The Effect Of The Franchising Model Commerce Essay


What are the factors effecting the quality in big restaurant chains? This question was the main drive for me to be interested in this subject. By time my interest has been shifted towards the problems deriving from franchising and how well are the franchisee businesses are applying the main model of the franchisor businesses.

Today franchising creates almost $2,000,000,000,000 (2 trillion) revenue every year, worldwide(WWW, Franchise Consultants Inc.). In 2001, there were nearly 768,000 business establishments that were either owned by franchisors or franchisees. These businesses employed approximately 10 million people, and had a direct output of nearly $625 billion, and a payroll of nearly $230 billion. 56.3 percent of these businesses were in the quick service restaurant industry (How widespread is franchising 2006). Larger franchisees pay franchisors large up-front fees, sometimes more than $1 million, in order to buy the rights to establish a new outlet. The franchise fee is just the beginning of the investment. New franchisees are often required to purchase specific assets, like signs, menus, equipment, and training that cannot be recovered or easily put to other uses(Shane & Spell, 1998, p. 43). United Kingdom alone has approximately 400 franchises, with 22,500 outlets, according to a NatWest Bank/BFA survey, with a need of 106,000 outlets to achieve the level of trade market.

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The franchisees in food industry, usually, will have to obtain most of their products from the mother-corporation. This ensures that the food a customer purchases from one outlet matches the food he or she might eat from another outlet. All over the world when anyone walks into McDonald's can find the same BigMac and the fries. This enables the company to have a uniformity between the brand and the products. This however causes another issue, the issue of quality management, the degradation of the raw products during the transport.

Subway in United States has implemented an internet based data collection service and connected all the franchisee businesses to it. In this way they managed to cut the quality based complaints to more than 25% below the figures compared to 2005/2006 respectively (QSRMagazine, 2006). So the company has acknowledged the fact that there is a problem with the quality control that does not meet the parent company specifications. I have first-handedly had some issues with Subway Restaurants. Their promise is to provide the customers with freshly chopped vegetables and ingredients. Most of the experience I had was positive but some were negative. In this project I will try to address the issues creating ?adexperiences for Subway customers and how the quality management could be sustained to the level of their slogan: Eat Fresh!

Subway Corporate overview

Subway is a multinational restaurant franchise selling mainly sandwiches and salads. It was formed in 1965. As at July 2009, it had more than 32892 restaurants in 92 countries , including 1258 in the UK. The corporate name of Subway is Doctor's Associates Inc. (DAI), and the company's headquarters are in Milford, Connecticut - USA. Subways global operations are supported by a number of regional offices. It was first established by Fred DeLuca. In the early days, DeLuca used to drive his beetle for 40miles a day to get fresh vegetables for his submarine sandwich restaurant which was doing very well by the '47s.

DeLuca was planning to expand his business and soon he realised that the easiest way will be to franchise the business. His first franchisee was a guy called Brain Dixon. DeLuca made him an offer that he couldn't refuse. He told him about their franchising plans and offered to loan him the money to buy their restaurant located in Wallingford, Connecticut. DeLuca even said that if he did not like the business, he could return it to them and owe them nothing. It is how the Subway restaurant chain and the worlds most successful sandwich franchising was born.

Today more than 70% of the new subway franchises are sold to existing subway owners and by 2010, subway aims to increase its outlet number in UK to 2010!(Keynote business reports, Fast food market 2009)

Uniformity is a primary concern of Subway and their franchisees, with the operation of each unit maintained to guarantee uniformity in both services and standards, including a fairly uniform menu.

A typical Subway restaurant menu include sandwiches with all the different fillings made freshly in the certain branch. Operating hours are fairly consistent across the franchise, with opening during breakfast hours, offering a full or limited breakfast menu, different sandwiches, freshly brewed coffee and soft drinks.

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Subway utilizes a conventional franchise agreement, wherein the franchisee provides capital by initially investing in equipment, seating and d?or of their restaurant businesses. Franchisees are also required to reinvest in these areas over time.

In the year 2008, the Subway chain entered its 43rd year of operation. It is the world's largest submarine sandwich chain with more than 30,000 restaurants in 87 countries. As a matter of fact, the Subway chain operates more units in the US, Canada and Australia than McDonald's does.(Subway, WWW, 2010).

According to a report published by the British sandwich association (BSA), Subway is the UK's leading seller of sandwiches, with it sales of around USD 300m being almost the double the sales of the nearest competitor, Tesco. This is the first time in history that the subway company held this position in the British market. Subway sees this as a result of its brand and franchising strategy (Keynote business reports, Fast food market 2009).

Research Objectives

The expansion of franchising has been a significant development in the fast food service restaurant industry ever since DeLuca was able to use franchising to grow his restaurant business to a chain. Quick service, also known as fast food restaurants have suffered from both internal and external pressures, thanks to the increased competition from an increasingly globalised marketplace. Because of this, victimisation can occur by unethical operators, whose actions sometimes become even criminal (Kaufmann, 1990a, 1990b). However, a successful franchisor-franchisee relationship has to be built on mutual trust, otherwise the alliance is doomed to fail. Just as the two parties share in the profits, they too must share in the effort for growth of both parties (Justis & Judd, 1989). The franchisor puts its reputation on the line when franchising, to complicate matters, often the franchisor's obligations are only painted in broad strokes in the contract, which has lead to charges of failure to due business in good faith.

With such intertwined destinies, conflict is likely to occur. Because of this, it is a common occurrence that franchisees have complaints about the franchisors they have contractual agreements with (Purvin, 1994). Without proper support from the franchisor, declining franchisee sales are likely to occur. Not only does this negatively effect the commission paid to the franchisor, but makes it more likely that the franchisee will either cancel, or not renew their franchising contract. This relationship and the critical success factors are investigated in order to better understand how franchisors can create a high quality franchisor-franchisee coalition. Subway has been a leader in their industry because they have been able to create exactly this high quality franchisor-franchisee relationship.

For this reason, this research is focused primarily on how the franchising strategy of Subway can be tuned to carry the best value for franchisees while keeping the product quality uniform all around.

As part of this, the research objective will try to achieve an insight regarding the threats and the opportunities faced by fast food companies in the UK, and their quest to expand as a result of increased competition that they faced in their homeland, the United States. This dissertation project will explore Subway and its franchising strategy as a standard of measures, as well as its strategy in the UK. As such, the research objectives are as follows:

To critically evaluate the link between franchising advantages and competencies and the overall strategy at Subway, specifically in the UK

To evaluate the perception of franchising and the Subway brand, as well as the gap (if any) in comparing it with their primary competitors.

To evaluate the quality differences in different franchisees in different parts of UK, determining whether franchising has an effect on the quality of the products.

To generate a list of suggestions to fine-tune the Subway franchising strategy in the UK in order to gain competitive advantage over its rivals.

The Research Questions

In order to address the quality issues derived from the franchising business model in Subway restaurants, I will have to evaluate the franchising strategy Subway is using and their quality management procedures both the parent company and their franchisees.

What are the criteria's affecting foreign market selection?

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What are the criteria's affecting company? choice of market entry mode?

What are the market entry modes?

What is the Subway's Franchising strategy throughout UK?

What are the Pros and Cons of the franchisee's effect on food quality?

What are the Pros and Cons of the franchiser's effect on food quality?

What effects does franchising model has on the fast food quality?

How effectively the main model is carried forward to the franchise's business?

Fast Food Industry Background

I chose this topic because franchising is most common in this sector as noted by the sales figure and number of franchised outlets. The growing pattern of eating out is derived from recent consumer trends over the last 20 years. This has had a significant impact on the growth of the franchising strategy, within the industry, as organizations seek to expand their distribution network, in an increasingly competitive business environment.

The franchisor-franchisee relationship is a very close relationship. There are five crucial elements to the health and stability of this relationship;




Individual behaviour

Group behaviour

Working knowledge is the base of the franchise family relationships; and through the process of learning, working knowledge is widespread through the system. As the franchisee? business continues to develop, there maybe new products and services developed out of the assets of the franchise's operations, which may transform the business into a more profitable enterprise.

The percentage of franchising on food industry was about 7 percent in the UK until 1990 according to The Seventh Annual National Survey of Franchising in Britain 1990 which was commissioned by the British Franchise Association (BFA), sponsored by the National Westminster Bank PLC, and complied by Power Research Associates. ( Maitland, 1991). Subway opened its first franchised restaurant in 1996 in Brighton. At present Subway has more franchised shops than McDonald's or Burger King. The company gives franchisees a full-training program, which takes about 2 weeks to complete, free of charge. Compared to the other expenses incurred when starting a new Subway franchise, the cost of training would only be a small percentage of the overall cost. The training program provided to the franchisees, however, improve their skills and give them the instruction needed to begin to run their business. The learning process is a constant and continuing process, in the fast food industry and specifically in Subway. For Subway franchises, franchisees are given full-support, whenever they need it. Franchisees are asked to achieve the superiority, hygiene and value of the Subway organization. They have the advantage of selling well-know, high quality, standardized products, which have been successfully test marketed, taking away much of the risk (The route to fast food franchising n.d.).

The UK franchise market, specifically, is growing significantly in the terms of the number of businesses offering franchises, as well as the number of branches and the total employment. The market was worth ?8.9 billion in 1999 in terms of turnover. By 2009, it was standing at ?10.8bn and the market researchers estimated a growth of 10% after the long recession we left behind.

There are two major directions franchising is moving. First, franchisors are becoming increasingly international, with the establishment of global brands, such as Subway. Europe has been slower than the UK to embrace franchising, although US franchises have successfully penetrated the continent. However, British companies are in the forefront of the movement to establish franchising across the continent and interest in underdeveloped sectors, such as copy shops, is rising in continental Europe. Fast food restaurants and drug stores, in particular, have been successful franchises in Europe.

The Structure of the Dissertation

Literature Review


The word franchise comes from the old French word ?ranchewhich means free or exempt. In medieval times, a franchise was a right or privilege granted by a sovereign power king, church, or local government. The payment was called a royalty, a term still in use to this day. (Blair & Lafontaine, 2005)

Franchising is a contractually centred business agreement that occurs between the franchisor, who has developed a specific product or service, and the franchisee who has purchased the right to not only sell the franchisor's products or services, but also to use the franchisor's trade name. It is a comprehensive business format which is evolving and developing itself in the present capitalist markets. This business strategy has become one of the widest used methods in the second half of the century. This business arrangement has become a prominent strategy for doing business, during the latter half of the twentieth century. Significant expansion occurred in the last two decades, and saw franchising as a powerful driver of the American economy (Alon and McKee 1999). The process of franchising offers the unique opportunity that allows the franchisor to increase the quantity of distributors of their unique product or service (Khan, 1992).

Franchising companies offer the franchisees, which have already been proven successes in their league, help with the infrastructure and guidance concerning many different topics from finding a commercial property to sourcing finance. According to Shane and Spell (1998) , Typically, entrepreneurs establish a new franchise system because they have created a superior formula, which is better than their competitors. If an entrepreneur has built better outlet operations, he or she can earn high profits by establishing a chain of outlets and reproducing the superior profit-generating operations in many locations. The expansion of franchising has become a powerful strategy for organizations worldwide, in an ever-increasing, hyper-competitive globalised marketplace, securing growth, job creation and economic development globally (Hoffman & Preble, 1993).

Singer Sewing Machine Company was the first developer of the concept of franchising, which was back in 1863 (Rosenberg, 1969). Since then, many industries have been successful to implement the franchising marketing system. Products as diverse as vehicles to soft drinks were the early entrants into the franchising system. During the early days, products were often sold to the customer directly either via the mail, a door-to-door salesman, or through a single distributor. Those days franchisees dealt directly with the manufacturers and had buyer-seller relationship with the independent retailers.

Franchising creates almost $2,000,000,000,000 (2 trillion) revenue every year, worldwide(WWW, Franchise Consultants Inc.). In 2001, there were nearly 768,000 business establishments that were either owned by franchisors or franchisees. These businesses employed approximately 10 million people, and had a direct output of nearly $625 billion, and a payroll of nearly $230 billion. 56.3 percent of these businesses were in the quick service restaurant industry (How widespread is franchising 2006). Lager franchisees pay franchisors large up-front fees, sometimes more than $1 million, to buy the rights to establish a new outlet. The franchise fee is just the beginning of the investment. New franchisees are often required to purchase specific assets, like signs, menus, equipment, and training that cannot be recovered or easily put to other uses(Shane & Spell, 1998, p. 43). United Kingdom alone has approximately 400 franchises, with 22,500 outlets, according to a NatWest Bank/BFA survey, with a need of 106,000 outlets to achieve the level of trade market.

Because of the rapid growth during the '70s and '80s, franchise restaurant chains account for around 25 percent of restaurant outlets and 43 percent of industry sales. However, the introduction of restaurant alternatives is expected to slow down the new unit growth and sales. Restaurants that want to continue high-growth and above average sales have already shifted their focus towards the international markets. New domestic initiatives include operating units in non-traditional markets and dual branding, where several restaurant chains or services operate in the same location. The simplest franchise type, of dual branding, involves a contract between a supplier and a business owner. The business owner agrees to sell only one version of a particular product. For example, Subway sells only Pepsi-Cola soft drinks. Conversely, product-trade name franchising, which accounts for 52 percent of all franchise sales and 33 percent of all franchise units in the United States, involves selling products to distributors who resell them (Ayling, 1987).

Khan (1992) further describes franchising as a system of internally-dependent organizations, which make a product or service available to the consumer through negotiation and exchange. The franchisee is given the right to use the franchisor's distribution system, as well as their trademark. This relationship is made official through a contract, which can either be for a specified period of time, or for an indefinite time. Although these limits are determined by the contract, there are many variables that are often addressed including: the products, pricing, quality, renewal and termination clauses, and many more.

There is a unique quality to franchising as it relies on a close relationship between the franchisor and the franchisees, as legally distinguished, an economic activity Even though the franchisor and franchisee are explicitly separate organizations, their success is depending on one another, thereby becoming a strategic alliance (McIntyre, Gilbert, & Young, 1994). There are two primary types of franchise systems; Product trade name franchising, which includes the distribution of a product that has been created by a franchisor as well as the format of business that the franchisor has created, in a specified geographic area. In the end it is the right given to the franchisee to duplicate a copy of the franchisor's original business model, and place it in a different location. This enables the core company to build an nationwide distribution network, while increasing the volume of production. Product trade name franchising is the precursor to business format franchising.

In business format franchising, the franchisors sell business ownership to the franchisee. This differs from product trade name franchising, which sells products through the franchises. The fundamental strategy for the decision to franchise out a business is nearly always the same. In both instances, the franchisor is pursuing the expansion of the distribution channels for their products or services. There are three types of interdependence for these franchise systems: the business form, the legal form, and the agreement form (Justis & Judd, 1989).

In last several years, there has been an effort made to reduce the time it takes for the development of franchises. Due to the efforts made, the number of franchisors increased by 5 per cent between 2008 and 2009. Bates (1998), Price (1996) and Stanworth (1995) have compared the reduced risk and lower failure rates of franchising, in contrast to other form of small business organizations. Rubin (1978) argues that franchising is an ineffective way for small businesses to increase capital to fund growth. On the other hand, additional factors have been brought to light about the reflection of franchising to the activities of what have become known as unethical franchisors As such, there is sometimes a failure to separate franchising and some frequently discredited -in some countries outlawed- business forms, such as pyramid sellingFelstead, 1993). As a result, growth of franchises has focused on recovering the public awareness of franchising as a type of self-employment and growing/expanding an existing business. Consequently if the general public sees franchising disapprovingly, then franchisors will have a noticeable difficulty when it comes to attracting new franchisees. Although development has been unhurried, franchising is still a significant part of the UK economy, equating to 30 percent of all retail trades (BFA, 1984-2003).

With the focus of sponsoring the growth of franchising, as an efficient and effective strategy for small business growth, franchisors must make certain that superior awareness of this business strategy is still active. Potential franchisees must know that franchising offers significant opportunity for those who wish to go into self-employment. It becomes clear though, that franchising ?s still a poorly understood phenomenon(Dant 1995, p. 10). Small business and market researchers, as well as academics, note that there is still a significant uncertainty over the actual contribution of franchising to business growth. Whereas there are significant hypothetical benefits in franchising for both those wishing to enter self-employment and those wishing to develop their existing small business, Price (1996) and Stanworth et al. (1998) has suggested that franchise failure rates are related to those of predictable small businesses and could be more uncertain during the first four years of the business's life. Without a doubt, Stanworth (1995) has argued that for a small business objective of developing into a probable franchise procedure, the strains normally associated with small business growth are, in fact, likely to be exaggerated and exacerbated, rather than reduced. As inter-industry distinctions influence development, the study contains itself to a single sector. Kostecka (1988) and Bradach (1998) mention that the industry distinction of restaurant franchising has a distinct strength in the franchising industry.

Having offered a proven business concept creates powerful advantages to franchises. In addition to that, franchisees are able to benefit from the recognition that the franchisor has secured with their business. There are also responsibilities that come with being a franchisee. Franchisees must conduct their businesses according to the contractual obligations that have been laid out by the franchisor. As I mentioned earlier, franchisees also must pay a percentage of their revenues to the franchisor, through some core products obtained or direct payments for the profits generated. In many ways, franchisees are customers of franchisors.

Justis and Judd (1989) theorized that there are four phases to the franchisor/franchisee relationship: Introduction, growth, maturity, and decline. Which could be named as Franchising Relations bell curve. At the introduction phase, there is a shared desire for both organizations to become successful and collect as much as rewards possible, interdependence begins to form. The growth phase then follows once the business begins to function. The franchisor mostly supports the franchisee during this phase as they begin to build their business. Of course, there are challenges that can occur during this phase, especially if requirements are not clear or training and support from the franchisor is not effective. Once these challenges are overcame, the maturity phase begins. During the maturity phase, the franchisee knows whether or not they value the franchisor's position in the relationship, if their expertise is valuable. The final phase is the decline of the relationship. As usual one of two possible scenarios tend to happen; The franchisee may wish to terminate the relationship with the franchisor, if they do not think it generates any value, or they may continue the relationship, if they believe that the relationship will continue to be successful and is of value.

The Advantages Of Franchising To Franchisor

Franchisee Capital Investment: Franchisors state that they are happy with capital benefits from franchising.

Franchisee's Commitment:Personal Capital investments forces the franchisees to be more committed to their business.

Savings on Cost: The franchisors emphasizes on the cost savings franchises enables franchisees.

Quality Control: Arguably, quality control is achieved easier with franchising.

Honesty:Franchising contracts force franchisors to be honest reporting their takings.(Dnes, 1992)

According to British Franchising association the advantages of franchising to franchisor are as below:

Having financial and manpower resources of the franchisee could grow the network,

The day to day operation of each outlet is not important for the franchisor,

The franchisor? organisation could earn profits regardless high capital risk,

The network could develop rapidly,

The franchisor does not have much staff and their problems,

The management or every single outlet is intended to be well motivated and successful,

It obtains wider and secured outlets for products and services,

Using his network of outlets gives the franchisor a way to service global clients.

The Disadvantages Of Franchising To Franchisor

Franchisees, in some cases, tend to develop a feeling of independence and to wonder whether they need the franchisor at all;

The operating standards of franchisees have to be monitored and controlled. The franchisor? name and the goodwill associated with it are at risk;

Some franchisees are difficult to motivate, particularly if they reach a level of trading which is satisfactory to them;

A breakdown of trust between franchisor and franchisee;

The risk that franchisor is teaching a prospective competitor when training a franchise;

The difficulty in getting a franchisee to upgrade his operation and spend more capital for that purpose;

The difficulty of effective communication;

The franchisee who may try to cheat by understanding his gross revenues for fee calculation purposes;

Developing the ability to assess prospective franchisees before entering into binding commitments particularly in the early stages;

The recognition that the financial return in cash terms are better in company owned operations than franchising. However, in terms of return on capital invested franchising provides, once profit is reached, very considerable returns. (British Franchising Association, 2009)

The Advantages Of Franchising To The Franchisee

Most franchisees in the business for a few years are happy with their positions, due in a large measure to the generally satisfactory level of franchisee income and the feeling of independence.

In starting a new business, the franchisor usually provides experience, or know-how, gained from starting other businesses successfully. The franchisor usually provides on-the-job and classroom training to the inexperienced franchisee.

The franchisor is a continuing source of know-how to the franchisee.

The franchisor usually brings to the retail unit an accepted trade name that not only attracts customers but also provides the unit with a niche in the community and easier access to credit, for example.

In general franchisees feel independent; they run their own show. (Vaughn, 1979)

The franchisee invariably needs less capital than required in setting up independently because of the assistance given by the franchisor in obtaining finance.

The franchisee receives the benefit on a national scale (if appropriate) of the franchisor? advertising and promotional activities.

The idea of the franchisee? business has lower risk due to being under the franchisor? umbrella. The all franchisee have no doubt that there is always risk while showing less effort and every success comes with harder effort.

The franchisor obtains the maximum amount of market information and experience which is available to be shared by all the franchisees in his system.

There are sometimes territorial guarantees in appropriate cases which protect a franchisee from competition from the franchisor and other franchisees of the franchise within a defined area around the franchisee? business address and in the case of mobile franchise, a defined area of operation.

Having franchise business give an opportunity to get lending sources by banks. These alternatives and/or opportunities are not possible to get while in non-franchise business. (British Franchising Association, 2009)

The Disadvantages Of Franchising To The Franchisee

Services provided by the franchisor are an expense item to the franchisee, and in some instances, at least, the services are dubious value.

The rather high level of satisfaction of the majority of franchisees is offset in a significant percentage of franchises by dissatisfaction often resulting from franchisor? not performing up to initial promises, by marginal incomes, and by a felt lack of prestige in the position

Misleading and fraudulent franchise sales practises victimize some would be franchisees.

The value of the trade name is questionable in certain business classifications. In those in which repeat sales at frequent intervals are sought, customer satisfaction with the product or service soon becomes much more important than the name or banner under which the establishment operates. (Vaughn, 1979)

The difficulty of assessing the quality of the franchisor. This factor must be weighed very carefully by the potential franchisee for it can affect the franchise in two ways. Firstly, the franchisor? offer of a package may well not amount to what it appears to be on the surface. Secondly, the franchisor may be unable to maintain the continuing services which the franchisee may need in order to sustain his business.

The franchisee may find himself becoming too dependent upon the franchisor and fail to produce the personal drive which is necessary to build up a successful business and to take full advantage of the foundations for business development which the system provides. Some franchisees lose their perspective.

The franchisor? policies may affect the franchisee? profitability.

The franchisor may make many mistakes in his policies.

The good name of the franchised business, or its brand image, may become less reputable for reasons beyond the franchisee? control. (Business Franchising Association,2009)

“The core of the franchised business is the ?oodwilldeveloped by the franchise system. Descriptively, this refers to the intangible values built through the expenditure of extensive money, time and effort.(Brown, 1981)


Before deciding on where and how to collect data, there are few steps that is important to think about. The main layers of the process research ?nion(Saunders et. al, 2007) are: Research philosophy; Research approaches; Research strategies; Data collection methods.

The aim of this chapter is to give the researcher the opportunity to define the research approach, strategy and philosophy to be while analysing Starbucks Coffee Company. The reasons justifying the choice of these methods as well as the problems that occur due to this will also be elaborated here.


Positivism, interpretive and realism are the three philosophies that the researcher could choose from. All three philosophies have different views, data collection and analysis. To provide a clear understanding of the philosophies, the researcher will explain briefly each of them.

The principles of positivism are that the conclusion from an analysis will be a kind of generalisation. According to this approach researchers have no influence on or will not be influenced by the subject. Most of the time, the data collection will be taken from observation and quantifiable data as well as statistical analysis. Remenyi (1998) defines positivism in the following terms as follows: ?ou will prefer working with an observable social reality and that the end of the product of such research can be law-like generalisations similar to those produced by the physical and natural scientists (Remenyi et al, 1998)

Interpretivists will contradict the positivist views by arguing that it is impossible to hypothesize on the fact that the business and management world have the same ?aws

Interpretivism sees the world of business and management as complex and in constant change. For them every company has their own strategies, uniqueness therefore it is difficult to generalise without making them less valuable. (Bryman & Bell, 2007)

Realism shares some philosophical aspect with positivism. Realism ?s based on the belief that a reality exists that is independent of human thoughts and beliefs.(Saunders 2003)

No one philosophy is better than the others but the researcher needs to choose the one that is most relevant to the research topic.

In this dissertation an interpretivism approach is adopted because the researcher feels that Starbucks has different ways of doing business when compared to other companies. The researcher has chosen to write on only one department of Starbucks because an analysis for all the departments will be too difficult to do due to the complexity of management. The researcher considers that it will be complicated to apply laws-like in the business world.


The two research approaches are inductive and deductive. The deductive approach is when the author develops a supposition or hypothesis and then creates a strategy to test the hypothesis. In using the inductive approach the process will be different; the author will first collect data and after an analysis of all of them will develop a theory. In other words, the deductive approach will test the theory and the inductive will build the theory.

The deductive approach owes more to positivism and the inductive approach owes more to interpretivism. In this research the researcher adopted an inductive approach moving from different types of data collection to a final conclusion. The researcher was interested on how they think and see the company efficiency, how they deal with problems and also the diverse opinion founded in the answers. Therefore an inductive approach would be more appropriate.


The strategies used by the researcher will have to be appropriate to the research question and its aims. The research strategy will describe the processes of data collection and the problems likely to be encountered during the research process for example, time and access to data. The different strategies cited in Saunders 2001 are:

Experiment is a classical form of research that owes much to the natural sciences, although it features strongly in much social science research, particularly psychology.

Survey will be often the most common strategies applied for business and management research. Questionnaires, structured observations and interviews are methods used in the survey strategy. These methods provide the researcher a large amount of data even if more time is needed. Others strategies are needed to collect efficient data for the dissertation but combine with another or others the survey is really efficient. Questionnaire, interviews can allow simple comparisons.

Case study is a good technique ?o gain a rich understanding of the context of the research and the processes being enacted.Cooper & Schindler, 2006). The component of a case study might include questionnaire, interviews etc. As well as qualitative and quantitative data. A case study on the subject needed can be a way to find clear answers on questions that the researcher may have.

Grounded theory is a strategy where after having gathered data by observation, a theory will be developed. In summary, a theory will be build after constant reference to the data.

Ethnography is not a strategy which is easy to use due to time consuming. ?he purpose is to interpret the social world the research subjected inhabit in the way in which they interpret it.

Exploratory studies means that you will explore the chosen subject by a search of literature, a talk to experts in the subject and conducting group interviews. The focus originally broad will become narrower with the progression of the research.

Explanatory studies ?stablish casual relationships between variables

In this research a mix of methods will be used simultaneously such as survey, case study of Starbucks and exploration. To collect data, the researcher interviewed different people from the organisation. In a sense the research was exploratory because it had to necessarily move from a wider subject to a narrow one. At the beginning the researcher did not know which areas to concentrate on within the organisation. As more and more data became available the main themes around which the core arguments needed to be built became more and more clear. Therefore it would be appropriate to classify the methods used as exploratory.


Primary data and secondary data are the sources that provide answers to the research questions cited in the literature review chapter. Primary data is information that is created for the first time by the researcher who creates them using experimentation techniques, observation or interviews. On the other hand secondary data already exists and has already been created by other researchers. Secondary data are found by looking at books, internet, reports etc.

Sources of primary data are observation, semi-structured interviews, in-depth interviews and questionnaires. The data that we collect ourselves will have a specific purpose. It will be specific to the research questions and objectives. The disadvantages of primary data are that more time is needed to collect them. Questionnaire and interviews need a lot of work and time to be efficient for the analysis.

“In-depth interview, like the term qualitative interview, this one sometimes, refers to an unstructured interview but more often refers to both semi-structured and unstructured interviewing.(Bryman & Bell, 2007)

In this dissertation the researcher has used semi-structured interviews by setting up a list of questions to be covered in each interview. However some of the questions were left out or explored further depending on the flow of the conversation. This is the clear advantage of the semi-structured interview as it does not limit the flow of the conversation or structure the response of the interviewee and therefore the researcher is able to extract greater detail and explore the topic in depth.

Two types of interviews were used by the researcher, face to face interview and e-mail interview. The researcher has not been able to do a face to face interview with one of the respondent who was situated in another city. The reason why the researcher called the e-mail an interview and not questionnaire is because the e-mail was sent to a particular person rather than a sample of individuals. Further there was no attempt made by the researcher to restrict the range of responses by the interviewee. The e-mail respondent was not able to have face to face or phone interview once again due to geographical constraints.

Face-to face interview was conducted with: Stefano Cutrona, Jon Day, Sarah Nias, Colin Trow and ten potential Franchisees.

E-Mail interview was conducted with: Karen Marzell

Documentary, multiple source and survey are the three main groups of secondary data. The main advantages of using secondary data are that time and expenses are saved. As the data is already collected, there will be more time to analyse and interpret the information. Secondary data have disadvantages also. The data could have been collected for another purpose than the researcher? hence the data could be inappropriate and would need to be made suitable to it. The access may also be difficult and expensive. (Ghauri & Gronhaug, 2005)

The researcher used three types of secondary data. Written materials such as company? website, books, journals/newspaper and organisation reports have helped the researcher to gain information on the company, the industry and the environmental issues.


The two types of data are qualitative and quantitative. Qualitative is non-numerical data that provide theories or supposition constructed from interviews, observation and survey. ?ualitative research is an exploratory research methodology based on small samples that provides insights and understanding of the problem setting.(Saunders 2003) Numerical data improves the robustness of the findings. ?t can range from simple counts such as the frequency of occurrences to more complex data such as test scores or prices.(Saunders 2003). In most research numerical and qualitative data are used together to enhance the result and verify conclusions.

In this paper, both qualitative and quantitative data have been used by the researcher to answer the research questions. The nature of the research questions and the philosophy underlying the research require the combined use of the both types of data. However qualitative data will be the type that is predominantly used. Theories and models such as the SWOT, PESTLE, Porter? Five Forces and oligopoly will be combine both types of data as this is important for the analysis.


In order to ensure that the research does not generate invalid conclusions and results, an attempt will be made by this researcher to focus on reliability and validity of the research. ?eliability can be assessed by posing three questions: Will be measure yield the same results on other occasion? Will similar observations be reached by other observers? Is there transparency in the analysis an attempt will be made to ensure that these questions are answered positively.

Validity is ?he extent to which data collection method accurately measure what they are intended to measure.(Saunders 2003) While using interviews data as will secondary research material the researcher will ensure that these questions are answered positively.

In interviewing top bosses, the researcher can possibly only collect positive data about the organisation. Therefore the questions in the semi-structured interviews will be probing and critical so that the results are not one sided. Similarly, the journals or magazines articles can also have a political or economical bias in them. Therefore the researcher will connect those data with the material and provide the counter arguments so that a balanced view appears in the dissertation. However, the researcher recommendations will be taken with the consideration given to possible bias.