Andrew Terry

Good Morning, Vietnam! Opportunities and Challenges in a Developing Franchise Sector

Until recently the development of franchising in Vietnam was hampered by a regulatory framework that did not recognize franchising as a discrete business relationship. The introduction of Vietnams Franchise Law in 2005 provided, for the first time, a legal foundation for franchising, which was a necessary prerequisite for sector development. Although there are currently few business format franchise systems operating in Vietnam, there is an increasing presence of established international franchise systems and increasing numbers of local systems albeit at an early “product distribution” evolutionary stage. Moreover, the commercial environment for franchising is increasingly favorable: Vietnam is the fastest growing Asian economy after China and India and is experiencing strong gross domestic product growth and annual retail growth. This article addresses the development of franchising, and the challenges and opportunities for franchisers in Vietnam.

Meeting the Challenges for Franchising in Developing Countries: The Vietnamese Experience

While business format franchising is the industry standard for developed countries, it remains an aspiration for many developing countries. Despite the attraction for developing countries of systems, training, and support and despite the economic and regulatory infrastructure being in place for the development of business format franchising, a range of commercial and socio-cultural factors may conspire to prevent its full expression. This paper addresses franchising development in Vietnam, a developing country. It considers strategies to bridge the gap between Vietnamese franchise practice and franchising best practice. It proposes that in Vietnams current state of development, the product and trade name model may be the appropriate starting point with a move to the business format model only when, and in places where, the socio-cultural, commercial, and economic factors and the legal environment can accommodate more sophisticated business format franchise arrangements.

Quasi-Franchising: A New Model for Strategic Business Cooperation

Franchising’s capacity for reinventing itself is a matter of record. Indeed its continual adaptation to accommodate changing circumstances and market conditions is a major factor in its increasing influence throughout the world. The franchising relationship is based on a prescribed business model developed by the franchisor and carried out under the franchisor’s guidance and oversight by franchisees who are granted the right to trade under the franchisor’s brand and system. The manner in which the franchise model is implemented is nevertheless capable of infinite variation. It is its capacity for adaptation and innovation which drives its relentless development.

Handbook of Research on Franchising

Franchising is one of the major engines of business expansion and job creation globally. The Handbook of Research on Franchising contains original work by leading franchise scholars from around the world who offer new insights into entrepreneurial behavior, organizational forms, regulation, internationalization and other contemporary issues relating to this dynamic business strategy. The book will provide readers with a base of knowledge about the entrepreneurial opportunities and behaviors of franchisors and franchisees as well as explore the forms that franchise organizations may take, the regulation of franchise companies, how franchisors and franchisees relate to one another, the development of the franchise model, franchising in emerging markets, social franchising and more. It introduces theory and sets the agenda for future research and adds to education and practice. Practitioners will benefit from the high quality scientific research, and scholars will find exciting opportunities for contributing to the body of knowledge on a subject that has not received sufficient attention. The research contained in this book will also be of value to franchisors, franchisees, service providers and government regulators.

Research contributions to understanding franchising

Franchising is a strategy for cloning a business through the replication of proven business and management systems. It is an increasingly popular method of business operation, providing an effective and efficient means for one enterprise, the franchisor, to expand its existing business and for another enterprise, the franchisee, to enter an industry. It provides ‘the means for merging the seemingly conflicting interests of existing businesses with those of aspiring entrepreneurs in a single process that promotes business expansion, entrepreneurial opportunity and shared cost and risk’ (United States House of Representatives Committee on Small Business, 1990, p. 13). Franchising has its origins in the exclusive branded distribution arrangements – today referred to as product and tradename franchises – that developed in the United States in the mid-nineteenth century. It was not until the mid-twentieth century that franchising in its contemporary business format mode developed. Franchising pioneers such as Ray Kroc (McDonald’s) and Harland Sanders (Kentucky Fried Chicken (KFC)) realized that comprehensive business and management systems could be licensed as well as the right to use another’s brand in the distribution of a product or service in a territory. Today business format franchising is, in Martin Mendelsohn’s words, ‘a sophisticated business relationship whereby the franchisor provides the franchisee not only with an established branded product or service but with an entire business strategy – an overall image and a method of doing business in accordance with a proven system’ (Mendelsohn, 1992, p. 19). It has been the same franchising pioneers – McDonald’s and KFC – that have been prominent in the international expansion of franchising to all regions, and most countries, of the world. Both operate in over 120 countries through over 38,000 (McDonald’s) and 20,000 (KFC) outlets and their presence has been influential in providing the catalyst for increasingly vibrant and dynamic local franchise sectors in these countries.

Beyond Main Street: Franchising Strategies for Indigenous Entrepreneurship in Australia

Australia’s Indigenous population faces disparities which tarnish Australia’s image as “the lucky country”: a life expectancy markedly less than non-Indigenous Australians, lower education standards, poorer health, greater unemployment, and the list goes on. Having developed a culture which enabled first Australians to survive, and indeed thrive, for over 60,000 years in all areas of Australia’s massive landmass and challenging climate and conditions, Australia’s original inhabitants have faced their greatest challenge in the form of European invasion and settlement just over 200 years ago. Successive Australian governments have made regrettably little progress in dealing effectively with the challenges faced by Indigenous Australians living within, and alongside, modern Europeanized and increasing Asianized Australia. A massive welfare budget has not resulted in sustained positive outcomes, and there is increasing recognition from Indigenous leadership that there is a need to find a way out of welfare dependency and that economic empowerment is likely to be a more effective strategy. This paper considers the potential role of franchising—albeit not as practiced in Main Street Australia—in supporting Indigenous entrepreneurship.

Development Prospects for Franchising in Southeast Asia: A Review and Outlook

Academic studies on global franchising had focused initially, from the late 1970s to the 1990s, on developed economies, including North America, Western Europe, and Australia, while over the last decade the research focus has moved to include transitional and emerging markets, such as the Asian economies of China and India. Only recently has academic research on franchising shifted towards developing Southeast Asian markets (Dant and Grunhagen, J Market Channels 21(3):124–132, 2014). The literature on scholarly research into franchise activities in the developing markets of Southeast Asia remains in its infancy (for notable exceptions see Binh and Terry, J Market Channels 18(2):147–163, 2011; Binh & Terry, 2014; Grunhagen, Le, & Ho, 2014).

Regulating the Franchise Relationship: Franchisor Opportunism, Commercial Morality and Good Faith

As franchising increases its influence internationally, regulators increasingly face the challenge of the appropriate manner of its regulation. A recent Australian report has focussed attention on an obligation of good faith as an appropriate regulatory strategy to address opportunistic conduct and has concluded that while the prior disclosure obligations of Australia’s regulatory instrument for franchising (the Franchising Code of Conduct) are for the most part adequately addressed, there remain concerns because of the ‘continuing absence of an explicit overarching standard of conduct for parties entering a franchise agreement’. The Opportunity not opportunism report of the Parliamentary Joint Committee on Corporations and Financial Services (December 2008) recommended that the optimal way to provide a deterrent against opportunistic conduct in the franchising sector was ‘to explicitly incorporate, in its simplest form, the existing and widely accepted implied duty of parties to a franchise agreement to act in good faith’. In November 2009 the Australian Government rejected this recommendation on the basis that it would ‘increase uncertainty in franchising’. This paper explores the challenges faced in grafting the civil law concept of good faith onto a common law system. It suggests that in Australia and other common law jurisdictions – and even in civil law jurisdictions – good faith is more an elusive ideal than a well settled commercial standard and that issues of definition, scope and application may frustrate its intended application in the franchising context.

The impact of China's regulatory regime on foreign franchisors' entry and expansion strategies

Since the “open door” policies adopted by China in 1978 ended 30 years of isolation, introduced massive economic and legal reforms, encouraged foreign investment and resurrected private enterprise, China has become the worlds second largest and fastest growing economy. In these circumstances, the development of franchising was inevitable. However, in addition to the normal commercial and cultural issues which challenge any franchise system in its international expansion, foreign franchisors proposing to enter China have faced additional regulatory obstacles. Market entry, participation in particular business sectors, and even the use of franchising as a method of business operation and expansion have all raised complex regulatory issues. This paper addresses the liberalisation of market access for foreign franchise systems under China’s World Trade Organisation accession commitments, and the new regulatory regime for franchising in China under the 2007 Commercial Franchise Regulation.