Towards a framework for the study of franchising as an operating mode for international retail companies

In recent years franchising has become a popular operating strategy for companies competing in the global marketplace. In particular, international retailing companies have increasingly been adopting franchising as a marketentry mechanism. While this growth in the popularity of franchising has led to increased research interest in the topic, there has only recently been a recognition of the need to consider franchising within the wider context of retailer internationalization activity. This paper attempts to provide a framework for the study of franchising as a strategy for retailers expanding into international markets. The discussion examines key findings to date from the established literature on international franchising concerning the motivations underlying internationalization, the internationalization process itself and the operating problems encountered. It is argued that a careful examination of findings from the international franchising literature can provide further development of retail internationalization conceptualization.     

Strategies for Business Format Franchisors to Expand into Global Markets

Abstract

Franchising is emerging as a highly effective strategy for growth, job creation, and economic development and is spreading rapidly around the globe. However, the pursuit of global markets by franchisors has traditionally relied on employing just three generic franchising options (i.e., direct franchising, master franchising, area development). This paper presents a more expansive view of strategic choice for franchisors by presenting first-mover, platform, and conversion strategies as additional strategic approaches that may be utilized to meet the challenge of expanding into international markets. Propositions are advanced to first suggest which strategic approaches aremost appropriate under varied foreign market conditions and then how these approaches should be linked to the three generic licensing options to create combination strategies based on franchisor experience/capabilities and similar/dissimilar markets. A contingency model of global franchising is presented, which depicts the above relationships and provides an overall framework that can assist franchisors in solving the foreign expansion and distribution question. Managerial and research implications are then provided.     

The Nature of Ethics Codes in Franchise Associations Around the Globe

The worldwide growth of franchising has been phenomenal during the past decade. At the same time there has been increased media attention to questionable business practices in franchising. Similar to some trade associations and professions, franchising has sought self-regulation by developing codes of conduct or ethics. This study examines the codes of ethics covering franchising activities in 21 countries. The results reveal that there is considerable variation in the activities/issues covered by the codes. Specifically, the codes cover most stages of the franchising relationship, focus on a narrow set of stakeholders, are short on ethical guidance, and offer few enforcement provisions. The implications of these findings for international franchising and research are discussed.     

International retailing operations: downstream entry and expansion via franchising

In this paper, the shift into international franchising from other forms of operation, rather than the typical home market franchising base, is explored. The focus is international retail franchising, based on a study of the Danish clothing and footwear industry. In this study it was found that Danish companies were moving into international franchising as an outcome of a more general shift from upstream wholesaling and subcontracting activities to downstream involvement in retailing activities. Preceding establishments of foreign subsidiaries and company-owned retail operations seemed to be important in facilitating the move into franchising.     

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.     

How western marketers respond to the new middle class in emerging market cities: The case of Italian fashion marketers

This paper deals with Italian Fashion Marketers (IFMs) expanding internationally through the opening of retail stores. Its main contributions are twofold. Firstly, an explanation is proposed for the reasons that IFMs decide to go international. In particular, it appears they are driven by the search for new customers, specifically among the middle class in emerging markets, where they have the advantage of being able to capitalize on brand equity, such as the Italian origin of their offerings. Secondly, the paper reveals some discernible patterns in new retail store internationalization, pointing out trends and choices in terms of the specific international markets targeted. In this regard, the main countries and cities where IFMs establish and cultivate a retail presence are identified, and comparisons made between emerging vs. developed countries as target markets.Some major implications of the findings are then discussed. In particular, the paper proposes an analysis that aims to contribute to filling a significant theoretical gap in the literature – the rising role of the middle class in urban areas and the potential response of western companies. Some managerial implications for companies engaged in expansion abroad are moreover addressed and six formal research propositions advanced.     

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.     

中国内外资零售企业竞争态势比较分析

本文以限额以上零售企业为样本，采用静态比较分析的方法，从基本情况、财务结构、盈利能力和工资福利等方面进行比较和分析。以探求当前我国内、外资零售企业的真实竞争状况和动向，并对我国内资零售企业如何把握和参与竞争提出相关建议。最后指出零售业自由化和全球化的最终赢家是PK台下的观众：中国的消费者和老百姓。     

Challenges and opportunities of new retail horizons in emerging markets: The case of a rising coffee culture in China

Economic growth and a rising middle class consumer base make emerging markets an attractive prospect for many international businesses. Changing patterns of retail in these countries present opportunities for business expansion that many are keen to capitalize on, but also present challenges for reaching their ambitions. This article examines the growth of the coffee shop industry in China—considering its key dynamics and drivers—in order to address questions about successful retail expansion in emerging markets. We aim to explore how changing consumer cultures have contributed to a rapidly growing industry and what strategies businesses have used to enter the market and maintain growth, as well as considerations for potential retail success in the future.     

Franchising choice in retail networks: a multi-level institutional framework

Franchising is one of the most dynamic forms of organization for retail networks. Conceptualized as a hybrid form by transaction cost theory, franchising outlets are supposed, in the long run, to be bought by franchisors in order to capture residual rents. However, franchising persists a long time and still represents one of the favorite means to cover territories. This article suggests that this persistence of franchising in the organization of retail networks can be explained by institutional theory. The article also argues that institutional forces exert their influence at multiple levels. Based on this, a set of seven research propositions are developed, setting out a research agenda in this area.     

International Franchising Research: Some Thoughts on the What,Where, When,and How

The purpose of this article is to examine the present state of international franchising research. We consider the origins and evolution of franchising as an enterprise form and summarize relevant research in this area. We advance and substantiate the premise that franchising research in the global arena has largely followed the geographic expansion trajectory of the franchise industry. And, based on these themes, we conclude by identifying a series of significant research topics in the international franchising domain.     

International Franchising: Evolution of Theory and Practice

This paper reviews the evolution of the theory of international franchising over the past two decades, from its humble beginnings in the early 1990s. The theories are grouped into three time phases. Ten theory papers are considered. It is clear that apart from a basic decision-making model explaining whether to internationalize or not, the theory of international franchising has “borrowed” theory from mainstream marketing. In particular, international franchising theory has evolved by incorporating capabilities theory, relationship theory, stakeholder theory, and governance mode theory. The biggest opportunity for future international franchising research is to add a branding theory perspective. Four sub-topics are put forward as promising areas for future research.     

Internationalization of South African Retail Firms in Selected African Countries

African markets are complex environments for foreign multinationals. The continent, which has recently attracted significant attention for its rich potential and growth prospects, presents a multitude of challenges for the South African retailers leading the charge of retail expansion. This qualitative study seeks a deeper understanding of the contextual challenges experienced by these firms in other African markets, and how they have managed this process. It further engages how these firms build networks with local stakeholders and how they overcome information deficits. This study confirms the rich variety of capabilities and approaches developed by South African retailers operating across the continent, as opposed to a single standard approach. The research has further confirmed that these firms typically use SA Inc. as a country specific advantage in their expansion, leveraging off their inter-firm networks and personal exchanges to gain a better understanding of African markets and their consumers.     

Research in emerging markets finance: looking to the future

Much has been learned about emerging markets finance over the past 20 years. These markets have attracted a unique interdisciplinary interest that bridges both investment and corporate finance with international economics, development economics, law, demographics and political science. Our paper focuses on the research areas that are ripe for exploration.     

Applying the scenarios method to capture uncertainties of retail development in emerging markets

Retail development in emerging markets has been the result of key driving forces operating in a variety of ways leading to unpredictable and complex patterns of retail change. Existing theories of retail change remain inadequate for capturing the complexities inherent in emerging markets. In order to capture the impact of the complex interplay of driving forces on retail change in emerging markets, the authors adopted the scenario method which accepts structural uncertainty and allows for multiple interpretations of multiple futures for the phenomenon under study. An example case study is presented, where four possible visions for retail development in emerging markets in Asia are identified. The four scenarios are firstly, a scenario where Traditional Retailers dominate through mom and pop stores, a second one where Regional Retailers dominate, a third one where Discounted Retailers dominate and a fourth where Mixed Retailers gain predominance. The scenarios highlight that the politics of retailing give rise to new conventions of competition in emerging markets, which sustain the coexistence of a variety of retail formats in these markets. The scenarios approach demonstrates that the nature of consumer behaviour rooted in traditions and customs alongside rising aspirations sustains a dual model of retailing in emerging markets. The paper concludes with reflections for retail development theory and implications for practitioners and policy-makers.     

Franchising: the dilemma between standardisation and flexibility

Both standardisation and flexibility are naturally linked to franchising and the balance between them has become an important research issue. Literature states that cost minimisation, brand image and innovation are the main reasons that push towards standardisation, while flexibility is claimed (for those that advocate for it) in order to achieve a higher adaptation to local markets and enhance franchisees’ entrepreneurial attitudes. This research will focus on the computer retail sector to find out how franchise networks in services settle this dilemma. Here, franchisors have decided to focus on economies of scale and strong common corporate image as key goals and thus allow franchisees to be flexible with any other variables that do not affect their main objectives, mainly by adding a complementary product and services portfolio. Results suggest that those resources and capabilities which sustain a competitive advantage are more susceptible to being standardised in franchising, opening an interesting research line through the Resource-Based View.     

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.     

新兴经济体市场需求变化态势与中国企业选择——基于东莞外向型企业拓展新兴市场的调研

国际金融危机后,新兴经济体成为世界经济复苏及其持续发展的主要动力来源。以IMF界定的26个新兴市场国家为范围,通过东莞外向型企业拓展新兴市场的情况调研,发现新兴市场需求具有进口规模不大、增速快、市场需求差异比较大等特征,对中国企业拓展新兴市场具有一定挑战。中国企业必须转变对新兴市场的观念,采取多路径进入新兴市场,并加强对新兴市场的维护。     

Industry type,culture, mode of entry and perceptions of international marketing ethics problems: A cross-cultural comparison

The authors investigate the differences in ethical perceptions of Australian and Hong Kong international managers. Ethical perceptions are measured with respect to different industry types, cultures and modes of entry into international markets. Mode of entry refers to how firms select to enter foreign markets. Modes of entry include: exporting (indirect or direct), contractual methods (licensing and franchising) and via direct foreign investment (joint ventures and wholly-owned subsidiaries). It was determined that culture and mode of entry have a significant effect on the perception of ethical problems.Robert Armstrong is an Associate Professor of Marketing and Research Associate of the Asia Research Centre at Murdoch University. His prior experience includes: industrial management, marketing research and corporate planning. His research and consulting interests are centred in the areas of international marketing ethics and services marketing.Jill Sweeney is a Senior Tutor at Murdoch University and is currently working on a doctorate. Jill's chief research interests are in the areas of services marketing and marketing ethics.