Internationalisation Through
Franchising Networks
Birgitte Dyhrberg Juhl
Marie Skytt-Hansen
Melissa Loucks
Kenneth Svenningsen
Agenda
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Introduction
Types of Entry Modes
Influencing Factors
Analysis of Entry Modes
Case Study – Palmers
Summary
Introduction
Which factors influence the choice of
franchising entry mode when
entering a foreign market?
Types of Entry Modes
• Direct Entry Modes
- Wholly-Owned Subsidiary
- Area Development Agreement
- Direct Franchised Unit
- Company-Owned Unit
• Indirect Entry Modes
- Joint Venture
- Master Franchising
Types of Entry Modes
Direct Entry Mode:
Wholly-Owned Subsidiary
Types of Entry Modes
Direct Entry Mode:
Area Development Agreement
Types of Entry Modes
Direct Entry Mode:
Direct Franchised Units
Types of Entry Modes
Direct Entry Mode:
Company-Owned Units
Types of Entry Modes
Indirect Entry Mode:
Joint Venture
Types of Entry Modes
Indirect Entry Mode:
Master Franchising
Theories
• Eclectic Paradigm of International Production
• Internationalisation
• Capitalisation
• Marketing
• Transaction cost
• Agency
Factors Influencing the Entry
Mode Decision
• Environmental Factors
• Organisational Factors
• Franchise Related Cost Factors
Factors Influencing the Entry
Mode Decision
• Environmental Factors
- Geographical Distance
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Cultural Distance
Currency Risk
Political Risk
Local Regulation
Market Size
Financial Situation of Local Partner
Factors Influencing the Entry
Mode Decision
• Organisational Factors
- Financial Situation of Franchisor
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Executive Attitudes and Orientations
Need for Control
Brand Protection
International Experience
Human Resources
Factors Influencing the Entry
Mode Decision
• Franchise Related Cost Factors
- Search Costs
- Intermediary Related Costs
- Servicing Costs
Analysis of Entry Modes
Wholly-Owned Subsidiary
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Capital Intensive
Complete Control
Brand Protection
Legal Position
Serious Intentions
Appropriate when:
– Geographical/cultural distance is high
Analysis of Entry Modes
Area Development Agreement
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Little Capital Requirement
Control
High Initial Costs
Quick Market Entry
Local Knowledge
Appropriate when:
– Geographical/cultural distance is high
Analysis of Entry Modes
Direct Franchised Units
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Control
Brand Protection
Higher Risk
High Search and Servicing Costs
Appropriate when:
– Geographical/cultural distance is low
– Managers are internationally experienced
– Few outlets are expected to be opened
Analysis of Entry Modes
Company-Owned Units
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Control
Brand Protection
High Risk
High Search and Servicing Costs
Appropriate when:
– Geographical/cultural distance is low
Analysis of Entry Modes
Joint Venture
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Control
Brand Protection
Shared Risk and Equity
Local Knowledge
Relationship Issues
Appropriate when:
– Local ownership restrictions exist
Analysis of Entry Modes
Master Franchising
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Small Investment  Less Risk
Less Control
Rapid Growth
Local Knowledge
Appropriate when:
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Geographical/cultural distance is high
Managers are internationally inexperienced
Legal diffenrences exist
Political risk
Case Study
• Facts about Palmers
• Master Franchising
• Wholly-owned Subsidiary
Case Study
Facts about Palmers
• Founded in 1914
• Franchise Experience since 1936
• 300 retail units, 170 are franchised (A)
• 25 Countries
Case Study
Master Franchising - Factors
• Capital
• Local Knowledge
• Maintain Control (Accumulated exp.)
Case Study
Wholly-owned Subsidiary - Factors
• Germany
• Low Risk
• Potential High Profit
Thank you for your attention!