A Study of the 2012 TFQA Certified Thai Food, Beverage, and Bakery Franchisor’s Readiness to Expand

Internationally

Arunee Lertkornkitja*

Food, beverage, and bakery franchises are considered major players in Thailand’s franchise business, representing a 48% market share in 2012. However, not many of them go international even though they have received the Thailand Franchise Quality Award (TFQA) certification from the Department of Business Development, Ministry of Commerce. This exploratory study is aimed at assessing the readiness of the 2012 TFQA certified food, beverage, and bakery franchisors to expand internationally and to assess various anticipated factors affecting their expansion.

Mixed-methods of research were used in this study. A semi-structured question-and-answer session was used to interview four (4) TFQA certified franchisors who expanded overseas. A questionnaire was used to collect data from a total of thirteen (13) TFQA certified franchisors. The findings revealed that the 2012 TFQA certified food, beverage, and bakery Thai franchisors were moderately ready for the overseas market. The highest ranking factors were: training; franchise operation system; and franchisee selection procedure, respectively. Constraints to international expansion were: the availability of capital investment and ability to admit initial possible losses; franchise legal regulations; after sales follow-up; organization and functions; strategies and goals; and administrative time. Furthermore, the in-depth interview revealed that, to successfully expand internationally, franchisors must firmly grow in a host country before expansion. ASEAN countries were the main target of this study due to geographic and cultural proximity.

The implications of these findings are that Thai franchise entrepreneurs should continuously assess their readiness before moving overseas. Preparation and readiness increase opportunities to strengthen competitive capacity in both domestic and overseas markets in the long run. Finally, a recommendation is discussed concerning the roles of government and entrepreneurs in strengthening firm competitiveness in both the domestic and ASEAN markets.

1. Introduction

The ASEAN Economic Community, which is to be established in December 2015, creates a huge potential for the streamlined flow of labor, goods and services, and investment capital across the region. There also will be tariff reductions and reform of certain administrative procedures. Indeed, improved economies of scale and scope, heightened competition, higher productivity, and increased foreign direct investments are all modifications that should stimulate greater growth, generate

* Arunee Lertkornkitja, Faculty of Business Administration, Stamford International University, Bangkok, Thailand. Email : arunee@stamford.edu

more intra-regional trade, encourage the emergence of robust and globally competitive ASEAN enterprises, and lead to more jobs for all. However, along with these opportunities there are also potential challenges that Thailand has to be aware of and address in order to fully exploit the potential benefits arising from the country's entry into the wider ASEAN market (The Board of Investment of Thailand 2013). Thailand, as an ASEAN country member, is facing the challenges of globalization as well as the prospect of new business opportunities. This will impact the country‟s strategies in managing international business in the future. The fact that both the goods and services markets will be larger means that there will be more opportunities available for both Thai business entrepreneurs and workers. Thailand has a domestic market of approximately 65 million people, but after the AEC this market will effectively increase to about 600 million people. If ASEAN succeeds in reducing taxes and tariffs, this will result in a considerable advantage to Thai businesses seeking new consumers, as well as increasing economies of scale (The Board of Investment of Thailand 2013).

The AEC will not just benefit large business enterprises but also Small and Medium Enterprises (SMEs). According to the Association of Southeast Asian Nations, SMEs account for more than 96% of all enterprises and 50% to 85% of domestic employment. The contribution of SMEs to GDP is between 30% and 53% and the contribution of SMEs to exports is between 19% and 31%. With the strong forces of

globalization, it is therefore essential to build the capacities of SMEs in the region in order to ensure that they are highly competitive and innovative, and that they will be able to utilize the regional economic initiatives and incentives provided by the government. Statistics show that Thailand has 43.94 SMEs per 1,000 population (ITD 2013). The U.S. Commercial Service (2009) data indicate that, in 2007, Thailand had a total of about 400 franchise systems, of which 320 (80%) were local franchises and only 80 (20%) were international franchises. Food franchises were the most popular and composed 51% of all franchise systems. The franchising business in Thailand had a total value of about US$ 2.3 billion in 2007, an increase of 6% from 2006. Recently, the average annual growth rate of the franchising business has been at 15% due mainly to economic expansion, changing consumer buying patterns, urbanization and improving communication and transportation networks. Since 2009, the overall business climate has improved and growth is expected to continue at 15% for the next few years. International franchises were fewer in number than domestic franchises but controlled 75% of total market value or $1,725 million in 2007. In 2012, there were 381 local franchises (Thailand Franchise Center). Food, beverage and bakery franchises were still the most popular and totaled 48% of all franchise enterprises. However, only 13 among them won the Thailand Franchise Quality Award held by Department of Business Development, Ministry of Commerce. From the above discussion, it is clear that determining Thai food franchise readiness for international market expansion, in light of the advent of the ASEAN Economic Community in 2015, are interesting and timely issues worthy of further study. Even though numerous studies exist regarding franchising, we could not find any study assessing the Thai food franchises readiness for the international market because, currently, very few of them expand internationally. Therefore, the objectives of this exploratory study are: 1) To assess the readiness of the 2012 TFQA certified food,

beverage, and bakery franchisors to expand internationally, including various anticipated factors affecting this expansion; and 2) To assess the success factors of these Thai franchisors in a foreign country. The findings of this study can then be applied in planning for capacity; in strengthening franchise enterprises; and in developing the competitive potential of franchises looking towards the AEC in 2015.

2. Literature Review Franchising is one of the conventional strategies for business growth, economic development and job creation (Hoffman & Preble 1995) and is considered by some to be the world‟s fastest growing method for business set up (Justis, Castrogiovanni & Chan 1994). Franchising has emerged as a business entity involving the same degree of professionalism and competence as other industry types (Vaughn 1970). Stanworth et al. (1995) defined a franchise as a contractual relationship between a franchisee and a franchisor in which the former agrees to produce or market a product or service in accordance with an overall blueprint devised by a franchisor. Franchising can also be defined as a network of interdependent business relationships that allows a number of people to share a brand, a successful method of doing business and a proven marketing and distribution system. Franchisees are the ones that invest their assets in a system and get a license and in return are able to utilize the brand name, operating systems and receive on-going support.

Franchise Executives’ Perception of Success and Failure The study of managerial perceptions is a major issue of theoretical and empirical concern in organizational analysis, studies of strategic management, and the measurement of performance (Falbe & Welsh 1998). Research findings indicate that executive perceptions affect actions, choices, and organization performance (Hambrick & Mason 1984; Starbuck & Miliken 1984; Thomas, Clark & Gioia 1993; Waller, Huber & Glick 1995). Empirical studies show that measures of perceived organizational performance are positively associated with objective measures of firm performance (Delaney & Huselid 1996; Dollinger & Golden 1992). These empirical studies show that franchisors‟ perceptions are key factors associated with franchisee success and failure. Based on prior research in the organization and franchise literature, executives‟ perception of the factors that make a franchise succeed or fail were important because these factors would influence franchisor decisions in a number of areas. These include: investment; policies; incentives; and training and development (Bracker & Clouse 1994; Falbe & Welsh 1998). Falbe and Welsh found that franchise executives rated system quality, brand name (a factor that included the quality of the operating system), local environment, communication, and the specific characteristics a system as the important determinants of its success. Paynter and Tiru (undated) found that when the franchisees sign the franchise agreement they are exchanging money (in terms of an initial payment and on-going royalties) for the knowledge (intellectual capital) of the franchise system. This knowledge is embodied in the franchise support systems. These in turn can be broken down into the initial support structures and the on-going support systems, as well as “group-office” support. Training is generally an essential element of each.

Franchisees need to think about the quality of services that they should receive when they purchase a franchise (Baucus, D. Baucus, M. & Human, S. 1993). Franchising is a knowledge transfer process and training plays an important role ranging from training programs, pre-opening training, start-up training, manuals supplied, no of pages, etc. (Paynter & Tiru). McCosker, et al. (1995) allude to the lack of agreement between franchisees and franchisors in regard to the franchisees‟ power to make changes to the franchise system. Franchisees have the power to recommend only; any input from the franchisees remains the property of the franchisor. Gassinheimer et al. (1996) found that participative communication improves relations and performance of the franchise system while enhancing franchisees‟ freedom to act on entrepreneurial tendencies and advance their own business ventures. It is of some concern then that communication (followed by conflict resolution) was the factor with the greatest disparity in the scores between the franchisees and franchisors. This is likely to cause problems in other areas such as entrepreneurial freedom. Two factors are particularly worthy of further investigation – entrepreneurship and support systems (Paynter & Tiru). Literature suggests the possibility of conflict in the first of these. The potential for conflict within franchise organizations, where owners can be said to be “bulls” and employees “bears”, with franchisees representing an intermediate position, is dealt with separately (Paynter 2002).

Franchising and Emerging Markets

Research on multinational companies traditionally focused on Western firms and developed markets. Indeed, in spite of the rapid growth and remarkable transformation in emerging economies over the past two decades, the rise of emerging markets has attracted scant academic attention (Anttonen et al. 2005; Filatotchev et al. 2007; Demirbag et al. 2008; Freeman & Sandwell 2008). Since the markets of developed countries are becoming more saturated and competition is diminishing profit potential, more and more franchisors are now looking to emerging market economies (Baena 2009; Baena 2012). A compelling case can be made that franchising is one of the most preferred strategies in international business expansion as it provides flexibility and economies of scale to worldwide operations (Contractor & Kundu 1998; Baena 2009; Alon 2010; Baena 2012). Puck, Holtbrugge & Mohr (2002) stated that the choice to enter a foreign market requires a comparison of the coordination costs associated with the internationalization, and the transaction costs arising from the search for, negotiation with, and control of a local market partner. Williamson (1975) stated that an interdependent set of transaction costs associated with franchising out into host markets can be envisaged: 1) motoringcosts; 2) research costs to identify and evaluate potential franchise buyers in the target market; 3) property right protection costs to forbid contracted parties from operating a similar business in a given territory and/or time once the franchise agreement expires; 4) servicing costs to transfer the franchisor‟s technology and know-how to franchisees.

Geographic Distance Geographic distance is one of the most often mentioned factors in US international franchising expansion literature. The problem of geographic distance (Fladmoe-Lindquist 1996) is the loss of efficiency -- with greater distances monitoring activities become more difficult and expensive. In other words, the cost of monitoring is likely to be high when the unit is physically removed from the franchisor (Rubin 1978). Furthermore, geographical distance makes logistical support more difficult especially when inputs have to be imported from the home country. The earlier-mentioned costs are substantially higher in foreign markets that span continents and time zones despite recent improvements in transportation and communication technology.

Cultural Variables The differences in cultural values across international markets can affect transactions within an organization (Anderson & Gatignon 1986). As a result, the transfer of management skills to countries that are culturally dissimilar will involve higher transaction costs. Franchising is more likely to appear in countries that have cultural distance from the home country, but not in countries that fall between these extremes (Fladmoe-Lindquist 1996). Consequently, when cultural distances are small, that franchise in the domestic market may prefer to do the same in the global market. In contrast, when cultural distances are significant, even firms that prefer high ownership arrangements in domestic markets may prefer adopting low ownership agreements in foreign markets (Alon & McKee, 1999). Furthermore, firms operating globally will have to understand the complexity of different cultures in order to set standards for evaluation since as cultural distance increases, transaction costs also rise. As a result, servicing costs are likely to increase if elements of the franchise package need tailoring to accommodate local market conditions (Eroglu 1992).

Capital Market Imperfection Sherman (1999) discovered that the expanding franchisor confronts the issue of capital and debt markets accessibility. Capital inadequacy prevents firms from responding instantly to a permanent increase in demand. Facing a capital constraint, the franchisor is able to raise capital at a lower cost than other arrangements would allow through franchising (Caves & Murphy 1976; Weinrauch 1986). If the capital market was perfect, the franchiser could not get additional funding at a lower cost. Thus, the franchisee was viewed as an inexpensive source of capital (Brickley et al. 1991; Vaughn 1979; Smith 1982). Martin (1988) and Martin & Justis (1993) found that liquidity constraints affected the immature system growth rate, while the growth rate of mature systems was not affected by credit conditions. The franchisor needs more capital to grow and survive. When the franchise system was new and small, it lacked many of the economies of scale available to larger systems. i.e. material purchasing, administrative overhead distribution, and brand name promotion (Ozenfeldt & Kelly 1969). Vaughn (1979) stated that the small company‟s purchasing economy of scale could be attained much faster through the franchise route than through its own expansion path. Moreover, the accumulated national advertising dollars were much more effective than an individual store

publication allocation (Caves & Murphy 1976; Vaughn 1979). Economies of scale exist in many activities in which franchisers engage, therefore, the larger the franchise system, the lower the per-unit cost of operation. When a new franchisor enters an industry with established competitors, the speed with which s/he grows to a size at which s/he could operate at a competitive cost is important (Martin 1988). Until s/he reaches the minimum efficient number of outlets at which s/he could operate at a competitive per-outlet cost, the new franchise system is at a competitive disadvantage vis-à-vis established systems (Martin & Justis 1993; Ozenfeldt & Kelly 1969). The survival of the new system depends on its ability to grow to a number of outlets with which it could develop a competitive cost structure before it runs out of cash (Carney & Gedajlovic 1991; Lillis, Narayana & Gilman 1976). By growing rapidly, franchising increases the likelihood that a firm will reach a size at which it could operate competitively before it experiences cash flow problems that would cause it to fail (Martin & Justis 1993).

3. The Methodology and Model In order to respond to the exploratory research objectives, this study was designed to employ mixed-methods of field data collection, combining a survey/questionnaire with more in-depth interviews.

3.1 Sample and data collection The target population for this exploratory research was all of the 2012 Thailand Franchise Quality Award (TFQA) certified food, beverage, and bakery franchisors from the Department of Business Development, Ministry of Commerce. There were 13 food, beverage and bakery franchisors certified this year. Data were collected from all 13 franchisors.

3.2 Research methods The methodology used was mixed-methods as follows: 1) A questionnaire was used for a telephone interview survey that collected data from all 13 certified franchisors; 2) A semi-structured interview was used to purposely question 4 certified franchisors that had expanded into international markets. These more in-depth interviews were conducted with key executives involved in the internationalization of the firms.

Before the questionnaire was developed, the secondary data were reviewed from various sources. We discussed with a committee from the Franchise and License Association of Thailand (FLA) how best to construct the questionnaire. A pilot survey was conducted to determine the quality of questions in the questionnaire. The initial questionnaire was given to 30 franchisors and SMEs who attended a seminar held by Department of Business Development, Ministry of Commerce. Results were tested to measure if the findings met the objectives. This helped to reveal the questions that were vague, or redundant, or difficult to comprehend and answer. Adjustments were made and the questionnaire was re-drafted in order to better relate to the TFQA‟s criteria. However, we could not exclude the franchisors who participated in the initial pilot survey from the final survey because the number of active franchisors was very limited.

The questionnaire was divided into two parts as follows: Part 1 – Questions on basic business data of franchisors i.e. type of franchise, time of operation, expanded international markets; Part 2 – A set of questions for evaluating readiness of the firm in the following dimensions: 1) strategies and goals; 2) franchise system; 3) legal issues and regulations; 4) franchisee selection procedure; 5) administrative time; 6) after sales follow-up; 7) training; 8) capital investment; 9) organization and functions; and 10) language and communication. The sixty questions were measured on a 5-point Likert scale: Where 1 = mostly disagree, and 5 = mostly agree. 3.3 Data analysis The principle aim of this research was to survey the readiness of 2012 TFQA certified Thai food, beverage, and bakery franchisors to expand internationally. The statistics used were descriptive statistics comprising frequency, mean, and standard deviation, which were used to analyze the data and classify franchisors‟ characteristics and their readiness in different dimensions.

4. The Findings Analysis through descriptive statistics as shown in Table 1 reveals the baseline business information of franchisors. They show that most of the 2012 TFQA certified Thai food, beverage, and bakery franchisors (46.2%) are food and most of the respondents (46.2%) have conducted their businesses more than 12 years.

Table 1: Descriptive Statistics of the Franchisors No. of franchise Percentage

Business Type

Food 6 46.2

Bakery 3 23.1

Beverage 4 30.8

Time of operation

Less than 4 years 0 0

4 – 6 years 2 15.4

7 – 9 years 1 7.7

9 – 11 years 4 30.8

More than 12 years 6 46.2

Total 13 100

Table 2 reveals the number, business type and time of operation of the internationally expanded franchises. There are only 4 franchisors (30.8%) that have expanded internationally. Most of the international franchisors (75%) have conducted their businesses more than 9 years.

Table 2: Cross tabulation between percentage of foreign sales, business type, and time of operation of the franchises

Percentage of foreign

sales

Franchisor's business

type

Time of operation (years)

Total Percentage

4 - 6 7 - 9 9 - 11 12+

0

Food 1 3 4

Bakery 1 1 2

Beverage 2 1 3

Total 1 1 2 5 9 69.2%

% of Total 11% 11% 22% 56% 100%

5 Bakery 1 1

Total 1 1 7.7%

10 Beverage 1 1

Total 1 1 7.7%

20 Food 1 1

Total 1 1 7.7%

30 Food 1 1

Total 1 1 7.7%

Table 3: Means and standard deviations among dimensions of firm readiness of the 2012 TFQA certified Thai food, beverage, and bakery franchisor

Dimension of Firm Readiness

Food Bakery Beverage Overall

Mean S.D. Mean S.D. Mean S.D. Mean S.D.

Strategies and goals 3.31 1.60 3.39 0.63 2.21 1.40 2.99 1.38

Franchise operation

system 4.39 0.49 4.00 0.33 4.29 0.72 4.27 0.53

Legal and regulations 3.17 1.6 2.67 1.14 2.25 1.45 2.77 1.41

Franchisee selection

procedure 3.98 0.55 3.33 0.50 4.07 0.44 3.86 0.56

Administrative time 3.70 1.49 3.27 0.92 2.35 1.56 3.18 1.43

After sales follow-up 3.27 1.61 3.04 0.90 2.28 1.49 2.91 1.40

Training 4.81 0.22 4.29 0.59 4.34 0.51 4.55 0.46

Capital investment & ability to absorb initial possible losses

2.78 1.13 2.67 0.83 2.29 1.49 2.60 1.12

Organization and

functions 3.33 1.63 3.25 0.43 2.19 1.40 2.96 1.39

Language and

communication 3.83 1.19 3.27 0.58 2.65 0.98 3.34 1.08

Overall 3.66 1.151 3.32 0.685 2.89 1.144 3.34 1.08

Analysis of the international readiness of the 2012 TFQA certified Thai food, beverage, and bakery franchisors is shown in Table 3. It can be seen that overall the 2012 TFQA certified Thai food, beverage, and bakery franchises were moderately ready for the overseas market (mean = 3.34). Only the food franchises in particular were deemed highly ready (mean = 3.66). The food franchisors showed a higher mean of factors measuring readiness to internationalize than the bakery and beverage franchisors in almost every aspect. The highest ranking factors were: training; franchise operation system; franchisee selection procedure; language and communication; and administrative time, respectively. Constraints found from the findings were: availability of capital investment and ability to absorb initial possible losses; legal issues and regulations; after sales follow-up; organization and function; and strategies and goals.

Additionally, the method of qualitative analysis employed in this research used a coding analysis (reducing the data to key events in key categories) in which the five main categories were: 1) geographic distance; 2) cultural distance and adaptability; 3) marketing approach; 4) partnership management; and 5) constraints.

Geographic Distance Strong capability in geographic distance management, which includes the constructs of control and monitoring, field support, key staff management, information exchange, and franchisee training, was found to enhance success in international franchising. This capability also serves as an effective mechanism for controlling franchisee opportunism (Norton 1988). In franchising, monitoring frequently requires the direct observation of the activities of franchisees. Geographic distance adversely affects the ability of the franchisor to closely monitor the foreign franchisees‟ activities. There is a need for international franchisors to have adequate human resources who have supervisory capability to undertake this observation (Combs & Castrogiovanni 1994). This study found that all 4 of the internationalized franchise firms have international staffs to undertake international market activities.

Cultural Distance and Adaptability Cultural distance was found to influence the choice of international food franchisor. This indicates that the food franchisor should, to some degree, adapt the product, price and business format to the way a franchisee would traditionally manage these in the foreign market. This study found that food franchisors practice both standardization and adaptation in their international operations in host countries. Standardization is found in the franchise brand image and value. Adaptation, where it is allowed on some of its products or services, is being closely monitored by franchisors.

Market Approach This study revealed that a form of master franchising is practiced among the 4 international franchisors. It is important that the local partner possess the financial and administrative resources necessary to build and manage a multi-unit operation. However, the franchisors‟ approach to the balance of power in the franchisor-franchisee relationship and how this translates into success or failure -- it is simply too soon to be discussed in this study as all 4 are just in the early stage of internationalization.

Partnership Management Franchising is a contractual relationship between a franchisee and a franchisor in which the former agrees to produce or market a product or service in accordance with an overall blueprint devised by a franchisor. The franchise system enables the advantages of a proven business format offered by the franchisor and the local knowledge of the franchisee to join together (Stanworth et al. 1995). All the firms were found to use master franchising as a means to enter overseas markets. Therefore, it becomes essential for a franchisor to identify the master franchisee characteristics that are required for success internationally. In this study, the respondents have highly ranked the franchisee selection procedure. One respondent said: “It is about relationships and therefore you have to spend time to support them -- Doing business with sincerity and honesty”.

Constraints This study found that the major constraint which franchisors face is the source of funding. All of the firms responded that they use their own capital to invest. Hence they have a rather limited availability of capital for investment and a limited ability to weather and absorb initial possible losses during start up.

Moreover, franchise legal issues – dealing with the variability of local laws and regulations -- are the most crucial constraint for both franchisor and franchisee especially when being an international franchisor. This should be of concern for any potential foreign franchisor, especially considering that there is a high potential for the franchise brand to be highjacked if there are no laws and regulations in place to protect franchisors.

Table 4: Findings and critical success factors of international franchising

Category Finding / Key Factors

Geographic distance

3 out of 4 franchises focus mainly on ASEAN countries. Only one big pizza franchise goes into Middle-East and Asia.

Geographic distance is a concern. It is more challenging than doing business close to home, with a similar culture.

Transaction cost is a main issue to be considered when expanding internationally. Costs include expenditures for travelling, transporting, logistics, and marketing. To be a successful international franchise, the business must have adequate resources to provide control and monitoring systems to ensure product consistency and quality.

Must have adequate resources to provide local field support.

Must have the resources and capabilities to manage key staff of master franchisees.

Must communicate regularly with the franchisees.

Must have the resources to provide initial and continuous training in both home and foreign markets.

Category Finding / Key Factors (cont.)

Cultural distance and adaptability

Must learn and have a clear understanding of the cultural differences in each country before moving in.

Must have clear brand and product policies that are strictly adhered to by all master franchisees.

Must monitor closely the product modifications and innovations introduced by the master franchisees to maintain the integrity of the concept.

Market Approach Must have a good quality product/service and a proven success record in home country before expanding internationally.

Must adopt a more aggressive proactive approach in recruiting potential master franchisees by joining the business matching held by Ministry of Commerce and attending international franchise expo.

Partnership Management

Most of the international food franchisors go for master franchise when expanding overseas.

Must demonstrate a commitment to establish a long term working relationship with the master franchisees.

One respondent stated that to be a successful international franchisor, you have to work sincerely and honestly with your franchisees.

Constraints Source of capital: all of the respondents use their own capital to invest, hence they have a rather limited supply of capital and a limited ability to absorb initial possible losses.

Legal issues: each country has a different legal and regulation framework. The international franchisor needs to clearly study and understand each host countries‟ laws and regulations. In addition, since there are no franchise laws and regulations in Thailand, this raises the risk for Thai franchises growing both at home and in foreign markets.

5. Summary and Conclusions The major objectives of this research were: (1) To study the level of firm readiness for the 2012 TFQA certified Thai food, beverage, and bakery franchisor to internationalize their businesses in order to prepare for the arrival of the ASEAN Economic Community in 2015; and (2) To determine the critical success factors and constraints of international franchisors. The findings reveal that even the certified franchisors are moderately ready to expand internationally and less than half among them (30.8%) penetrate foreign markets. The fact that the international readiness of Thai food, beverage, and bakery franchisors is only moderate while competition and rivalry across borders is becoming higher is a real concern.

This research indicates that the major obstacles of franchisors can be classified into three major categories: 1) a shortage of financial resources and an inability to absorb

initial possible losses during start up; 2) variability of international franchise legal rules and regulations; and 3) insufficient allocation of time for follow up sales and/or insufficient skills necessary for international business transactions. The franchise entrepreneurs should adjust their executives‟ time management so they have more time to focus on international markets. Strategies and goals for internationalization should be planned clearly for both the short and long terms. Following this strategic plan, the firm‟s organization and functions should be rearranged as necessary to support expansion into the targeted international markets.

The first two major obstacles can be minimized through cooperation between governmental and private organizations. The Department of Business Development, Ministry of Commerce must play a major role to establish franchise rules and regulations that protect business enterprises against the tendency to highjack the franchise brand. Franchises rely heavily on the professional expertise and advice of their solicitors who specialize in domestic and international franchising. Therefore, having an appropriate solicitor who specializes in international franchising will compensate for the lack of ability to negotiate contractual modifications and handle contract enforcement.

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