2. School of Management
Critical Success Factors of International Franchising:
Case Studies of Foreign Franchisors in Asia
Stephen Choo
This thesis is presented as part of the requirements for
the award of the Degree of Master of Commerce
of the Curtin University of Technology
December 2001
3. i
Abstracts
A multiple case study of four foreign franchisors was conducted in 2000 to study the
critical success factors of international franchising in East Asia. The four franchisors
were chosen because they possess different international franchising capabilities and
are at varying levels of internationalisation. This study provides a useful insight into
how a foreign franchisor should approach and compete successfully in East Asia.
Firstly, the research provides a conceptual model, which displays the six key
categories and success factors for international franchising in East Asia. The study
has made a significant contribution in identifying two new categories that have mostly
been neglected by researchers in international franchising. Secondly, the study
reveals a unique form of master franchising that is being practiced in East Asia.
Thirdly, the effective management of Asian partners is found to begin with recruiting
the right partners with the desired characteristics and subsequently developing a long-
term mutually beneficial working relationship with the partners. Finally, successful
franchisors were found to believe strongly in the power of branding and niche
marketing in East Asia.
4. ii
Acknowledgements
I would like to express my heartfelt appreciation and gratitude to my supervisors Dr.
Tim Mazzarol and Professor Lawson Savery for their wisdom, encouragement, and
invaluable direction throughout the year. I am particularly appreciative of their fine
effort in meticulously and painstakingly going through my thesis with a “fine tooth-
comb.” My special thanks must go to Dr. Mazzarol for his continuing mentoring,
support and guidance over the past several years.
This research would not have been possible without the open access to the four
studied organizations. I wish to thank all of the respondents who willingly gave their
time to share their knowledge and stories with me. In particular, I would like to
acknowledge the significant contributions Messrs Phil May and Shaik Aziz of Dome
Coffees have made to this study. They have been incredibly generous in their
support, of which I am most appreciative.
My deepest gratitude and love, however, is reserved for my wife Tina. Her tireless
effort in preparing those delicious sandwiches for my lunches and unconditional
support has made the undertaking of this thesis possible. This thesis is, therefore,
dedicated to my beautiful wife, partner and friend.
5. iii
TABLE OF CONTENTS
1 Introduction.............................................................Error! Bookmark not defined.
1.1 Problem Statement ........................................Error! Bookmark not defined.
1.2 Purpose of the Study.....................................Error! Bookmark not defined.
1.3 Contributions of the Study............................Error! Bookmark not defined.
1.4 Definition of Terms ......................................Error! Bookmark not defined.
2 Literature Review...................................................Error! Bookmark not defined.
2.1 Definitions of International Franchising.......Error! Bookmark not defined.
2.2 International Franchising Phenomenon........Error! Bookmark not defined.
2.3 Modes of International Franchising..............Error! Bookmark not defined.
2.4 Research on International Franchising .........Error! Bookmark not defined.
2.5 International Franchising Capabilities..........Error! Bookmark not defined.
2.6 Internationalisation of U.S. Franchisors .......Error! Bookmark not defined.
2.7 International Franchising in East Asia..........Error! Bookmark not defined.
2.8 Changing Consumers in East Asia ..............................................................44
3 Country Profile: Singapore...............................................................................47
3.1 Background Information..............................................................................48
3.2 Marketing Environment ...............................................................................48
3.3 Franchise Industry.......................................................................................54
3.4 Implications for Foreign Franchises ............................................................61
4 Research Methodology ......................................................................................63
4.1 The Case Study Method...............................................................................64
4.2 Application of the Case Study Method........................................................68
5 Case Studies........................................................................................................80
5.1 Dome Coffees Australia Pty. Ltd.................................................................80
5.2 Coffee Bean and Tea Leaf.........................................................................117
5.3 The Body Shop ..........................................................................................125
5.4 Royal Copenhagen Ice Cream...................................................................139
6 Data Analysis....................................................................................................147
6.1 Distance Management ...............................................................................147
6.2 Contract Enforcement................................................................................156
6.3 Cultural Adaptability.................................................................................166
6.4 Host Country Risk Management ...............................................................171
6.5 Marketing Approach..................................................................................174
6.6 Partnership Management ...........................................................................181
7 Findings ............................................................................................................193
7.1 Propositions Discussed ..............................................................................193
7.2 The Model..................................................................................................196
6. iv
8 Conclusions and Recommendations...............................................................200
8.1 Answering the Research Questions ...........................................................200
8.2 Conclusions................................................................................................207
8.3 Recommendations for Future Research.....................................................209
9 References.........................................................................................................211
10 Appendix A: Guideline for Interview Questions ......................................227
7. v
LIST OF TABLES & FIGURES
TABLE 2:1 International Franchising Capabilities and Capacity for
Development
30
TABLE 2:2 Success Factors in Establishing and Operating Foreign Units by
U.S. Franchisors
32
TABLE 3:1 Proportion of Singaporeans by Age Group 51
TABLE 4:1 Typology of International Franchisors 74
TABLE 5:1 International Locations of Dome Cafes 81
TABLE 5:2 Operational Categories for Auditing Dome Cafes 114
TABLE 5:3 Schedule of Franchise Fees for Indonesia 114
TABLE 5:4 Dome Coffees’ International Activity 115
TABLE 5:5 International Locations of Coffee Bean and Tea Leaf 117
TABLE 5:6 The Body Shop’s Worldwide Locations 125
TABLE 5:7 International Locations of The Body Shop’s Company Stores 128
TABLE 5:8 Royal Copenhagen’s Overseas Master Franchisees 140
TABLE 6:1 Distance Management 150
TABLE 6:2 Contract Enforcement 159
TABLE 6:3 Cultural Adaptability 167
TABLE 6:4 Host Country Risk Management 172
TABLE 6:5 Marketing Approach 177
TABLE 6:6 Partnership Management 183
FIGURE 6:1 Frequency Distribution of Issues Within Each Category 148
FIGURE 7:1 A Model of CSFs of International Franchising in East Asia 198
