Is franchising a successful method for multi-national business expansion
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.
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 challenges encountered by hospitality firms seeking to enter and expand and international franchisee system, managers will be better positioned to avoid some of the more common pitfalls. Through awareness of the distinctive characterizes of foreign as opposed to domestic markets, hospitality managers will be aware of the need to develop innovative and flexible market strategies that are responsive to the needs and wants of foreign markets.
Purpose of the study
The main purpose of the study is to examine and evaluate if franchising is a successful method for multinational companies in Europe with particular focus on the examination of the strategies of McDonald's.
Aims and Objectives
The main aim of this study will be to:
To explore the concept of franchising and review its theories.
To prove that franchising is the successful method of multinational business expansion.
To focus on the successfulness of the franchising system in hospitality industry.
How does franchising helps in the expansion of multinational expansion of the firms?
What are the typical difficulties and challenges encountered by hospitality firms seeking to enter and expand in international franchisee system?
CHAPTER 2: LITERATURE REVIEW
In a franchise system, one firm (the franchisor) sells the right to a second firm (the franchisee) to market goods or services under the franchisor's brand name and use business practices developed by the franchisor. Put differently, it is the rental of an intangible proprietary asset ...