E-Strategy and Soft Landings for Franchising in Emerging Markets

E-Strategy and Soft Landings for Franchising in Emerging Markets

Ye-Sho Chen (Louisiana State University, USA), Ed Watson (Louisiana State University, USA) and Renato F. L. Azevedo (University of Illinois – Urbana-Champaign, USA)
DOI: 10.4018/978-1-4666-4510-3.ch008
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Abstract

International franchising as a global growth strategy, especially in emerging markets, is gaining popularity. For example, the U.S. Commercial Service estimated that: (1) China, having over 2,600 brands with 200,000 franchised retail stores in over 80 sectors in 2007, is now the largest franchise market in the world; (2) India, having over 70 international franchise operations successfully operating with an investment of $1.1 billion and sales turnover of $2.7 billion in 2009, has made franchising the second fastest-growing industry in the country. The popularity of franchising continues to increase as the world witnesses an emergence of a new e-business model, Netchising, which is the combination power of the Internet for global demand-and-supply processes and the international franchising arrangement for local responsiveness. The essence of franchising lies in managing the good relationship between the franchisor and the franchisee. In this chapter, the authors show that e-business strategy plays an important role in growing and nurturing such a good relationship. In addition, the chapter discusses how an effective e-strategy can help a growing franchise go abroad to emerging markets through soft landings to reduce risks and costs.
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Franchising: Managing Relationships

Franchising is “a business opportunity by which the owner (producer or distributor) of a service or a trademarked product grants exclusive rights to an individual for the local distribution and/or sale of the service or product, and in return receives a payment or royalty and conformance to quality standards. The individual or business granting the business rights is called the franchisor, and the individual or business granted the right to operate in accordance with the chosen method to produce or sell the product or service is called the franchisee.” (Justis and Judd, 2002, pp. 1-3). Developing a good franchisor-franchisee relationship is the key for a successful franchise (Justis and Judd, 2002). Figure 1 describes how to develop a good franchisor-franchisee relationship. The franchisor needs to learn continuously for the growth of the franchise. The learning process is developed through five stages (Justis and Judd, 2002):

Figure 1.

Understanding how to manage the franchisor-franchisee relationship

  • 1.

    Beginner: Learning how to do it;

  • 2.

    Novice: Practicing doing it;

  • 3.

    Advanced: Doing it;

  • 4.

    Master: Teaching others to do it; and

  • 5.

    Professional: Becoming the best that you can be.

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