INTRODUCTION
With the decision to carry out a business internationally, there are several issues arising which managers have to take into account and which they have to find an optimal solution to. One of the questions companies are facing while planning to spread their business is the question on the operation mode. What kind of possibilities of becoming international do we have, what are the advantages and disadvantages come along with the different kind of possibilities and which one, finally, fits best to our company? To goal of our term paper is to investigate one of the different operation modes companies can choose, also on their domestic market, but especially when carrying out operations on international markets. To introduce the method of franchising, we will present the most important knowledge on this topic in the next chapters.
Beginning with the theoretical part, we are giving an overview on the history and development of franchising, “how did it start and where is it going?” Followed by that, the method of franchising as it is applied nowadays is explained very carefully. We are giving answers on what franchising is, what role it is playing in the process of the internationalization of a firm and the different modes of franchising. Additionally, the situation on the franchising market in three different regions, Europe, Germany and the United States are presented. Based on the theory, we are taking the subject a step forward by investigating a real franchising case from the practical life. The company we chose is the worldleading sandwich restaurant chain which is operating not less than 26,000 restaurants worldwide through franchising. The company will be introduced briefly before we start to show how franchising works at Subway, what comes along with becoming a franchisee of Subway, like requirements which have to be fulfilled and, probably the most interesting part, the financial flow between the franchisee and Subway as franchisor. So the reader gets especially a view on how Subway is earning money even though they are not running their restaurants directly by themselves. This will be followed by the explanation of the franchising mode used by Subway and the key success factors which are critical for Subway to become such a great example on the applicability of franchising to internationalize a company.
Table of Contents
1. INTRODUCTION
2. THE THEORY OF FRANCHISING
2.1 The development of franchising
2.1.1 Origin of the Franchising Term
2.1.2 Development of the First Franchise Systems
2.1.3 Development of the Modern Franchising
2.1.4 World-Wide Break-Through of Franchising
2.1.5 Future Prospects for Franchising
2.2 The Franchising System
2.2.1 Overview
2.2.2 Direct Unit Franchising
2.2.3 Master Franchising
2.2.4 Direct Subsidiary Franchising
2.3 Advantages and Disadvantages of Franchising
2.4 Franchising Situation in Three Chosen Markets
2.4.1 Europe
2.4.2 Germany
2.4.3 USA
3. FRANCHISING IN PRACTICE: “The Subway Case”
3.1 Introduction
3.1.1 Company Background
3.1.2 Products
3.1.3 Distribution System
3.2 Franchising at Subway
3.2.1 Franchising Operation Mode
3.2.2 Constraints and Support
3.2.3 Key Success Factors
3.3 Internationalization
4. CONCLUSION
Objectives and Themes
This paper investigates franchising as a primary operation mode for companies expanding into domestic and international markets. It bridges the gap between theoretical frameworks and practical application by analyzing the operational mechanics, financial structures, and success factors that allow firms to scale globally without managing every individual unit directly.
- Historical development and evolution of franchise systems.
- Taxonomy of franchising models and internationalization strategies.
- Comparative market analysis (Europe, Germany, USA).
- Case study of Subway: operational structure, franchisee constraints, and support systems.
- Strategic assessment of financial flows and success factors in global fast-food franchising.
Excerpt from the Book
3.1.1 Company Background
The story of today’s world’s biggest sandwich restaurant chain and second biggest fast food chain began in 1965. Fred DeLuca and Dr. Peter Buck established their first restaurant named “Pete’s Super Submarines” in Bridgeport, Connecticut (U.S.A.). Within 10 years 32 restaurants were opened. To let their business grow Subway became a franchise company in 1974. Today over 26,000 restaurants in 79 countries in the world are named Subway. Subway was ranked the number one franchise opportunity for 2005 (the 13th time in 26 years), the well-known burger chain McDonalds was ranked on place 13 (Entrepreneur.com). 2002 more than 4000 franchises were sold. 65% of new franchises were sold to existing owners.
Summary of Chapters
1. INTRODUCTION: Outlines the challenges of international business expansion and the research motivation to study franchising as an effective operation mode.
2. THE THEORY OF FRANCHISING: Provides a comprehensive history of the term, the evolution of early systems into modern business format franchising, and an overview of different franchise models and their market presence.
3. FRANCHISING IN PRACTICE: “The Subway Case”: Examines Subway as a real-world case study, detailing its company history, unique distribution system, operational model, and the specific factors driving its global success.
4. CONCLUSION: Synthesizes the findings, highlighting the discrepancies between theoretical concepts and the high degree of individualism found in real-world franchising, while confirming its effectiveness as a tool for rapid international growth.
Keywords
Franchising, Internationalization, Business Format Franchising, Subway, Market Entry, Royalties, Development Agents, Distribution System, Global Expansion, Franchisee, Franchisor, Operational Support, Fast Food, Retail Strategy, Licensing.
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines franchising as a strategic operation mode for businesses aiming for international expansion, comparing theoretical models against the practical reality of a global brand.
What are the central thematic fields covered?
The study covers the history of franchising, the classification of different franchise systems, market-specific data for the US and Europe, and a deep dive into the business operations of Subway.
What is the primary objective of this work?
The goal is to understand how companies can successfully internationalize through franchising and to clarify the financial and operational relationship between franchisors and franchisees.
Which scientific methodology is employed?
The research combines a review of existing franchise theory with a qualitative case study analysis of Subway's business model to assess its applicability and operational framework.
What is covered in the main section of the paper?
The main section details the development of franchise systems, compares international market situations, and breaks down Subway's internal mechanics, including franchisee constraints and corporate support structures.
Which keywords best characterize this work?
Key terms include Franchising, Internationalization, Business Format Franchising, Subway, Market Entry, and Global Expansion.
How does Subway differentiate its distribution system from other fast-food chains?
Subway is noted for being one of the only major franchising chains that operates almost exclusively through franchisee-owned outlets, avoiding dual distribution systems where the parent company runs a large number of corporate-owned stores.
Why is the case of Subway considered a significant example of internationalization?
Subway demonstrates a highly individualized adaptation of franchise theory, utilizing Development Agents to manage regional growth, which allows for rapid scaling across 79 countries without the parent company having to manage local operations directly.
- Quote paper
- Peter Strehle (Author), Göksen Iyiköy (Author), Henning Isbrecht (Author), 2005, FRANCHISING as a method of internationalization - SUBWAY case, Munich, GRIN Verlag, https://www.grin.com/document/37396
