Previous applications of DEA (data envelopment analysis) models in the field of franchising have been scarce. In particular, measurement and analysis of the operational efficiency of coffee shop franchisors in the explosively growing coffee market in Korea is required. In this study, we categorize 29 Korean coffee shop franchisors into three groups according to their number of franchisees and employ the metafrontier analysis to measure the efficiency of coffee shop franchisors from 2015 to 2018. Based on the results of metafrontier DEA, this study identifies sources of inefficiency within individual coffee shop franchisors to provide insights for coffee franchise operators and investigates efficiency differences between small-chain and medium-chain coffee shop franchisors. Furthermore, the results of bootstrapped truncated regression provide that the external environmental factors affecting the efficiency of each individual group are totally different patterns depending on the franchise group. Based on the analysis results, this study suggests strategic initiatives tailored to individual coffee shop groups to enhance their operating efficiency and identifies the principal operational drivers of the environmental variables to achieve sustainable growth.Additionally, analyze the impact of the industry in which the franchisor operates its business on its chain efficiency by comparing 43 chains' efficiency between and across industries (retail versus services) using a meta-DEA and a context-dependent DEA. In this study, they developed a level-by-level benchmarking path with the context-dependent DEA approach to provide realistic short-term and long-term objectives to inefficient chains.
Methodology
Analysis Technique (1): Metafrontier DEA ModelTraditional DEA models consider the units selected for analysis as a homogenous group, thus, it is supposed that all the considered DMUs use the same technology and are completely homogenous organizations [18]. Comparisons of technological efficiencies among groups cannot be performed using conventional DEA because the technical efficiency of a particular company is difficult to compare with that of others operating with other technologies [9,10]. However, franchising activity includes numerous and diverse sectors and groups, such as travel agencies, hotels, restaurants, and fashion outlets. This fact makes us to suppose that there can be differences between the efficiency of franchise firms depending on their belonging sector or their franchise group managed by individual franchisors [18]. To account for this heterogeneity problem, there are several approaches that take account of different production technologies. In particular, Battese et al. [7], Battese and Rao [22], and O'Donnell et al. [23] consider the fact that technology could differ across regions and develop the stochastic metafrontier approach. A metafrontier approach is able to measure efficiencies of DMUs associated with distinctive and heterogeneous technologies. This involves a metafrontier estimation, which...