produced over the years. This study will conclude by uncovering future issues that Applebee's may face and pose future questions to ponder about the company.     

A franchise: a resource-rich small service firm?

Internationally, the small firm community has been the focus of attention from academics and policy makers for several decades. On the other hand, franchising of services is a relative newcomer, particularly in the United Kingdom, and has not received the attention that this form of business organisation warrants. This article investigates the extent to which franchising represents the intelligent leverage of resources by ‘small firm’ owner-operator franchisees, focusing on one major ‘benchmark’ franchisor in the UK – McDonald's Restaurants Ltd. The article enables the exploration of the profile of individuals attracted to franchising and the associated resources, costs, tensions and contradictions, and moves discussion towards conclusions based on a resource scarcity/efficiency thesis from the dual perspectives of the franchisee and franchisor.     

International Franchising Decision-Making: A Model for Country Choice

The present study examines how a number of market conditions may drive diffusion of franchising. It considers a sample of 63 Spanish franchisors operating through 2321 franchisee outlets across 20 different Latin American countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay, and Venezuela in January 2011. Results conclude that geographical and cultural distance between the host and home country, as well as the level of the host country's uncertainty avoidance, individualism, political stability, unemployment rate, market potential, and efficiency of contract enforcement, may drive the spread of international franchising. Results reinforce previous research on country choice as to the association between international franchising and the host country's unemployment rate and cultural distance, but also identify differences from other regions in some issues such as political stability. Moreover, new insights relative to the effect of market potential, individualism, uncertainty avoidance, and the efficiency of contract enforcement on international franchise diffusion are also shown.