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INTRODUCTION Franchising is a great chance for entrepreneurs to startup a business and it is a method of marketing or distribution in which franchisee hold

the right that given by franchiser to use the brand and market a company‟s product. It is an agreement between franchiser and franchisee where franchiser will provide the product and business system while the franchisee invest money, manpower, time and effort to sustain the business. Some examples of popular fast food franchises include McDonald‟s, Subway, and Domino‟s Pizza. Other than fast food business, there are format of franchise such as health and beauty, auto, retail, business services, education, lodging, maintenance, restaurants. The franchisee will need to follow certain guidelines once the contract has been signed, and in most cases, the franchisee must pay up-front entry fee and royalty fees. Franchise has become a popular business way in today‟s marketplace because it would benefit both franchiser and franchisee. Franchise is considered as an efficient mechanism used to penetrate the market and it will be resulted in the expansion of business through the investment of franchisee (Franchise Development in Malaysia, n.d.). The advantage of buying a franchise is because of the existence of corporate image, brand image and brand awareness where consumers will purchase the product comfortably from the company they trust. Franchiser will usually provide an extensive training and support in terms of selection of appropriate location to start the business, counseling on business management and franchise outlets management. The top 10 global franchises in 2010 include Subway, McDonald‟s, 7-eleven, KFC, Pizza Hut, Burger King, Taco Bell, InterContinental, Snap-On Tools and Ramada. (Refer to appendix I) (Franchise Direct, n.d.). In Malaysia, the statistic showed by Franchise & Vendor Development Division revealed that 7 percent of Page | 1

As we can see. Md Nor Hayati Tahir & Ismaunur Hadi Ahmad Bakeron. n.).franchisees already failed in operating their franchise business ((Nor Ratna Masrom. a good selection in franchisees could lead to a success on franchise business. Page | 2 .d.

2003). According to Dant and Nasr. Franchiser explores an opportunity to run a new business and add on new ideas for value creation. Mohd Amy Azhar. Chee. Dadfar & Brege. 2013). franchiser has to depend on franchisees to run their business efficiently in a franchise system. Franchising has become popular nowadays because it is mutually beneficial for both franchiser and franchisee if it is well-managed. & Mohd Hassan Mohd.LITERATURE REVIEW The franchise entrepreneur is being viewed as the creator and builder for a unique business format who responsible for managing the system of business and the majority of franchisers activities are described as entrepreneurship (Abu Bakar Abdul Hamid. Osman. In the other word. & Mohd Hassan Mohd.49 percent in 1997 in the United States (as cited in Mohd Harif. According to Clarkin & Rosa. Hee Hoe & Mahad Noor. franchising is being described as a business relationship between franchiser and franchisee because a franchiser must depend on the franchisee to take action on the franchiser‟s behalf when comes to decision making during crucial situation (as cited in Abu Bakar Abdul Hamid. Rozita Selamat. According to Holmberg and Morgan. Nor Hamimah Mastor. franchisee also viewed as an entrepreneur who focuses on opportunity. risk and innovation. Nor Hamimah Mastor. 2003). Rozita Selamat.86 percent in 1994 to 10. Osman. a franchise business is typically initiated by franchiser and directed to franchisees for implementation in their respective market (as cited in Asgharian. In the journal entitled “Franchisee Failures in Malaysia: Contribution of Financial and Non-financial Factors” which identify the factors that contribute to the failures in Malaysia by conducted telephone interviews with five respondents who were franchisees before that failed in operating the franchise business. Norsyema Hani. 2011). Page | 3 . franchisee failures rates had increased from 8.

non-financial factors and financial factors. & Mohd Hassan Mohd. absent for training. too rapid expansion of franchise business could turn a company‟s operations sloppy which led to a failure in business. All agreed that they spend less time in office. staffs or customers. and unable to maintain good service and also relationship either with franchisers. There is one respondent admitted lack of commitment and too depend on staffs in operating the business. poor service and attitude provided to customers. They were interviewed through face-to-face and telephone to answer the questionnaires. Osman (2003). Strong establishment where franchisees have to obtained full support and training from franchiser in business management and franchise management. financial factor include under-capitalization of the franchisee. Nor Hamimah Mastor. 1. neglect the operation manual. The study revealed there are two types of factors that will contribute to the franchise failure. The study has selected 25 franchisees who operating different form of franchise business in Johor Bahru. For the non-financial factors include rapid expansion of the franchise business. Meanwhile. according to Kelly (2005). Page | 4 . it attempts to investigate the success factors encouraging franchise business. a franchisee should understand that a strong start-up capital is needed to invest when starting and developing the franchise business. conflict with franchisor. In the research done by Abu Bakar Adul Hamid. Rozita Selamat. this could be the factor a franchisee should take into consideration before making the decision. The result showed there are seven major factors that contribute to a success in franchise business. The following factors by the greed of franchisee who wants to earn more profit.The findings of the study showed that all 5 respondents had problems with their attitude towards managing their business. dissatisfaction on the location and external factor.

publishing and sharing content. According to Kaplan and Michael Haenlein. a franchisee should be independent and have a marketing background experiences and able to operate business without the help of manager. social media is a form of internet-based applications which allow the creation and exchange of user-generated context (as cited in Nor Ratna Masrom. financial institutions in order to achieve mission and goals of business. 3. According to the research on proposes a model of social media marketing for developing effective marketing strategies for franchising system (Nor Ratna Masrom. franchisees should focus on its target customer and provide excellent services and products to win customer trust and remain their loyalty towards company. Md Nor Hayati Tahir & Ismaunur Hadi Ahmad Bakeron. it found that there is Page | 5 . Develop a good relationship between franchisee and franchiser as well as establish relationship with government. 7. Ccustomer focus. franchise association. and people by creating.).).d. it is an online tool that encourages people to interact with companies. product or services that are well-known or recognized by public could help in the success on franchise business. brands. Product or service visibility. Availability of strong resources which include sufficient financial capital and strong employee commitment.2. n. n. 6. Franchisee should possess strong personnel. 4. 5. Entrepreneurship skill. a franchisee should portray characteristic of an entrepreneur who is a risk-taker and innovative. Md Nor Hayati Tahir & Ismaunur Hadi Ahmad Bakeron.d.

necessary for a franchisee to utilize internet to attract customer‟s attention because consumers are usually accessing social media by using their laptops and smart phones. The research found that the highest percentage of companies with a profile on a social site is on social networking sites (79%) which most probably referring to Facebook. the research found that companies nowadays preferred to use social networking sites as a platform for them to communicate with their customers. Besides that. In order to attract more customers and get recognition from customer. some companies tend to use social networking sites as a marketing strategy to inform customer the better service or products and promotion. Page | 6 .

It was found that the business had failed because of its bad location. It was believed that poor management of the A&W franchise business lead to the failure of it. The management of the business also considered is a factor that caused failure in JOM Makan franchise business because it was found that the restaurant in Tokyo has changed managers for several times due to dishonesty of the manager (Free Malaysia Kini. & Robert. According to Schroder & McEachern (2005). KUB acquired A&W Malaysia. M.). and retailing (7%).d. a menu that was too wide. When look on the McDonald‟s franchise in Malaysia. K.). 2009). n. 2003). n.5 million in the 2011 fiscal year (Free Malaysia Today. unreasonable price and poor food quality (Free Malaysia Kini. while the clothing and apparels came second (11%). A survey done by the Malaysia Franchise Association (MFA) reported the growth of 815% in franchise outlets from 413 in 1993 to 3781 in 2003 (The Star.. A&W franchise was brought into Malaysia in 1963 and in year 2001. inexperience of management team.ANALYSIS In Malaysia. 2012). the global target market fast-food industry Page | 7 . In franchising. R. it is an idea for an international chain of Malaysia restaurants. KUB Malaysia Bhd will close 34 A&W outlets where 24 in Malaysia and 10 in Thailand because A&W in Malaysia and Thailand faced a losses of totaling RM44. right people should be hired to contribute to a greater success of the business. Another failure franchise business is JOM Makan. franchisers need to select potential partners because the right partner is important for the success of the franchise business (Rahatullah. it is considered as success franchise business because it is a well-known fast food restaurant in Malaysia that recognized by public. the highest number of franchise outlets were found is in the food industry (22%).d.

purchasing and equipment (McDonald‟s. and workers. n. As stated in McDonald‟s Malaysia website. McDonald‟s will provide the best training for all employees and those employees with potential to manage restaurants will be sent to Hamburger University to attend courses that will help prepare them further in business management. The qualification McDonald‟s requested in seeking its potential franchisees as below:        High personal integrity Posses entrepreneurial traits Have a strong desire to succeed Ability to motivate and train people Ability to manage finances Willingness to devote full time and efforts to the day-to-day Willingness to participate in a training programme. This is how McDonald‟s led to a success franchise business in Malaysia because their management considers on many areas and will provide training for employees in order to create a good image for public. Chaswood Resources is the largest multi-concept restaurant operator in Malaysia where currently 12 restaurant brands under its umbrella. So that they able to commit in management and loyal to the company. including support in various areas such as training.). Reddy started the TGIF franchise in Malaysia with only four outlets. the director of Chaswood Resources.d. McDonald‟s mainly target on different groups which includes children. In addition. TGI Friday‟s. The franchise license for TGIF Page | 8 . it‟s one of the franchise business under Chaswood Resources. teenagers. McDonald‟s provide extensive training and support as well as provide the tools that help franchisees succeed in business.account for 79 percent is at age 17-25. construction.

one in Singapore. franchisees must make sure they have experience in managing in the food service industry since TGIF franchise required their franchisees to have an experience in Food Hospitality industry. As stated before. Currently.d. Chatime has gained 97. Page | 9 . the financial factor that caused a failure is under-capitalization.070 fans in over two year in their official Facebook page. Chaswood achieved RM79 million revenue up 18 percent from 2008 and Reddy is looking forward to expand to Indonesia and targeting to open two TGIF outlets (Malaysian Franchise Association.000. Chatime normally will have its Buy 1 Free 1 promotion during a period and it could be seen as a strategy that wants to maintain its existing customers and this will be published on Facebook page to inform customers.000. if franchisees would like to buy TGIF franchise. they must need to understand the detailed information such as the start-up cost of a single franchise of TGIF ranges from $3.) Last but not least. Chatime is a well known beverages franchise from Taiwan which could be an example where doing well in using social media to win public‟s heart.000 up to $6. Starting up a TGIF‟s business requires a huge amount of capital but the advantage of this business is that the return would also be high. There is also a royalty fee of 4% of the total sales monthly and this will go to the franchise company (TGI Fridays Franchise Information. In order to start TGIF franchise. Almost every Chatime outlet has their own Facebook page to promote new flavor drink and promotion.was bought in 2003 and it has since grown to 17 outlets. 2010). n. Chatime also offers loyalty which allows members to collect points and enjoy special privileges in store including birthday rewards. „member-only‟ promotions.000. Chatime event and launch invites and up-to-date information on Chatime‟s activities.

Not only that. Trust and loyalty must be building between both parties so that they could make a success on the business. such as the overall brand recognition and reputation. a franchiser or a franchisee must able to manage the cash flow and planning every aspect of the business from the development of the business until maintain the business. The next is to find the best franchises to buy deals with the territory restrictions of the franchise because sometimes the territory you have can make or break your business. it is not easy to start up a franchise business. They should be able to analyze each situation and able to make clear decision during a crucial moment. before looking at franchises to buy. relationship between franchiser and franchisee also is a key to determine the success of the franchise business. a popular brand can attract loyalty customers purchase the product. There are many factors that has possibilities to make a success or failure in franchise business. The last thing that a franchisee should look on is the initial cost of entry to open a franchise business. 2013). The third thing that a franchisee has to look on is the structure of the royalty fees. most franchises fall in the 2% . do not start the business if undercapitalization.CONCLUSION AND RECOMMENDATION In a conclusion. there are few aspects that the franchisee has to look at. Page | 10 . A great franchisee will take calculated risks that will help to make their business grow (Franchise Gator. It is essential to face the risks and make crucial decisions to create a thriving business. Subway and McDonald‟s could be a good example on this. Franchising is a good idea for many companies to expand but must be prepared to face the risks and turn it into opportunities that could grow your business. this could give a great advantage in doing franchise business.10% range of royalty fees and they are based on gross sales. it can caused the huge losses to be occurred. not net profits. As a recommendation. Retrieved January 31. Chatime offers loyalty card. from 8/873/ Franchise opportunity: application process. An encouraging factors for entrepreneur in franchising: a Malaysia experience. Franchise development in malaysia.franchisedirect. H.westeastinstitute. 2013. from http://www. WEI International Academic Conference Proceedings.asp Free Malaysia Today. (2013).).) 2013. R. from http://www..pdf Asharian. Retrieved February 20. (n. (2012).REFERENCES Abu Bakar Abdul Hamid. 2013. from http://www.Retrieved February Retrieved January 31.d.pdf Dhillon. Nor Hamimah Mastor. Franchisess‟ activities as entrepreneurship. Retrieved January 29. (2012).my/abtus/franchise/application. Retrieved January 28. from Retrieved February 2013. (n. (n.).cric. thailand.d. from Page | 11 . The top 100 global franchises 2010. KUB to close 34 a&w outlets in malaysia. 2013. S.franchisemdtcc. from http://www. & Mohd Hassan Mohd. E. Rozita Selamat. (2003).my/c/document_library/get_file?uuid=0fc6897c-81c3424a-ac4f-d4cc5d9f30a5&groupId=13905 Francise Direct. 2013. & Brege.

from http://www. from http://ictmt.blogspot.d. 2013.univie.).com/tgi-fridays-franchise-information. from http://www. (n. ( Retrieved January 28. Hussain.d. D. (n. Retrieved February 3. from http://www. (n.entrepreneur.html Kelly K.http://www. Mohd Amy Azhar Mohd Harif.htm Wei-Shen. Retrieved February 1. Franchisee failures in Malaysia: contribution of financial and non-financial factors.wbiconpro.). Multi-unit franchising: a case study analysis. 8. (2013).pdf Nor Ratna Masrom. W. Hoe Chee Hee & Norsyema Hani Mahad Noor.)..utem. from http://malaysiansmustknowthetruth.pdf ‘Jom makan’ restaurants a recipe for disaster. (2005).ac. Md Nor Hayati Tahir & Ismainur Hadi Ahmad Bakeron.d.d. from http://emnet. 2013. The Star. growing rapidly isn’t always best.startupbizhub.asp?file=/2013/2/2/business/12628449&sec=business Page | 12 . Model of social media marketing for franchise system. Retrieved February. (2012). 2013. Retrieved February 22.php?option=com_docman&task=doc_view&gid=21&Itemid=31 Tgif franchise information. & Schromm. For franchises. Retrieved February 18. Up close and personal with andrew from http://biz. Retrieved February 24. 2013.

APPENDIX Appendix I Page | 13 .