For thr case study about Subway, we try to learn the business model of Franchise shops and its pros and cons. We also learned the difference between the franchise stores and chain stores.
After class, I worked on the case of KFC and how this brand experienced its own expansion at China. Then, I finished a short essay and received some comments from our teacher. （Essay showing below)
Question One: Ways of KFC expanding with Pros and Cons in China whole title
We can almost see the stores of Kentucky Fried Chicken everywhere around world, but how can a brand expand to such a scale? KFC, as a subsidiary operated by the Yum! China division, was the first western food company in China. Through franchising and enlarge the scale of chain store, KFC occupies a large portion of the fast food market in China [This statement should be supported by references]. Franchising, as a theory that “provides firm-specific and location-specific conditions when a firm may choose the franchising business model” (Mishra, 2, 2017), [Need to include the year published in the citation] can help an impressive brand increasing its influence in the market. Compared with franchising, chain store is a similar method to expand brand’s market, but there is a slight distinction. [Need to explain the distinction between franchises and chain stores] After all, the business models of franchising and chain stores have both advantages and disadvantages reflecting from its management.
Initially, franchising is a strategy under investment of the brand and use the effect of brand advertising in order to a get a higher profit with least labor-saving management. Considering the four factors as capital, land, labor and enterprise, franchising tries to “employ the enterprise power” to help them manage the store everywhere. [Need a reference to support the explanation of franchising] The individual owner can operate the store of their own and get the profit after handing in franchising fee to the brand company. Since 1987 when KFC opened the first outlet in Beijing, this company has become a successful example of expanding in different regions and be localized. [Need a reference to support the discussion on KFC growth] By 2015, KFC has over 5003 outlets in China with an absolute trend of increasing in the future. Through this way, KFC develops the flexibility in management and enterprise, and allocate management resources wisely so as to get profit as much as possible with a limited enterprise energy.
Furthermore, chain stores have a similar business model with franchising. Through opening outlets as the methods of franchising, many brands increase its competitiveness. However, KFC did not choose this way while they entered different markets. What is different with franchising, chain store is not employing a power of enterprise [Need to explain what is meant by “power of enterprise”] but directly opens and operates different stores through parent company instead of the individual owner. Many convenience stores may choose the model of chain stores like FamilyMart. [Need to explain the principles of chain stores, and support the discussion with references] Nevertheless, unlike the management of restaurant as KFC, the operation of a convenience store seems easier which is suitable for directly operating. [This sentence appears to provide an opinion, which may be appropriate, if it is supported by suitable references] need to get more reference
Last but not least, both of these business models have some advantages and disadvantages. For franchising, it is born with a brand recognizing during the market competition as “branding is a very powerful component” (Barim, [Year of publication?] 517). Moreover, with the influence from the parent company, franchising seems to have a lower risk of failure for individual investment. However, it requires an initial cost if investors would like to open a franchising store, and, taking the example of KFC, there are always strict rules from the brand for individual owner to open and operate a store. This is how this brand protect the fame of brand. Moving to chain stores’ model, there is no such a fee like initial cost. However, the cost of operating directly by the brand seems to a fortune. [Again, need to support statements such as this with references]
[Whilst a few of the advantages of franchises and chain stores have been considered. No attempt has been made to consider disadvantages]
After all, various business models, like franchising and chain stores, have both pros and cons. KFC can be served as an outstanding example for entering the Chinese market using franchising and opening outlets. As soon as the individual owners want the positive influence from a well-known brand, they always have to pay something. (we open a Franchise still need to pay a fortune to clarify) Brand influence is one of the reasons for some investors’ preference in franchising, while chain store can also be the optimal choice for some companies in directly operating.
Works cited
Barim, Menekse & Salar, Orkide. (2014). Determining Pros and Cons of Franchising by Using Swot Analysis. Procedia - Social and Behavioral Sciences. 122. 515-519. 10.1016/j.sbspro.2014.01.1385.
Barua, Swarup. (2017). RETAIL CHAIN STORE: PRESENT SCENARIO IN SYLHET DISTRICT OF BANGLADESH. [This publication has not been cited in the essay. It may have been used to help formulate the essay. If so it should have been included in the text]
Mishra, Chandra. (2017). The Theory of Franchising. 10.1007/978-3-319-54540-0_7.