Crucial Role In Economic Development Business Essay

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Franchising has a crucial role in economic development and has received a lot of attention for doing business and growth strategy.(9:1) Identifying the influential factors in business' failure and success, always, are considered as important cornerstone in business researches, especially entrepreneurial activities. (10:1)

During the past decades, franchising is growing fast in many countries in the world (16:6)

In retail and services business franchising is quite common (7:1) ,in which production and consumption of services have to be done at the same time and close to customer (10:9) where business need to develop outlets in different geographic place (12:4)

According to …. 77 percent of the best international franchising are within service industry include… (11:3)

Franchising play an important role in economic development (10:3)

Cost and risk of developing business in new market, enforce the businesses to get into inter-organizational partnership. (11:1)

According to Michael (1996) considerable parts of the sale in services industry such as restaurants (46%of sales), tax preparation (67% of sales), specialty food retailing (55%), printing and copying (71%), and lodging (39%) are in result of franchising. (12:3)

Also franchising has been considered as a growth strategy for organization expanding among businesses (16:3)

Franchisees in order to avoid fail in business prefer to involve in established franchise system.(10:14)

Franchisees' failure should be separate from factors are due to franchisor's features. (10:14)

Although studying on franchise failure has received a lot attention among researchers such as … (10:11) There is lack of study about investigation of franchisors related factors in franchisees' failure and success (10:10)

Franchisees' failure and success has not received enough attention in studies, and in some studies which have been done like (NAFTA ) implies to franchisors perception in franchisees' failure. (6:5)

Franchising because of increasing impacts on business studies has been subjects of wide variety of several discipline include, (12:1, 18:2) economic, strategic, marketing, entrepreneurship and law. In economics, structure of contract is discussed; in Strategic , franchising is an organizational form ; franchising in marketing is an important distribution channel ; in entrepreneurship it is a way for run a new business (high cited one) and at last contractual clause and legal issues between franchisees and franchisor is studied in law.

In many countries franchising has an active role in way of doing business (7:2)

High rate of failure among new franchise systems (10:13)

More than 40 percent of retail sales in the United States are in result of franchising.(12:2)

Although some believe franchising is more common in small business but some others think in reveres (16:7)

Business format franchising has been increasing during the past decades (6:1)

Franchisees as potential entrepreneurs have profit motivation also (5:2)

There are 809 active franchise systems with 34200 franchised outlet in the UK that has more than £ 12.2 million annual turnover (2:2)

Businesses are always looking for a way for expansion. (1:5)

Despite the problem of involving in the franchise system, franchise have bright future for franchisees and franchisors.

Franchisee is a source of new idea and innovation for franchise system from local market and customer preferences (22:2)

Franchising as one of the fast growing business forms during the past decades. (2:1)(9:3)

Franchising has been developed instead of traditional form of organizing in the retail organization. (7:1)

In order to lack of agreement in franchising , qualitative study should be done. (16:7)

Franchising success is due to doing business in collaborative way.(9:4)

Selection of proper partner has important role in success of business in franchising and both side should evaluate each other capabilities precisely and select the best one (9:4)

During the recent years , franchising has turned into one the most common way for doing business (20:1)

Also franchising is used as a market entry mode for internalization.

There was more than 158,625 franchises with approximately $ 209 billion turn over in service industry. Franchising has created about 4,145,613 jobs in the United States(7:3)

Influence of franchise on potential entrepreneurs (franchisee) has received less attention than franchisors (21:2)

There is lack of research about Iranian franchise system.

Franchising as an attractive way for expanding business has been considered. (21:1)


Franchising due to separated organizational units, standardization across the units and joint ownership is different from other kinds of partnership. (20:3)

Franchising is a collaborative business (9:5)

In franchising, potential entrepreneur (franchisee) purchase the right of using a franchisor trademark, operational system and business format (10:2) within a specific region and period. (16:2) (4:2)(11:4)

In this relationship franchisee get the benefit form proven brand and tested product and services and franchisor will be able to transfer risk and cost of the entry to the new market to franchisee and also get the benefit of initial fee and royalty.(4:3)(11:5)

According to Rubin (1978):

"A franchise agreement is a contract between two (legal) firms, the franchisor and the franchisee. The franchisor is a parent company that has developed some product or services for sale; the franchisee is a firm that is set up to market this product or services in particular location. The franchisee pays a certain sum of money for the right to market this product" (Rubin , 1978, p.224) .


Tatham et al(1972) , Edens et al. (1976) , Knight (1986) , Olm et al. (1988) , Withane (1991) , Castrogiovanni et al.(1993) , DeCeglie (1993) , Forward and Fulop (1993) , Kahn (1994) Hing (1995) Kaufmann and Stanworth (1995), Shubart and Bennett (1997), Falbe and Welsh (1998), Fenwick and Strombom(1998), Jambulingam and Nevin (1999), Berni (2002) Kasselmann et al. (2002) Clarkin and Swavely (2006), Ramirez (2007) provided an explanation about proper franchisee's characteristics such as the entrepreneurial capacity , professional experience , motivation, financial capacity , personality , extroversion, communication capacity and desire for success (7:1,2)

Selecting a right partner in franchising has a pivotal role in franchisors and franchisees success (7:4) and wrong selection of partner cause conflict between them and will have strategic effects on both.(11:9)

So they have to look for an ideal partner (7:5)

Franchisor should identify and choose more cooperative and less opportunistic franchisees (1:3)

Selection of proper partner has pivotal role in success of franchise network (1:1)

And right selection of partner can give an explanation of variance in franchisees' behavior.(1:2)

And how they select each other has not been explored largely. (11:10) and it is needed to study how franchisor and franchisee use different criteria for selection the partner.(11:11)

Not many studies discuses about applying different selection criteria from franchisee's point of view . However there are some studies that have paid to both sides perspective in partner selection. (11:8) and they believed further studies for understanding more about should be done.

Franchisor and franchisee enter to this system with certain expectation and "unrealistic expectation" will increase conflict between them. (9:7)

And they have to compatible partner to avoid conflict (9:8)

According to (8:3) local environment, brand name, partner characteristics, support services, system quality, cost and communications has been identified as influential factor in franchisee decision to engage in a franchise system. (8:3)

Poor selection can lead to serious problem for continuing the partnership (9:6)

Importance of exploring the partner selection process and criteria (11:7)

According to Clarkin and Swavely (2006) there is no sufficient studies about how they evaluate each other characteristics in franchisees.

Provided services include cost of supplies, independent resourcing, financing sources, training, pre-opening services and exclusive territory have pivotal role in franchisees decision (Falbe & Welsh, 1998; Hing, 1996; Peterson & Dant, 1990; Piedmont & Whitehead, 1990; Roh, 1998). (8:3)


Lack of knowledge about affecting factor on franchisees' performance and consequences of franchising , as integral part of franchise system, has made a gap in franchise literature.(10:7) (10:4) (Combs, Michael, and Castrogiovanni 2004)

Understanding about influential factors on franchisees performance, in one hand help franchisor to adopt more supportive strategy and in the other hand will help franchisees to select proper franchise.(10:8)

Franchisees are always important source of new idea and innovation base on local market.(16:4)

Franchisee also absorbs the risk of expansion into the new market.(10:5)

Studies about

In spite of importance of franchisee in the franchise system, there are no knowledge about contribution factor to franchisee performance (10:6)


Service industry in Iran and their role in GDP.


Partner selection

Provided services

Competitive advantage

Resource based view


Case description