Determinants of Monitoring Capabilities in International Franchising: Foodservice Firms within East Asia

Abstract

This paper undertakes an exploratory study on determining capabilities of international franchising within East Asia. There is a need to develop a deeper understanding in franchising within East Asia as much of the franchising literature is based on the U.S. experience. Findings from this paper indicate that international franchisors use a combination of mechanisms to prevent franchisee opportunism in East Asia. They include ex-ante bonds, performance schedules and formal controls in brand management. However, the effectiveness of these mechanisms depend on the capabilities of the franchisor to negotiate a high initial franchise fee, select the right franchisee and make adaptation but still maintain brand integrity. Copyright Springer Science + Business Media, Inc. 2005Agency theory, capabilities, monitoring, international franchising, East Asia, case study,

Internationalization, Innovation and Sustainability of MNCs in Latin America

“…It is necessary to understand what franchisees expect from potential franchisors and what criteria they consider when selecting their partners (Vaishnav & Altinay, 2009). Regarding the franchisor's selection criteria, available evidence suggests that they look for qualified local franchisees (Pak, 2002) with strong managerial capabilities (Choo et al, 2007), financial strength (Choo, 2005;Choo et al, 2007;Clarkin & Swavely, 2006;Doherty, 2009), business experience, adequate psychological profiling, formal education (Clarkin & Swavely, 2006), specific industry experience (Clarkin & Swavely, 2006;Doherty, 2009), and a shared understanding of the strategic direction of the business (Doherty, 2009). Moreover, in food service retail franchising, the potential franchisees should also have the contacts and ability to secure prime retail space, and local knowledge (Choo, et al, 2007;Doherty, 2009) to successfully adapt the franchised concept to the local market.…”

“…For example, a master franchisee selected by company S in Chile was considered to have strong managerial capabilities (Choo et al, 2007), general business experience (Clarkin & Swavely, 2006), specific industry experience (Clarkin & Swavely, 2006;Doherty, 2009), local market knowledge (Choo et al, 2007;Doherty, 2009), and franchising experience. Companies S and P looked for a franchisee with the financial resources (Clarkin & Swavely, 2006;Choo, 2005;Choo et al, 2007;Doherty, 2009) required for the success of the venture. Company P also indicated a preference for candidates with an entrepreneurial profile.…”

Hotel Industry Regulations and Cross-Border Franchising: The Case of Saudi Arabia

“…Moreover, saturation of the franchisor's local market had been considered crucial (Elango, 2007). As far as the international franchisor-franchisee relationship is concerned, issues related to the possible potential dispute between the two franchising parties and the expected managerial difficulties caused by the local franchisee and encountered by the franchisor had also are taken into account by various researchers (Szulanski & Jensen, 2008;Paik & Choi, 2007;Szulanski & Jensen, 2006;Choo, 2005).…”

Toward a Stage Model of the International Franchise System Development

“…Due to the partial examination available in their descriptive conceptual model that was limited to cases from America-a fact asserted by McIntyre and Huszagh themselves, more thorough empirical studies are required in order to embrace all stages of the international franchise system. Furthermore, according to Choo (2005), there is a pressing need to develop a deeper understanding in international franchising within East Asia as much of the franchising literature is based on the U.S. experience. This research therefore attempts to echo the suggestion in the literature, and based on evidences from cases in Taiwan, provides a full-scale stage model of the international franchise system development.…”