Franchising business model in Malaysia: exploring the growth factors, critical success factors and business

Abstract

Globally, franchising businesses are recognised as the fastest-growing business model. Although the world economy is often reported to be quite turbulent, the franchise industry is projected to expand in the coming years. However, the framework of comprehensive franchising business model is still vague and poorly defined with limited existing studies on franchise growth, business strategies and development of franchising business model. Thus, this research aims to identify the growth factors for Malaysian franchisors, critical success factors in businesses that affect Malaysian franchisors’ performance, and franchisors’ business strategies formulation for competitive advantage. This study is carried out based on the conceptual framework that integrates Dynamic Capabilities Theory, Institutional Theory, Resource Dependence Theory, Partnership Theory, Knowledge-Based Theory, and Social Action Theory as the underpinning theories. To achieve the study’s objective, the case study method is adopted, where semi-structured interviews were conducted with franchisors and franchisees from the franchise brands of two sectors, food and beverages, and learning centre and nursery sector. The informants are from the firm’s middle management, totaling 20 participants. The qualitative approach was chosen due to the in-depth data and the richness of information needed to answer the research objective, which helps to understand the phenomena of growth, critical success factors, and business strategies from the informants. Data organisation and thematic data analysis were conducted using manual coding, Microsoft Word, and Excel and facilitated by ATLAS.ti software. The perspectives of the franchisors and franchisees have been obtained based on dyadic relationships and data triangulation to get input from multiple perspectives in the same process. A total of 19 themes emerged throughout the study. The findings show eight themes of factors that affect franchisors’ growth, which are organisational structure, firm competitive strategies, firm resources, dynamic capability, shared organisational culture, negotiation and support, micro and macro environments, four critical success factors for franchisors’ performance which are people, structure, culture and system, and seven extension themes of franchisors’ business strategies for competitive advantage, which are varieties of services, niche and focus scope, quality, unique selling point, brand identity, pioneer in delivering and adaptability to local preference. Other than that, twelve propositions were developed with thirty sub-propositions from the findings. At the end of this study, a new comprehensive model of franchising business that explains the growth factors, critical success factors and formulation of franchising business model has been developed, which particularly extends Porter’s Generic Strategies and franchising-related theories. Practically, the emergent model can be applied by franchise players in general, franchisors and franchisees, in strategically managing the business model in the long run.