Home > Articles > Business & Management

Introduction to Global Franchising Operations Management: Cases in International and Emerging Markets Operations

Ilan Alon introduces his book, which brings together an unprecedented collection of in-depth cases that illuminate the field’s unexplored opportunities, key pitfalls, and proven best practices.
This chapter is from the book


What is a franchise? According to the International Franchise Association, the industry’s lobby group, “A franchise is the agreement or license between two legally independent parties which gives:

  • A person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor)
  • The franchisee the right to market a product or service using the operating methods of the franchisor
  • The franchisee the obligation to pay the franchisor fees for these rights
  • The franchisor the obligation to provide rights and support to franchisees1

Franchising is a commercial relationship between two entities in which one of the entities, the franchisor, grants the other entity, the franchisee, the right to use its commercial and intellectual assets for a period of time in return for fees and royalties. Fees are often expressed as a fixed sum paid in advance, and royalties are often expressed as a percentage of gross revenues. The nature of the relationship between the franchisor and the franchisee is determined by the institutions that govern franchising—franchise law, as well as the personal and commercial relations developed between the franchisee and the franchisor. Because franchising is often defined by the legal environment, multiple variations exist. Italian franchising law promulgated in April of 2004, for example, defines franchising as “a contract by which one party grants to the other, for a consideration, the use of combination of intellectual property and/or industrial rights, know-how, technical and commercial assistance, as well as the opportunity to be part of a franchising network.” Governance by contract means that appropriate institutions to enforce and support franchising should exist. The contract defines the roles and obligations of the parties.

Franchising is a hybrid form of business. It requires the franchisee to follow the rules of operations, or the franchisee may lose his/her rights to the franchise. In this way, franchising is less entrepreneurial than the stand-alone business. However, the franchisee is often an owner-operator who has a significant investment, both in time and money, built into the system. The franchisee’s engagement with the business—taking risks, solving problems, and operating the business—qualifies him/her as an entrepreneur. Because the franchisee has no boss in the traditional sense, he/she is really not an employee. Therefore, the franchisee is somewhere between being an employee (whose actions are monitored and controlled) to an entrepreneur (whose actions lead to residual income). In this way, franchising possesses both marketlike relations and firmlike relations. The extent to which franchisees can act entrepreneurially depends on the size of the franchisor, how franchising is embedded within the franchisor, the legal relationship, the operational autonomy, the commercial interdependence, and the extent of mutual benefits.

From an operations perspective, franchising is a systematized method of transferring organizational know-how to agents (franchisees) while minimizing the risks involved in making investments. To the marketers, franchising is a way to reach optimal distribution, perhaps in areas where the company’s own tentacles cannot overreach. Franchising can also be viewed as a financial vehicle for both passive and active investors. Real estate developers might want to buy the rights to develop certain retail concepts when building a regional mall, for example. Such developers often buy multiple units at a time and multiple concepts to fit their desired developmental plans. Master international franchising has become the most popular method for expanding overseas as it allows one entity the control and responsibility for the development of entire countries or regions within countries. In short, franchising is a contractual agreement, a hybrid form of business, a method of distribution, a mode of entry into a new country, a financial investment, and a method of operations.

There are various advantages and disadvantages to the franchisor and the franchisee. The franchisee’s biggest benefit is the slogan used by the industry: “be in business for yourself but not by yourself.” The franchisee can benefit from the franchisors’ brand-name recognition, proven products and methods, proven marketing systems, proven technology, know-how and competitiveness in the industry, financial assistance from the franchisor or a banking affiliate, pooled resources, and economies of scale in advertising and buying. However, the franchise dream is sometime unfulfilled as the franchisee finds that results are based on hard work and resource commitment is insufficient. Fees and royalties have to be paid, contractually, even if the residual income of the franchisee is nonexistent. The franchisor has much power over the franchisee’s operations, contract, and, therefore, in legal disputes.

In addition, many benefits accrue to the franchisor. Franchisors who reach a critical level of output can spread the fixed costs over a greater number of outlets, giving them a competitive cost structure. Increased purchasing power against suppliers, economies of scale, additional capital, and the potential to expand the brand quickly are some of the benefits of franchising. On the other hand, franchisors are sometimes troubled by monitoring the franchisees’ actions, controlling quality, protecting their brand, getting into legal disputes, sharing revenues with franchisees, creating new future competitors, and limiting operational flexibility. Conflict with franchisees can lead to dissolution for a small franchisor. Failure to control for quality can lead to the deterioration of the total brand and to eventual closure.

Like a marriage, the focus of successful franchising relies on the ability of the partners to work together harmoniously. This means that franchisees are empowered and engaged, that there is a mutual commitment from both sides, and that relational norms embody flexibility and trust. Cooperative relations emerge from good franchisee selection and training, shared decision making, adherence to ethical standards, and, perhaps most important, profitable businesses.

Franchising is a huge part of the modern global economy. In the U.S. economy alone, it represents about 785 million establishments with an output that approaches $740 billion (see Table 1.1). International markets for franchising are also growing. In the United States, franchising accounts for nearly 18 million jobs (1 of 8) and a $2.1 trillion contribution to output2 (see Table 1.2). Although reliable statistics are not available, several books have documented international growth in recent years through a variety of country and industry studies.3 See Table 1.3 for franchise associations around the world.

Table 1.1. Franchising in the United States



Output (Billions of Dollars)

(Billions of Dollars)

Business Lines


Percent Change Over Prior Year


Percent Change Over Prior Year


Percent Change Over Prior Year








Business services







Commercial and residential services














Personal services







Quick service restaurants







Real estate







Retail food







Retail products and services







Table/full service restaurants














Table 1.2. U.S. Jobs and Output from Franchising

Percent of U.S. Nonfarm Private Sector

Because of Franchised Businesses






$707.6 billion



$2.1 trillion



$1.2 trillion

This book is divided into three parts:

  • Part I: To Franchise or Not to Franchise
  • Part II: In Search of Global Opportunities
  • Part III: Franchising in Emerging Markets and Developing Countries

Multiple franchising systems from different industries (coffee, supermarket, clothing, photography, food, athletic wear, and farming) and different countries (Croatia, Korea, United Kingdom, United States, China, and Indonesia) are represented. The diversity of companies/industries and countries in this book gives a panoramic overview of franchising around the world, across both time and space. Executives who read this book will learn about franchising success and failures through case studies. Students of franchising will learn the key success factors of franchising around the world, best practices, and will be given the opportunity to identify franchising problems and solutions. The last chapter of the book provides insight into each of the cases along with the epilogue based on what happened after the case was written.

The first part of the book discusses the decision to franchise and offers chapters with cases on coffee franchising in Croatia and Korea, as well as an example of a large UK retailer. The first two cases, featured in Chapters 2, “San Francisco Coffee House: An American-Style Franchise in Croatia,” and 3, “Trying to Create a Stir: Opening a Coffee Shop in Korea,” examine the decision to franchise from both the franchisor point of view and the franchisee point of view. In Chapter 2, the franchisor has developed a franchise system, but the system is new and the environment is not auspicious to franchising due to its immaturity and lack of supporting institutions. In the case, Tensek and Pacek are faced with the problem of should they franchise or not and, if so, how should they go about doing so. Chapter 3 supplements Chapter 2’s case very well because it focuses on the franchisee perspective, looking at the same industry. There, two would-be entrepreneurs, Min-Guk “MG” Kim and Kevin Andes, attempt to evaluate whether to buy a coffee franchise in Korea. Both domestic and foreign options existed, as well as the option to open their own storefront. Chapter 4, “International Marketing and Franchising at Marks & Spencer,” is differentiated from Chapters 2 and 3 as it shows how franchising is implemented in a large corporate setting. M&S is the largest UK retailer and franchising is only used in the international marketplace, in places that the company does not want to invest because of a limited market and/or high exposure to risk. Franchising has a trade-off between risk and return. While the financial risks are relatively low, the potential return is limited to the royalty stream.

Part II of the book specifically deals with the international environment, first by measuring potential demand in Chapter 5, “Estimating Demand in Emerging Markets for Kodak Express,” for Kodak Express, and then selecting an international market for a steak concept from the United States in Chapter 6, “Ruth’s Chris Steak House: The High Stakes of International Expansion.” Market assessment and selection are interrelated aspects of successful internationalization. Estimating the potential demand is one of the prerequisites for targeting a country for international expansion. The case in Chapter 5 shows how companies can use country-level statistics to estimate the potential demand. Using income distribution and family size, the case shows how to calculate the economic potential starting with GDP. Making some assumptions about income elasticity of demand, the manager can estimate the market potential for a concept. Chapter 6 presents the analyst with the problem of how to target a country using a restaurant concept as a case. Using statistics on beef consumption and income per capita, the analyst is asked to choose the most appropriate markets for expansion, where the manager is expected to make an investment.

The third and final part of the book focuses on franchising in emerging markets and developing countries. Multiunit franchising arrangements are popular among emerging markets and developing countries. In these markets, a franchisee may be a company or a rich individual or family business that is able to purchase and develop the region. The company is often connected to the local culture and customs and is able to make the adaptations needed as well as monitor and control the system expansion. In a sense, the master franchisee becomes the subfranchisor in a given location. The master franchisee collects the fees, shares the royalties with the franchisor, and is responsible to the administration and management of the system in the host market. Chapters 7, “Master International Franchising in China: The Athlete’s Foot, Inc. (Part A),” and 8, “Master International Franchising in China: The Athlete’s Foot, Inc. (Part B),” feature the case of a master franchisee Rick Wang, owner of RetailCo, who franchised the American Athlete’s Foot concept in China. At the time of entry, the situation was ideal, large pent-up demand for branded athletic shoes was matched by opening for space in department stores and on street fronts. Shortly after opening and expanding the Athlete’s Foot system in China, Rick got into trouble and started to lose sales to the brands themselves that opened direct channels to the consumers. How Rick has managed to avoid financial collapse is instructive to would-be master franchisees considering a purchase of a foreign system into an emerging market. The last case, presented in Chapter 9, “Social Entrepreneurship and Sustainable Farming in Indonesia,” shows how franchising can be used to create social change. In this organic farming case situated in Indonesia, microfranchising is proposed as a model to expand this social business. Microfranchising is franchising for the bottom of the pyramid and these businesses attempt to be inclusive to the poorest.

Collectively, the cases presented in these chapters show managers how to think about franchising from a multinational and multi-industry perspective. Both franchisee and franchisor considerations and problems are discussed. The final chapter shows what has actually transpired and provides an analysis and epilogue, where available, for each of the cases. It is hoped that this book, along with the cases presented, will show future practitioners how to franchise, under different institutional environments, and how to select and operate in different world markets.

Table 1.3. National Franchise Associations, Members of World Franchise Council, WFC

ARGENTINA—Argentinean Franchise Association (AAF)

Lucas Secades, Executive Director



AUSTRALIA—Franchise Council of Australia (FCA)

George Yammouni, Chairman

Steve Wright, President and CEO



AUSTRIA—Austrian Franchise Association

Andreas Schwerla, Chairman

Susanne Seifert, Managing Director




BELGIUM—Belgian Franchise Federation (BFF)

Didier Depreay, Chairman


Gilbert Lardinois, Secretary General


BRAZIL—Brazilian Franchise Association (ABF)

Ricardo Bomeny, Chairman

Ricardo Camargo, Executive Director



CANADA—Canadian Franchise Association (CFA)

Lorraine McLachlan, President and CEO



CHINA—Chain-Store & Franchise Association (CCFA)

Guo Geping, President

Lucy Wu Rui Ling, Vice Secretary General



CROATIA—Croatian Franchise Association (CAF/FIP)

Ljiljana Kukecs, Chairman



CZECH REPUBLIC—Czech Franchise Association (CAF)

Ivo Lamich, Chairman

Hana Juraskova, Managing Director



DENMARK—Danish Franchise Association (DFA)

Inger Fredsted, Chairman

Toke Allentoft, Managing Director



ECUADOR—Ecuadorian Franchise Association (AEFRAN

Ing. Guido Santillán, Executive Director



EGYPT—Egyptian Franchise Development Association (EFDA)

Moataz Al Alfi, Chairman

Hussein Abou El Fath, Secretary General



EUROPEAN UNION—European Franchise Federation (EFF)

Dieter Frohlich, Chairman

Carol Chopra, Executive Director



FINLAND—Finnish Franchising Association (FFF)

Veli Pekka Pihlainen, Chairman

Juha Vastamäki, Managing Director



FRANCE—French Franchise Federation (FFF)

Guy Gras, Chairman

Chantal Zimmer, General Director



GERMANY—German Franchise Association (DFV)

Dieter Frohlich, Chairman

Torben L. Brodersen, Managing Director



GREAT BRITAIN—British Franchise Association (BFA)

Mike Goddard, Chairman

Brian Smart, General Director




GREECE—Greek Franchise Association

I. Illiadis, Chairman

S. Yanakakis, General Director



HONG KONG—Hong Kong Franchise Association (HKFA)

Charlotte Chow, General Manager



HUNGARY—Hungarian Franchise Association (HFA)

Laszlo Muranyi, Chairman

Katalin Mandel, Managing Director



INDIA—Franchise Association of India (FAI)

C. Yoginder Pal, Chairman

Dhruv Jaywant, CEO



ITALY—Italian Franchise Association (AIF)

G. Fiorelli, Chairman

Italo Bussoli, Managing Director



JAPAN—Japanese Franchise Association (JFA)

Kiyoshi Hijikata, Chairman

Tomoyuki Kimura, Managing Director



KAZAKHSTAN—Kazakhstan Franchise Association

Andrey Zakharov

Web site not available

KOREA—Korean Franchise Association (KFA)

Kim Yung Man, Chairman

Park Kee Young, Vice Chairman



LEBANON—Lebanese Franchise Association (LFA)

Charles Arbid, Chairman



LEBANON—Lebanese Franchise Association (LFA)

Charles Arbid, Chairman



MALAYSIA—Malaysian Franchise Association (MFA)

Abdul Malik Abdullah, Chairman

Ahmad Faizal Mohamed Noor, General Manager



MEXICO—Mexican Franchise Association (MFA)

Diego Elizarraras, Chairman



MORROCO—Moroccan Franchise Association (FMF)

Miss Btissam Omari



NETHERLANDS—Netherlands Franchise Association

Maarten Dorhout Mees, Chairman

Jos Burgers, Executive Director



NEW ZEALAND—Franchise Association of New Zealand (FANZ)

Estelle Logan, Chairman

Graham Billings, Executive Director



PHILIPPINES—Phillipines Franchise Association (PFA)

Robert F. Trota, Chairman

Chit Estrada, Executive Director



PORTUGAL—Portuguese Franchise Association (APF)

P. Antunes, Chairman



RUSSIA—Russian Franchise Association (RARF)

Merab Elashvili, Chairman

Yury Mikhaylichenko, Managing Director



SINGAPORE—Franchising and Licensing Association (FLA)

C. Chandroo, Chairman

Terry Wong, General Manager



SLOVENIA—Slovenian Franchise Association (SFA)

Milan Stegne, Chairman

Igor Pavlin, Secretary



SOUTH AFRICA—Franchise Association of South Africa (FASA)

Kobus Oosthuizen, Chairman

Vera Valasis, Managing Director



SWEDEN—Swedish Franchise Association (SFF)

Jonas Idestrom, Chairman

Anders Svensson, Managing Director



SWITZERLAND—Swiss Franchise Association (SFV)

Cristoph Wildhaber, CEO



TAIWAN—Taiwan Franchise Association (TCFA)

Chung-Jen Hsu, Chairman



TURKEY—Turkish Franchise Association (UFRAD)

Mustafa Aydin, Chairman

Gurkan Donat, Vice Chairman



InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020