Critical success in frachise management in Malaysia: a case study

Abstract

As a result of an encouraging competitive franchising business worldwide the Government of Malaysia has taken initiatives to pursue such business to boost the small business entrepreneurs. Malaysia is second in Asia and 21st in the world in franchising development considering its inception in 1994. Under the Franchise Development Programme, the franchise business system has embarked on the business system as smart, systmatic, efficient and effective. By the 2000 there were 756 franchisees registered as compared to only 54 in 1995. Unfortunately about 20 per cent have to close down their operations due to several factors. Franchising has been described as a form of "business cloning" and as a business format franchisers seek to have franchisees replicate in their local community an entire business consipt, including product or services, trade name and methods of operations. previous studies have indicated that business format franchising is the fastest growing business and have identified that the failure rate of the business using franchising is generally lower than those of the conventional startups. This paper thus attempts to investigate the success factors towards incorporating franchising and problems of failure that they seriously faced. Twenty-one related success factors and eight related failures factors are considered. A structured and semi-structured questionnaire was designed and interviews were conducted with twenty-five on going business franchisees to facilitate systematic data collection in this survey. However, the problems with failures, interviews were conducted by telephhome to twelve franchisers from the main office and with only three franchisees that have ceased operation. The success factors addressing full support and training; continuous communication; excellent franchise image; and factors contributed to their failures such mismanagement and lacks of experiences are identified. Some pertinent findings of the study are discussed.