The market size of Korean franchise industry has grown to 9.5 billion won in 2010 and the number of franchisee is also increased to 310 thousands as of 2012. The drastic growth of Korean franchise industry is mainly attributed to the retirement of babyboomers in recent years and the trend will be expected to continue for some time. However, the business opportunity for franchisees is not so promising due to the fierce competition among them and diminishing consumption by consumers. Therefore, it is crucial for prep franchisee to evaluate the capacity of the franchiser and the business chance very closely before the start of new business. For this, the information from the acting franchisee, like the satisfaction level, is very important for prep franchisee. However, in Korea, the info of franchisee satisfaction is not easily available though many government and private institutions survey the franchisee satisfaction regularly as they do not open the information.
To solve the problem, we developed the measurement model of franchisee satisfaction. We performed an empirical study using the model and showed the results for two major franchise industries, chicken stores and convenience stores. For this, firstly, existing scientific research papers regarding the success factor of franchise business and the franchisee satisfaction index were reviewed. Secondly, evaluation systems of franchise business both in Korea and other countries were investigated fully. Based on the review, we suggested a hypothetical measurement model of franchisee satisfaction composed of 6 satisfaction factors and 35specific variables.
To check the propriety of the suggested model, we performed a survey of 107 franchisees in the Seoul metropolitan area and collected data. Using the data collected, we performed a series of statistical analysis. From the exploratory factor analysis, 6 satisfaction factors were selected.
The correlation analysis was performed to reduce the number of variables based on the similarity among variables. The reliability test for variables in each factor was applied and finally the confirmatory factor analysis was performed Based on the results, the measurement model of franchisee satisfaction as finalized. In <Table 1>, the franchisee satisfaction model, composed of 6 categories and 29 variables, is shown.
Using the developed franchisee satisfaction model, we performed a main survey for two franchise industries, chicken stores and CVS, in which the number of franchisees and the level of competition is very high. For each industry, we selected 4 top brands based on the number of stores and we surveyed 30 stores for each brand in major cities of Korea. Finally, data from 240 franchisees were collected during November 2012.
The results of franchisee satisfaction from the survey is shown in <Table 2>. Overall, the level of franchisee satisfaction was not that high for both industries. The average of total franchisee satisfaction index were 60.0 and 59.9 points out of 100 points for chicken stores and CVS respectively, which were lower than results from other studies applied to consumer and business industries.
The level of franchisee satisfaction was found to be different across brands for both industries. For chicken franchise, Kyochon ranked the highest at 64.9 points out of 100 as shown in <Table 3>, followed by Nene, Perikana, and BBQ. The satisfaction score for BBQ,the market leading brand, was found to be relatively low even with the highest sales level due to higher expectation. For CVS, GS25 ranked the first at 64.4 as shown in <Table 4>, followed by MiniStop, Seven Eleven, and CU.
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