Franchising in Russia and Customer Satisfaction: A Subway Case Study

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RESEARCH PROJECT
“Franchising in Russia and customer satisfaction- A case of Subway”

Table of Contents
Task 1- Research Proposal............................................................................................................. 3
P1 Research Title....................................................................................................................... 3
Introduction...............................................................................................................................3
Research Problem......................................................................................................................4
Research Questions................................................................................................................... 4
Hypothesis................................................................................................................................. 4
Aim.............................................................................................................................................5
Objectives.................................................................................................................................. 5
Research Rationale.................................................................................................................... 6
Literature Review.......................................................................................................................7
P2 and M1 Data Collection and Analysis Methodology...........................................................10
Research Design.......................................................................................................................10
Action Plan............................................................................................................................... 12
Timeline of activities................................................................................................................12
Gantt chart...............................................................................................................................12
Strategy....................................................................................................................................12
Task 2- Written Report.................................................................................................................14
P3 Primary and Secondary Research........................................................................................14
Access...................................................................................................................................... 14
Estimated budget.....................................................................................................................15
Ethical Consideration...............................................................................................................15
M2 Merits, pitfalls and limitation of approaches to Data Collection and analysis...................16
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P4 Data Analysis and Interpretation........................................................................................17
REFERENCES.................................................................................................................................27
APPENDICES................................................................................................................................. 29
Questionnaire.......................................................................................................................... 29
Template Research Proposal Form..........................................................................................32
Research Ethics Approval Form............................................................................................... 37
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Task 1- Research Proposal
P1 Research Title
“Franchising in Russia and customer satisfaction- A case of Subway”
Introduction
One of the most important topics in today's time is the globalization of the economy. it also
refers to the globalization of the business world in which more and more companies enter into
a new market or introduce new product and services around the world through disappearing
boundaries and barriers in order to compete with foreign businesses (Hitt et al., 2016). Here the
question arises that how expansion strategies are followed by the companies. The answer to
this question is the entry mode decision. Appropriate mode to enter in the market allows the
company to get success in its globalized activities.
There are various entry options available for the company to enter a new market, direct
exporting, partnering, licensing, and buying a company, joint venture, turnkey product and so
on. Among these, one of the possible entry modes is franchising which is being used by a large
number of popular companies such as McDonald's, Dominos and so on (Ekanem, 2017).
Franchising is a contractual entry mode which is a type of license agreement focusing on the
organization that wants to enter a foreign market in a quick manner with a low degree of risks
as well as resource commitment. Here assistance is provided by the company related to design,
organization equipment and market of a contractual partner in the target market (Madanoglu
and Castrogiovanni, 2017). Here the selling or assisting the company in contractual partnership
is franchisor and Partner Company is a franchise. The franchisor allows and provides grants or
right to the franchise to run a business in order to sell the products and services under the
successful business model or identified trademark and brand by the franchisor.
Subway is a US-based fast food chain that was founded in 1965 by Fred DeLuca in Bridgeport in
Connecticut. The core products are made-to-order sandwiches in which the types of bread and
other ingredients are chosen by the customers. Subway network comprises approximately
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42,431 restaurants in 112 countries. Subway has emerged as one of the worldwide market
leaders in the fast food industry that is close to McDonald's in terms of revenue (Madanoglu
and Castrogiovanni, 2017). Franchising mode is actively used in expansion strategy by Subway
in order to spread around the world. The focus of this research project is to evaluate franchising
as an entry mode based on the example of Subway which is an international operating fast-food
chain.
Research Problem
Globalization has provided opportunities to the business organization to enter and operate in
any part of the world along with risks such as increasing competition and pressure to deliver
effective customer service (Baena and Cerviño, 2015). This research is based on understanding
the influence on customer satisfaction while using franchising by Subway as a strategy to enter
Russia.
Research Questions
1. How effective customer satisfaction can be achieved by Subway while using franchising
strategy to enter Russia?
2. Does Subway is benefitted by using franchising strategy for their competitive growth
and expansion around the world?
Hypothesis
1. The franchising activities will have a positive influence in delivering effective customer
service.
2. The franchising activities will sustain the growth and worldwide expansion of Subway.
3. The franchising activities of Subway will result in the positive impact the customer
satisfaction.
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Aim
The aim of the research is to identify the impact of using franchising strategy by Subway on
customer satisfaction while entering in Russia.
Objectives
The objectives are:
1. To collect background information through a literature review regarding the use of
franchising as a market entry mode.
2. To identify the use of franchising strategies by Subway for entering Russia fast food
industry.
3. To determine the impact of franchising strategy to be used by Subway on customer
satisfaction in Russia.
4. To explore the advantages of using a franchising strategy by Subway in entering Russia.
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Research Rationale
Fast food companies such as Dominos, McDonalds and Pizza Hut and so on use franchising
strategy to expand around the world and serve excellent quality food and beverages to a large
number of customers. Nowadays, globalization led these fast food companies to focus on
entering a new market with the aim to improve the profitability along with business efficiency
in domestic as well as global business market (Baena and Cerviño, 2015). Fast food
organizations have excellent market potential around the world. One of the major risks for the
fast food chain is to gain the satisfaction level of customers. This research is aimed at
identifying the influences of activities of franchising strategy in gaining customer satisfaction by
Subway while entering in Russia.
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Literature Review
MARKET ENTRY STRATEGIES
Due to the emergence of globalisation, the organizations of different size are open to enter the
international market and serve the customers of other countries. In order to identify the
choices of mode to enter the foreign market, a literature review is prepared. The present state
of knowledge and information related to the entry mode of the foreign market by SMEs. A total
of 33 relevant journal articles were analysed in terms of contextual dimensions and theoretical
framework (Laufs and Schwens, 2014). This helped in identifying the gaps in the works of
literature and also further developed the agenda for guiding future scholarships in relation to
research on entry mode for the foreign market by SME.
Another study was conducted by Nisar et al (2012) with the aim to investigate as well as
compare the motives of the SMEs in relation to the equity model to enter in Norway. A cross-
sectional survey was employed to find that the choice of cross border mergers & acquisitions‐
and international equity joint ventures is influenced by market develop and power. The
essential motives behind wholly-owned subsidiaries are the need to access resources as well as
control resources (Nisar et al., 2012). It was indicated that different entry mode choice is
significantly impacted by technology development, synergistic gains, location advantage,
market development and power.
FRANCHISING AS A MARKET ENTRY MODE
In the analysis literature of foreign market entry mode, the traditional views related to
international franchising is universally presented as a contractual non-direct, non-equity
association between the host country entities and market entrants (Burton and Cross, 2015).
This paper demonstrated the limited scope in such perspective as franchising firms employed a
variety of organizational forms related to international franchising. The re-evaluation of
international franchising is deserved in the analysis literature of foreign market entry.
Another study by Rosado-Serrano and Paul (2018) found that it is essential to study the
performance of system and theory development considering the multidimensional elements
like trust, distance and its impact on the franchise relationship. A conceptual model was
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developed in this paper on partnerships of international franchising so as to integrate the
factors that determine formation, performance and expansion of franchise deal with in
Relational Contracting theory.
Madanoglu et al (2017) stated that the difference in environmental conditions between the
host and home market influence the expansion of US international franchising. Also, it showed
the difference between the economic growth as well as economic uncertainty and its impact on
the desire to expand overseas by franchisors on a continuous basis. The authors used the panel
data for 151 franchising firms based in the US for the years between 1994 and 2008 along with
macroeconomic environmental data for explaining franchising probability. It was found that the
desire to expand overseas of the franchisor is impacted by the difference in economic growth
as well as economic uncertainty. It stated that international franchising must focus on
environmental variables of the host market and also the conditions in the home market.
FRANCHISING MARKET STRATEGY IN FAST FOOD INDUSTRY
A thesis was carried to examine four market entry modes to be selected to enter an emerging
market and success in the largest growing market that is India. Country or market selection and
mode of entry are the two primary components of market entry strategy. This thesis examined
the entry modes such as a wholly owned subsidiary, exports, franchise and joint venture (Greer,
2018). These entry modes were used by the companies such as Pepsi Co, Nestle, and Coca-Cola
and pizza hut in order to establish their business presence in India as well as in food plus
beverage market.
Another paper examined the experience of the two US companies that recently entered in the
soft drinks sector in India. It includes the reviews in consideration of the economic liberalisation
program, its causes along with results in India (Amine and Raizada, 2015). It concludes that it is
imperative for the companies in different sectors to consider the choice of a local partner, entry
mode, and timing of entry as well as the size of investment required with the aim to penetrate
in the Indian market.
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Thus, it is interpreted from the above literature review that the fast food industry has become
an essential part of globalisation as the demand for quick food services has risen with an
apparent free time shortage. Fast food outlets are becoming popular among the people as they
offer quick services in a cost-effective manner.
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P2 and M1 Data Collection and Analysis Methodology
Research Design
The research purpose is to identify the use of franchising strategy to enter Russia by subway
and its influence on customer satisfaction. Mixed research approaches will be selected for this
study to get the most reliable outcome and conclusion. Qualitative research will be used to
collect the data and information by understanding the human traits such as their views,
opinions, behaviours and attitudes (Hopkins, 2017). The qualitative research approach will be
applied in research to understand the insights and views of the respondents related to the
impact of franchising activities of the subway on customer satisfaction.
While quantitative research will be used in the research to count the insight and views of the
respondents into numeral form to get the objective outcome. This is a commonly used
approach that represents an exact and accurate outcome (Harrington et al., 2017). The
selection of these approaches will be based on to compute as well as represents the insights
and views of the respondents regarding the use of franchising strategy to enter Russia and its
influences on customer satisfaction in presentable form.
The data collection and analysis is referred to gathering and analysing the data in
correspondence to the research topic and get the final and reliable outcome. A combination of
primary and secondary research will be used to collect the data and draw the final conclusion of
the research (Pradhan, 2018). Secondary research technique includes different sources, such as
books, journals, articles, blogs, magazines and online publications will be used to collect
secondary or background information which will be presented in the literature reviews section.
Primary research includes questionnaire survey method will be used to collect original and
present data and information through the responses of the people. In the primary research, the
data and information collected will consider the present market scenario according to
relevance to the research topic (Mackey and Gass, 2015). The framing of the questionnaire will
be systematic and close-ended in order to distribute among people for their response.
Random sampling method will be used to select n number of participants for this research.
Potential customers of the subway will be randomly selected from public places such as malls,
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theatres, and other public locations. Around 100 numbers of potential customers will be
selected to get their opinions on franchising activities by subway influencing their customer
satisfaction level.
For every research or study, it is essential to extract and use essential information to draw an
effective conclusion and support the research. The research aim and objectives can be
effectively achieved by effective processing the data collected and analyse the same to convert
it into presentable and useful information. The data and information then collected for the
research will be analysed using tables and charts from Ms-Excel to be easily understood by
large audiences.
The research represents a limitation in the validity and reliability because of the involvement of
the human factors and also the macro environmental factors. Different entry modes are being
used by companies to expand and grow around the world. Adoption of franchising strategy is
deliberate upon the expansion decision of the company. The changes in the external business
environment in a fast food market may affect the entry strategy of subway resulting in limited
reliability (Harrington et al., 2017). Also, the response of the potential customers may be biased
or ambiguous which may affect the result and conclusion of the research. Since the base of the
research is secondary data collected from the secondary sources, it may be possible that the
limitation in secondary sources might continue in the current research.
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