A study of the factors which influence franchisor profit structure with running royalty policy for its sustainable growth: Focus on the food industry in Korea

Abstract

Purpose

The purpose of this paper is to assess the conceptual relationship between the running royalty programs and the performance of a franchisee or franchisor. Thus, this paper will analyze the correlation of financial stability when the franchisor strengthens the running royalty policy at aspect of franchisor.

Design/methodology/approach

A model is presented and designed. The paper will analyze the causality which is affected by strengthening the profit structure with the running royalty program and also find out how the strengthened profit structure will affect and improve the franchisors' sustainable supports for the franchisees, service quality and service satisfactions.

Findings

Although the franchise industry is growing in Korea, the stability of business is still in doubt because the business cycle of the franchisor is shortened. This paper found the reasons why franchisors have unstable status in Korea. The main reason was the instability of profit structures for franchisors which are a burden to the franchisees which then worsen the franchisors' financial status. The biggest different from the US franchise industry was the running royalty program. So, this paper will apply the running royalty program politically to the franchise business in Korea and find out how it will affect the overall business cycle.

Originality/value

This study was limited to the Korean franchise industry and found out the factors which influence the franchisors' performance in various aspects. By analyzing with casual loop diagram, this paper found how each of the factors interact and bring out the positive feedback process. Also, it suggests a way of adopting the running royalty program into the Korean market.

Citation

Kwon, T.(k). and Choi, K. (2010), "A study of the factors which influence franchisor profit structure with running royalty policy for its sustainable growth: Focus on the food industry in Korea", Asian Journal on Quality, Vol. 11 No. 3, pp. 266-276. https://doi.org/10.1108/15982681011094014