FRANCHISING AS A POTENTIAL GROWTH STRATEGY FOR A SMALL BUSINESS (A case of Sam-Chi fast food restaurant)

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ABSTRACT

The purpose of this study was to find out whether Sam-Chi fast food restaurant can grow through franchising as well as to give the owners recommendations on how to effectively adopt the franchising business model as a means to grow their business. Sam-Chi restaurant is situated in Lagos, Nigeria and the restaurant is owned and operated by Samuel Okore and his wife Chichi Okore.

The theoretical framework of this research is separated into two sections. The first section covers the growth of a business and what entrepreneurs should know about growth in general. The second section describes in detail what the franchis-ing business concept is and how it can be effectively adopted by an entrepreneur as a growth strategy. The franchising concept was viewed from a franchisors per-spective.

The qualitative research method was used in this thesis and the data was collected through interviews. The owners of Sam-Chi fast food restaurant were the first to be interviewed followed by two of their employees. Five customers of Sam-Chi restaurant were also interviewed and all the interviews were conducted separately except for the one of Sam-Chi couple.


The results of this study revealed that Sam-Chi fast food restaurant cannot cur-rently grow through franchising because the restaurant does not have some of the requirements a company needs to be franchised. However, the restaurant has the possibility to grow through franchising in the future if these requirements are met. The future of Sam-Chi fast food restaurant is very promising because the restau-rant has some of the key success factors of global fast food brands that have been franchised. Recommendations have been given to the owners of Sam-Chi restau-rant on how they can prepare their restaurant for growth through franchising.


TABLE OF CONTENTS

ABSTRACT

1 INTRODUCTION
            1.1 Background of the Study
            1.2 Research problem and objective
            1.3 Limitations
            1.4 Outline of the Thesis

2 BUSINESS GROWTH
            2.1 To grow or not to grow
            2.2 What entrepreneurs should know about growth

3   FRANCHISING AS A GROWTH ALTERNATIVE
            3.1 History of franchising
            3.2 Concepts of franchising
                        3.2.1 Franchisor
                        3.2.2 Franchisee
            3.3 Franchising explained
            3.4 Types of Franchise
                        3.4.1 Business Format Franchising
                        3.4.2 Traditional or Product Distribution franchising
            3.5 Types of franchising agreements
                        3.5.1 Individual franchise agreement
                        3.5.2 Area franchise agreement
                        3.5.3 Master franchise agreements
            3.7 Franchising relationships
            3.8 Franchising guidelines
            3.9 Fast food franchising (Industry overview)
            3.10 Cost of franchising a restaurant business
                        3.10.1 Marketing the franchise

4   THEORETICAL FRAME OF REFERENCE

5 EMPIRICAL STUDY
            5.1 Marketing research
            5.2 Marketing research process
            5.3 Qualitative, quantitative and mixed research methods
            5.4 Research Process and Sampling
            5.5 Sampling
            5.6 Presentation of the interview questions
                        5.6.1   Questions for the owners of Sam-Chi fast food restaurant
                        5.6.2   Questions for the employees of Sam-Chi fast food restaurant
                        5.6.3   Questions for the customers of Sam-Chi fast food restaurant
6 ANALYSIS OF THE RESEARCH
            6.1 Growth
            6.2 Franchising
            6.3 Franchisor franchisee Relationship
            6.4 The current state of Sam-Chi fast food restaurant
            6.5 Company strengths and recommendations

7 CONCLUSIONS

8 THEORY CONNECTIONS

9 RELIABILITY AND VALIDITY OF THE RESEARCH
            9.1 Reliability
            9.2 Validity

10 SUGGESTIONS FOR FUTURE RESEARCH
11 REFERENCES
APPENDIX 1: INTERVIEW QUESTIONS


1    INTRODUCTION

This thesis is structured into three sections; the introduction, the theoretical framework and the empirical study. The first section gives an introduction of the thesis and background information, the research problem and objective is also de-fined followed by the outline of the thesis.

1.1    Background of the Study
The theoretical framework of this thesis is divided into two; the first section brief-ly discusses what growth is and also clarifies the basic assumption of growth. The main focus of the thesis is franchising and the second section discusses the con-cepts of franchising in detail.

Growing a business can maintain and secure competitive advantage for a compa-ny but growing without a coherent plan and budget can undermine the fundamen-tal strengths of a business. Growth is mostly seen by entrepreneurs as a positive thing but in reality growth can be good for a business and it can also be bad, de-pending on the circumstances. It is essential for entrepreneurs to have a realistic view of growth because growth comes with another phase of business risk and managing a business growth is complex and challenging. (Allen 2005, 358; Bar-ringer, et al. 2010, 513)

Growth brings change and it requires capital, people and processes which need to be properly planned and managed for the growth to be successful. Successful growth requires proactive management since growth is dynamic and the franchis-ing business model provides entrepreneurs the possibility to grow without having to worry about managing the new business units. Franchising is one of the growth methods available to entrepreneurs and the concept is especially attractive to new and small ventures because it provides entrepreneurs with limited capital the pos-sibility to grow rapidly. (Allen 2005, 356)


Over the years the franchising business model has gained attention from entrepre-neurs around the world due to the numerous opportunities the model creates.

These opportunities have been brought into light by the success of global compa-nies like McDonald’s, The Body Shop, and KFC etc. Franchising as a form of business growth is especially attractive to small companies with limited capital because franchising makes it possible to grow rapidly within a short period of time using franchisee’s capital. (Allen 2005, 366; Barringer & Ireland 2010, 513)

The strenght of franchising comes from the win-win situation it proposes to both the franchisor and the franchisee. The franchisor is the owner of the concept and he wins because he can quickly grow the business and strengthen its brand name with the franchisees’ capital and the franchisees also win because they will start their operations with a proven and tested business idea and also benefit by using the franchisor’s intellectual property. (Barringer, et al. 2010, 513)

1.2      Research problem and objective
Sam-Chi is a fast food restaurant owned by Samuel Okore and his wife Chichi Okore. The restaurant is located in Lagos, Nigeria and it currently operates in one location. The restaurant offers its customers different types of fast food items but their meat pie and egg roll are the best-selling items. Sam-Chi fast food restaurant was opened in 2012 and the restaurant has been experiencing increased profitabil-ity ever since. The constant increase in sales made Sam-Chi owners want to grow their business and after considering different types of expansion strategies, they decided to grow their restaurant through franchising. According to the owners of Sam-Chi fast food restaurant, the main reason why they want to grow their busi-ness is to make more profit from their investment. The reason why they decided to grow through franchising is that franchising will provide them the opportunity to open multiple outlets of Sam-Chi restaurant in a short period of time and their franchisees will also provide the capital for opening the new units.


The franchising business concept truly offers the possibility to grow with the fran-chisees’ capital in a short period of time but for a business to be franchised, it has to meet the franchising criteria. Therefore, this research will aim at finding out whether Sam-Chi fast food restaurant can grow through franchising. After the in-vestigation, recommendations on what needs to be done or developed before...


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