Franchising and Small Businesses in Saudi Arabia

This assignment delves into the burgeoning franchise industry in Saudi Arabia. It examines the factors driving its appeal, particularly for small and medium-sized enterprises (SMEs). The discussion includes challenges faced by these businesses, highlighting the importance of ethical practices in handling personal data. The assignment also acknowledges limitations of previous research due to small sample sizes and emphasizes the need for robust methodologies involving knowledgeable individuals.

RESEARCH METHODS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Industry background and research problem.................................................................................1
Rationale of research...................................................................................................................1
Academic aims and objectives.....................................................................................................1
Current issue faced by the company in respect to franchisee......................................................2
Literature review..............................................................................................................................2
Research methodology.....................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Rationale and significence of research
Restaurant industry is observing rapid growth on yearly basis as population is increasing
and per capital income also is on rise. Different retaurants use varied approaches to increase their
business. Restaurant chains like McDonald’s are using franchisee model to expand their
business and to give tough competition to rivals. Model proved successful for the company and
help it in increasing its business. However, with passage of time compeition also increased and
due to this reason an attempt is made in the present research study to identify impact that
franchisee model have on the McDonald’s business growth. Rationale behind research is that
restaurant business is growing at fast rate in Saudi Arabia and many SME open in past years.
McDonald’s use franchisee model to expand its business in mentioned nation (Showail, McLean
Parks and Smith, 2013). Hence, it was necessary to conduct research to identify extent to which
mentioned model will benefit firm in terms of busines growth in current and future time period.
This, reflect the importance of the present research study for the business firm.
Mc Donald background and research problem
Mc Donald is one of the fasest growing restaurant chain in the world(Asad Sadi and
Henderson, 2011). Company have vast product portfolio and country to country to some extent it
varies. More then 30000 outlets are operating by the firm across the globe through franchisee
model. 3,75.000 employees are currently in the company workforce and in future same will
increase at rapid rate. Firm is consistently focusing on increasing its footprint across globe by
using franchisee model. This was one of the trend that is observed from past few years. Other
trend that is identified is that franchisee business model is emerging as one of the popular
medium of growth for firms like McDonald’s. Hence, in such kind of situation it is hard to find
out extent to which franchisee model become successful because already there are small retail
restaurant chains that are in position from where tough competition can be given to the company.
Hence, it can be said that major research problem is to identify extent to which franchisee model
can contirbute to business growth of McDonald’s.
Academic aims and objectives
Aim of research: Present research study aims at identifying impact that franchisee model have
on growth of the McDonald’s business in Saudi Arabia.
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Objective of research
To evaluate growth rate of McDonald’s business in Saudi Arabia.
To find out reason behind success of franchisee model in Saudi Arabia.
To identify role that sub franchising which is not very popular in Saudi Arabia can play in
growth of the business firm.
Current issue faced by the company in respect to franchisee
In current time period gap between franchisee owners and management is increasing.
Franchisees have common assumption that management is not taking care of them and they are
only concerned about shareholders and profitability. Trust gap become 1.45 on scale that is
between 1to 5. On this category franchisee give rating to management in terms of cooperation
given by it to them in operating business. Pressure to control employee cost is another factor that
is affecting franchisee and mangement relationship. Franchisee are struggling to earn profit in
business because nothing special is offered in menu in comparison to rivals. Hence, lack of
cooperation between management and franchisee is affecting business growth of Mc Donald.
Literature review
According to Yousuf Danish and Lawton Smith, (2012) franchisee model help a lot to
the business firms in opening their branches in the Saudi Arabia and other nations of the world.
This is because by making own investment it is very difficult task to expand business at fast rate
across the globe. It is the franchisee model that assist firm in increasing its business in the world.
In past few years on multiple locations in Saudi Arabia McDonald’s and other large restaurant
chains open multiple restaurants and capture the market. Hence, it can be said that franchisee
model proved effective for the company. Currently, company is operating 150 stores in the
mentioned nation and plan to increase same to 200 by 2020. This fact revealed that franchisee
model assist firm in giving boost to its growth rate in the mentioned nation and in upcoming time
period also this rate will keep on growing consistently. This is because company presently
looking for digital transformation of its business as it recognize importance of data driven
technology for the company in terms of making business decisions. Thus, it can be said that use
of advance technology will further assist firm in reaping advantage of franchisee model in Saudi
Arabia.
Contrary to this Zamani‐Farahani and Henderson, (2010) state that franchisee model is
affecting firm growth and give boost to it but it is not factor that alone help company in
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expanding its business at fast rate. It is the product quality and service that assist firm in creating
more customers in the business. Franchisee model help firm in expanding business in short
duration. Even if McDonald’s will not make use of this model in its business then it also it was
possible for it to observe robust growth in the business. Hence, it can be said that franchisee
model does not play any big role in the company growth.
As per views of Sadi. and Saricimen, (2010) there are varied reasons behind success of
franchisee model in the Saudi Arabia. One of the basic reason is that income level of people is
high in the Saudi Arabia. Due to higher per capita income spending is also high among people in
Saudi Arabia. Hence, local people prepared to take franchisee of the McDonald’s and this factor
help company in growing its business at fast rate in the Saudi Arabia. Apart from this, large
number of foreign people live in Saudi Arabia for employment purpose. Such kind of people on
festive seaosns or for party purpose prefer to visit such kind of costly restaurants. Such kind of
consumer behaviour lead to increase in franchisee at fast rate in Saudi Arabia. Apart from this,
there are multiple foreign dishes that are quite popular in the Saudi Arabia like Pizza etc. These
dishes are prepared by using specific ingredients. Such kind of taste can not be observed in case
of local restaurants. Hence, there is great demand of the products of McDonald’s in the Saudi
Arabia and due to this reason, number of people are consistently taking franchisee of mentioned
firm in relevant country.
Contrary to this Park and Glascock, (2010) state that even Mc Donald name is quite
popular it does not mean that it will get huge success in business for long years. From long time
no change is observed in menu of the restaurant and due to this reason people get boared by
visiting Mc Donald restaurant. They are looking for different alternatives and small size
restaurants are to some extent meeting their expectations which impetus pressure on Mc Donald.
Hence, it become inevitable for the company to increase new dishes in its restaurant menu so that
customers can find something new and something different every time when they visit restaurant.
Such kind of strategy will give competitive edge to the firm over rivals.
According to Macdonald, (2013) firms that are runing restaurant chains like Mc Donald
are following franchisee model which is proving successful for them and pave a way of growth
for them in gulf countries and other nations of the world. This is because through this model they
in collaboration with local people are easily runing their business and coms to know about needs,
want, taste and preference of local people. All these things assist firm in developing deep insight
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about people of specific nation and according to their taste food products are served. Hence, it
can be said that there is huge importance of the fanchisee model for the business firm and it is
playing major role in its success.
Contrary to this Ali, (2008) state firms like Mc Donald are not exploiting opportunities
fully that are available in the market. This is because they are not following sub franchisee model
in many nations of the world where ample opportunities are available. Sub franchisee model is
one under which single entity that is appointd as master franchisee which guide and train as well
as provide other support to other franchisee units in same nation. Sub franchisee model assist
firm in bringing drastic change in business expansion growth rate. This is because better
supervision is given to franchisee owners by the company management indirectly through
mdiation fo sub franchiser. In franchisee model it become hard to maintain management in
specific nation. Hence, it can be said that failure to adopt sub franchisee in varied nations of the
world may prove costly to the Mc Donald in terms of growth rate.
Research methodology Research type: Research work will be conducted by doing primary and secondary
research both. In respect to secondary research literature will be reviewed and
questionnaire will be distributed among respondents in respect to primary research
(Riedl, Davis and Hevner, 2014). It is necessary to conduct both sort of research because
if secondary research is carried out then in that caseold literatures are revieed and better
understanding is developed about research topic. By doing so it is ensured that research
will be carried out in right direction. On other hand, it is necessary to conduct primary
research by doing so recent facts are collected about trends that are going on in the
market. Thus, it can be said that there is huge significence of the primary and secondary
research in present study. Research design: Exploratory research design will be used in research study because
from starting point entire research work is carried out. Exploratory research design seems
appropriate. Experimental research design is usually used when scientfic research study is
carried out by the researcher (Dunne, 2011). Current research is not scientific in nature.
On other hand, descriptive research design is used when researcher have wide knowledge
of research topic and further intends to enhance knowledge in respect research topic.
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Descriptive and experimental research design can not be used because research study is
not scientific and there was no knowledge of research topic previously. Research approach: Inductive research approach is considered for research because data
analysis will be done and literature will be reviewed and on that basis new theory will be
developed (Valeras, 2010). Deductive research approach is another method under which
there is already a theory in respect to research topic and same is tested by doing analysis
of fact. In current research by doing analysis of facts theory will be prerpared and due to
this reason inductive research approach is selected. Research philosophy: Interpretivism philosophy will be used in research study because
same is not scientific in nature and due to this reason positivism philsophy does not seem
appropriate for research work. Data collection method: Data will be gathered by distributing questionnaire among
respondents and amid of this sample of 15 respondents which are employees of the Mc
Donald is determined. Secondary data will be collected from books, journals and
magezines. Data analysis: In order to analyze data thematic analysis will be done under which
response given by the respondents will be evaluated in proper manner. Charting of
variables will be done which will assist reader in evaluating facts and getting insight
about existing trends (Tavakoli, 2012). Apart from thematic analsis method SPSS can
also be used to analyze data but mentioned technique will not be used because research is
not scientific in nature. Validity and reliability: In order to ensure that obtained results are reliable only relevant
people will be taken as sample unit. After receipt of raw data its detailed analysis will be
done and modification will be done in it to ensure that reliable results are obtained from
research. Ethical consideration: Data collection will be password protected and it will be ensured
that personal data does not go in hand of other people. This is one of ethical factor that
need to be considered in the current research study. Limitation of study: Major limitation of current research is that small sample size is
taken. However, in order to eliminate this limitation it will be ensured that only
knowledgeble person are taken as sample units for research.
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REFERENCES
Books and Journals
Asad Sadi, M. and Henderson, J.C., 2011. Franchising and small medium-sized enterprises
(SMEs) in industrializing economies: A Saudi Arabian perspective. Journal of
Management Development. 30(4). pp.402-412.
Dunne, C., 2011. The place of the literature review in grounded theory research. International
Journal of Social Research Methodology. 14(2). pp.111-124.
Macdonald, A.P., 2013. From military rule to electoral authoritarianism: The reconfiguration of
power in Myanmar and its future. Asian Affairs: An American Review. 40(1). pp.20-36.
Park, A. and Glascock, J.L., 2010. The performance impact of strategic corporate real estate in
franchise organizations. Journal of Corporate Real Estate. 12(2). pp.81-95.
Riedl, R., Davis, F.D. and Hevner, A.R., 2014. Towards a NeuroIS research methodology:
intensifying the discussion on methods, tools, and measurement. Journal of the Association
for Information Systems. 15(10). p.I.
Sadi, M.A. and Saricimen, T., 2010. Value factors determining consumer satisfaction at full-
scale restaurants in Saudi Arabia. Journal for Global Business Advancement. 3(4). pp.285-
294.
Showail, S.J., McLean Parks, J. and Smith, F.L., 2013. Foreign workers in Saudi Arabia: a field
study of role ambiguity, identification, information-seeking, organizational support and
performance. The International Journal of Human Resource Management. 24(21).
pp.3957-3979.
Tavakoli, H., 2012. A dictionary of research methodology and statistics in applied linguistics.
Rahnama press.
Valeras, A., 2010. “We don’t have a box”: Understanding Hidden Disability Identity Utilizing
Narrative Research Methodology. Disability Studies Quarterly. 30(3/4).
Yousuf Danish, A. and Lawton Smith, H., 2012. Female entrepreneurship in Saudi Arabia:
opportunities and challenges. International Journal of Gender and Entrepreneurship. 4(3).
pp.216-235.
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Zamani‐Farahani, H. and Henderson, J.C., 2010. Islamic tourism and managing tourism
development in Islamic societies: the cases of Iran and Saudi Arabia. International journal
of tourism research. 12(1). pp.79-89.
Online
Ali, S., 2008. [Online]. Franchising’s appeal: market growth in saudi arabia. Available
through:< https://www.franchise.org/franchising%E2%80%99s-appeal-market-growth-in-
saudi-arabia>.
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