Difference between Franchisers with and without Direct Retail Stores

Abstract

The new regulation was introduced to the franchise market of South Korea in that an applicant who wants to be a franchiser must set up direct retail stores and run them for at least one year before recruiting franchisees. Considering the purpose of the regulation, it is inferred that once franchisers run their own stores, their franchisees would be better off than otherwise. This paper addresses one reason that the Korea Fair Trade Commission has no choice but to introduce the regulation. Along the line, this paper investigates whether franchisees would have a more likelihood to make profit in case of franchisers operating their own stores. The result demonstrates that this case could be true since the operation of franchiser-owned stores could be helpful in reducing the cost of franchisees.