Is franchising a successful method for multi-national business expansion

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

Contents

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 1: INTRODUCTION1

Background of the research1

Problem Statement1

Purpose of the study2

Aims and Objectives2

Research Question2

CHAPTER 2: LITERATURE REVIEW4

What is franchising?4

Who is involved?4

How does it work?5

Franchising In UK5

A background on franchising5

Growth and future of franchising6

Relevance to SME sector6

Code of Franchising7

Organizational and Structural Elements7

Types of Entities7

Documentation8

Franchise Agreement8

Manuals and Policies8

Franchising fees9

Relationships10

General Implications10

Agency Implications10

Financing Elements - how to finance your franchise11

General11

Options for finance12

Personal Equity12

Banks12

Leasing13

Trade Creditors13

Profit Retention13

Venture Capital14

Public Offering14

HISTORY14

Definitions of Franchising:15

Franchise Growing Trend16

The strategy of franchising17

Resource scarcity19

Theory of scarce resources19

Agency Theory and Franchising22

Contributions Of Agency And Resource Scarcity Theory24

Licensing theory26

International Franchising27

International Licensing30

Benefits of Franchising:32

Benefits to the franchisee32

Benefits to the Franchisor33

Drawbacks of franchising:33

Disadvantages to the franchisee:33

Disadvantages to the franchisor:34

Examples of successful restaurant franchise business:35

Future of franchising35

Social Reasons of Franchise36

Social Balance36

The contract37

Economic and social benefits38

Ethics39

Competition40

Social Disadvantages41

CHAPTER 3: METHODOLOGY46

Research Method46

Research Design46

Instrumentation48

CHAPTER 4: DISCUSSION49

Strategy of expansion franchises49

Advantages to the franchisee53

Being their own boss53

Selling a well established, high quality product54

Intensive initial training54

Continuous support55

Benefit from national marketing carried out by McDonald's55

Forecasting57

CHAPTER 5: CONCLUSIONS58

APPENDICES70

Fax:70

Mobile:70

Email:70

CHAPTER 1: INTRODUCTION

Background of the research

Franchising is considered a less risky investment decision than a wholly owned subsidiary. It provides entrepreneurs a low-risk opportunity to co-own a business with a proven format for success. In addition, franchising provides opportunities to capture economies of scale while empowering the entrepreneur. Franchise/license agreements typically involve contractual arrangements. These contracts represent relational exchanges; this means that benefits and burdens are shared in the relationship.

Some studies have looked at franchising from a non-theoretical perspective. Knight (1986) found that entrepreneurs were likely to franchise because of a known brand name and the ability to start a business more easily. In addition, franchising provides access to managerial help, a 'proven' business plan and name, and greater probability of survival. From the franchisor perspective, franchising was used to reduce risk. A firm could expand via franchising in order to test the potential of a new market; a franchisor could determine market potential without using company-owned assets, thereby reducing overall firm risk.

Problem Statement

To date, there have been few theoretical or exploratory studies about international franchise systems in the hospitality industry. By contrast, in the last two decades, manufacturing and retail franchise systems in foreign markets have been the subject of several empirical analyses. But systematic scholarly investigation has yet to be undertaken of the actual success and failure factors in Europe from a business perspective.

Not only will such an investigation contribute to the academic knowledge of franchise marketing, but it will also yield insights that will be of practical benefit to managers within the hospitality industry. With an understanding of the typical difficulties and ...