Effects On Franchisor's Financial Performance Caused By Increasing Number of Franchisee Outlets

Franchising business in Korea has grown up by leaps and bounds since Lotteria adopted its franchise system in 1979. In line with this remarkable growth of franchise business, there have been a number of studies and researches on franchise business. But most of researches have focused on the relationship issues such as conflicts, control, support, etc, between franchisor and franchisee in order for them to improve outcome of business performance, whereas there are very few researches to study financial performance for franchising business. In this context, this paper has studied the implications that increasing franchisees outlets would improve financial performance of franchisor. This study concluded that increasing the number of franchisee outlets would lead to the increase of sales volume of franchisor, and increasing ratio of franchisee over total franchise system would lead to the improvement of operational profit for franchisor but not the improvement of net income, and increasing number of franchisee outlets has nothing to do with debt ratio decrease unlike the resources scarcity theory suggested.