Bridging the Operational Efficiency Differences between Franchisors and Franchisees: A Metafrontier Approach
Abstract
:1. Introduction
2. Literature Review of Food Franchise Efficiency
3. Research Model and Data
- Franchisor’s Advertising and Promotion Expenses (FsorAP): The costs for promoting a franchise brand and recruiting franchisees.
- Franchisor Employee (FsorE): Full-time employees of a parent franchising company, such as employees in any other type of business (e.g., franchise supervisors and franchise operating managers).
- Franchisor Total Sales (FsorTS): The annual total sales amount of a franchise establishment company, including: (a) franchisees’ sales-based ongoing royalties, (b) franchise initial fee revenue, and (c) distribution revenue allocated to goods and services that franchisees sell.
- Number of Franchisees (NFsee): The total number of franchised outlets under the control of a parent franchising company.
- Franchise Initial Fee (FseeIF): The license fees of entry and owning a franchise to be paid by a franchisee to a franchising company (e.g., franchise subscription fee, education fee, deposit, etc.).
- Franchisee Set-up Cost (FseeSC): This refers to the total cost of opening a franchise shop, specifically, the interior costs of a franchisee, such as the cost of supplies and equipment, furniture, and fixtures.
- Franchisee Average Sales (FseeAS): The average annual sales per franchisee over a given time.
4. Results
4.1. Metafrontier DEA Results of Coffee Franchisors
4.2. Metafrontier DEA Results of Coffee Franchisees
4.3. Bootstrap DEA Results of Coffee Franchisees
4.3.1. Comparison between Franchisors and Franchisees
4.3.2. Comparison between Premium and Mainstream Brand Groups
5. Discussion
5.1. Theoretical Implications
5.2. Practical Implications
6. Conclusions and Future Research
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Acknowledgments
Conflicts of Interest
Appendix A. The categorization, DMU codes, and full names of the decision making units (DMUs)
Group | DMU Code | Coffee Chain Name | Business Start Date |
Premium Coffee Franchise group | A(01) | Dal.komm Coffee | 7 May 2012 |
A(02) | DROPTOP | 18 Aug 2011 | |
A(03) | EDIYA COFFEE | 17 Aug 2001 | |
A(04) | Caffé TIAMO | 1 Apr 2005 | |
A(05) | CAFÉ-BENE | 28 Jun 2008 | |
A(06) | Coffeenie | 5 Nov 2009 | |
A(07) | TOMNTOMS | 18 Dec 2004 | |
A(08) | TWOSOME PLACE | 30 Sep 2008 | |
A(09) | HOLLYS COFFEE | 1 Jun 1999 | |
Mainstream Coffee Franchise group | B(01) | THE LITTER | 1 Aug 2015 |
B(02) | the Venti | 21 Mar 2014 | |
B(03) | DUTCH&BEAN | 4 Nov 2014 | |
B(04) | 10000LAB COFFEE | 14 Oct 2015 | |
B(05) | MEGA MGC COFFEE | 9 Mar 2016 | |
B(06) | BULK COFFEE | 15 Jan 2018 | |
B(07) | Café BOMBOM | 16 Jan 2015 | |
B(08) | PAIK’S COFFEE | 7 Sep 2009 | |
B(09) | Selecto Coffee | 20 Nov 2012 | |
B(10) | Amasvin | 12 Aug 2008 | |
B(11) | XOXO HOTDOG & COFFEE | 22 Apr 2016 | |
B(12) | YOGER-PRESSO | 20 Nov 2007 | |
B(13) | Cheongja Dabang | 14 Sep 2015 | |
B(14) | Coffee-mama | 8 Sep 2010 | |
B(15) | COFFEE-BAY | 30 Jun 2011 | |
B(16) | Coffee-banhada | 30 Mar 2011 | |
B(17) | COFFEE ONLY | 10 Sep 2016 | |
B(18) | Compose Coffee | 11 Aug 2014 | |
B(19) | ToPresso | 1 Oct 2005 |
Appendix B. Mathematical framework for Metafrontier Efficiency
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Authors | Method | DMUs | Input Variables | Output Variables | |
---|---|---|---|---|---|
Coffee Industry | Park et al. [1] | Metafrontier DEA | 29 Korean Coffee Shop Franchisors | Employee, Franchisee’s Average Sales, Number of Franchisee | Financial Stabilization, Total Sales, Total Asset |
Kim et al. [11] | Input-oriented CCR | 6 Coffee Franchises in Korea from 2010 to 2014 | Product cost, Labor cost, Costs for interior design | Sales Profit | |
Joo et al. [12] | Input-oriented CCR/BCC | 8 Premier Coffee Retail Stores | Cost of Sales, Occupancy expenses, Wages/Benefits, Other Expenses, | Total Sales | |
Joo et al. [13] | Input-oriented CCR | 7 Specialty Coffee Retailers | Costs of Goods Sold, Sales, General, and Administrative Expenses, Depreciation/Amortization | Revenue | |
Wang et al. [14] | Network metafrontier DEA | 54 B Coffee Company of Taiwan and China from 2010 to 2012 | Personnel Pay, Raw Material Costs, Selling Expenses | Operating Income, Sales Revenue, Advance Receipts, Administrative Expenses | |
Food Restaurant Industry | Reynolds [17] | CCR/ BCC | 38 chains of same-brand franchises in United States | Hours worked, Average wage, Number of competitors, Seating capacity | Daily sales, Tip percentage |
Roh and Choi [3] | Input-oriented CCR/ BCC | 550 chain restaurants operating within the Pacific Rim | Environmental/Location, Physical resources, Human resources, Management efficiency | Sales, Net income | |
Sveum and Sykuta [18] | Two-stage DEA | 8900 restaurants in United States | Payroll, Age of the establishment, Number of seats | Total Sales, Counter Sales, Drive-thru Sales, Takeout Sales, Server Sales | |
Alberca and Parte [19] | Metafrontier DEA | 863 restaurants in Spain | Total assets, Staff Costs, Cost of Sales | Total Sales |
Category | Operational Efficiency for Franchisor | Operational Efficiency for Franchisee | ||||||
---|---|---|---|---|---|---|---|---|
FsorAP (1000 won) | FsorE (Person) | FsorTS (1000 won) | NFsee | FseeIF (1000 won) | FseeSC (1000 won) | FseeAS (1000 won) | ||
Max | Premium | 13,342,110 | 2303 | 364,058,442 | 2885 | 39,150 | 260,050 | 508,907 |
Mainstream | 1,855,012 | 281 | 134,708,794 | 1188 | 21,000 | 156,051 | 298,566 | |
Min | Premium | 13,142 | 14 | 3,945,604 | 99 | 5300 | 51,590 | 90,685 |
Mainstream | 6743 | 11 | 1,047,124 | 105 | 0 | 42,400 | 34,789 | |
Ave | Premium | 3,018,980 | 456 | 93,293,856 | 668 | 18,561 | 142,369 | 220,237 |
Mainstream | 376,379 | 49 | 21,502,480 | 375 | 10,961 | 66,203 | 147,957 | |
SD | Premium | 4,584,804 | 732 | 126,456,525 | 916 | 9323 | 72,501 | 126,016 |
Mainstream | 515,076 | 62 | 31,121,487 | 300 | 5144 | 25,326 | 71,986 |
Group | DMU Code | CRS | VRS | SE | RTS | Main Cause of Inefficiency | |||||
---|---|---|---|---|---|---|---|---|---|---|---|
ME (TE) | GF | TGR | ME (PTE) | GF | TGR | PTE | SE | ||||
1 | Fsor_A(01) | 0.0932 | 0.2130 | 0.4377 | 0.1602 | 0.4200 | 0.3814 | 0.5821 | DRS | ◯ | |
Fsor_A(02) | 0.2168 | 0.5288 | 0.4099 | 0.3133 | 0.5638 | 0.5556 | 0.6919 | DRS | ◯ | ||
Fsor_A(03) | 0.4564 | 1 | 0.4564 | 1 | 1 | 1 | 0.4564 | DRS | ◯ | ||
Fsor_A(04) | 0.5730 | 1 | 0.5730 | 1 | 1 | 1 | 0.5730 | IRS | ◯ | ||
Fsor_A(05) | 0.2176 | 0.5174 | 0.4205 | 0.3527 | 0.6622 | 0.5327 | 0.6169 | DRS | ◯ | ||
Fsor_A(06) | 0.6448 | 1 | 0.6448 | 0.8319 | 1 | 0.8319 | 0.7751 | IRS | ◯ | ||
Fsor_A(07) | 0.4903 | 0.8849 | 0.5541 | 1 | 1 | 1 | 0.4903 | DRS | ◯ | ||
Fsor_A(08) | 0.1685 | 0.4092 | 0.4117 | 1 | 1 | 1 | 0.1685 | DRS | ◯ | ||
Fsor_A(09) | 0.2004 | 0.4846 | 0.4136 | 0.7321 | 0.8628 | 0.8485 | 0.2737 | DRS | ◯ | ||
Ave. | 0.3401 | 0.6709 | 0.4802 | 0.7100 | 0.8343 | 0.7945 | 0.5142 | DRS: 77.8%, IRS: 22.2% | |||
2 | Fsor_B(01) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | ||
Fsor_B(02) | 0.4658 | 0.4658 | 1 | 0.7006 | 0.7026 | 0.9972 | 0.6649 | DRS | ◯ | ||
Fsor_B(03) | 0.3283 | 0.3283 | 1 | 0.3494 | 0.3494 | 1 | 0.9397 | IRS | ◯ | ||
Fsor_B(04) | 0.3319 | 0.3319 | 1 | 0.3353 | 0.3353 | 1 | 0.9897 | DRS | ◯ | ||
Fsor_B(05) | 0.7803 | 0.7803 | 1 | 1 | 1 | 1 | 0.7803 | DRS | ◯ | ||
Fsor_B(06) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | |||
Fsor_B(07) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | |||
Fsor_B(08) | 0.5137 | 0.5137 | 1 | 1 | 1 | 1 | 0.5137 | DRS | ◯ | ||
Fsor_B(09) | 0.3999 | 0.3999 | 1 | 0.4429 | 0.4429 | 1 | 0.9029 | DRS | ◯ | ||
Fsor_B(10) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | |||
Fsor_B(11) | 0.6135 | 0.6135 | 1 | 0.6356 | 0.6362 | 0.9991 | 0.9651 | IRS | ◯ | ||
Fsor_B(12) | 0.5928 | 0.5928 | 1 | 0.7138 | 0.7138 | 1 | 0.8304 | DRS | ◯ | ||
Fsor_B(13) | 0.8584 | 0.8584 | 1 | 1 | 1 | 1 | 0.8584 | IRS | ◯ | ||
Fsor_B(14) | 0.4324 | 0.4324 | 1 | 0.4702 | 0.4702 | 1 | 0.9197 | DRS | ◯ | ||
Fsor_B(15) | 0.2301 | 0.2301 | 1 | 0.5767 | 0.5767 | 1 | 0.3991 | DRS | ◯ | ||
Fsor_B(16) | 0.5963 | 0.5963 | 1 | 0.7972 | 0.7972 | 1 | 0.7480 | DRS | ◯ | ||
Fsor_B(17) | 0.5614 | 0.5614 | 1 | 0.6314 | 0.6314 | 1 | 0.8891 | IRS | ◯ | ||
Fsor_B(18) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | |||
Fsor_B(19) | 0.4995 | 0.4995 | 1 | 0.5364 | 0.5364 | 1 | 0.9312 | DRS | ◯ | ||
Ave. | 0.6423 | 0.6423 | 1 | 0.7468 | 0.7470 | 0.9998 | 0.8586 | DRS: 71.4%, IRS: 28.6% |
Group | DMU Code | CRS | VRS | SE | RTS | Main Cause of Inefficiency | |||||
---|---|---|---|---|---|---|---|---|---|---|---|
ME (TE) | GF | TGR | ME (PTE) | GF | TGR | PTE | SE | ||||
1 | Fsee_A(01) | 0.1104 | 0.1445 | 0.7642 | 0.3043 | 0.3043 | 1 | 0.3628 | DRS | ◯ | |
Fsee_A(02) | 0.7280 | 1 | 0.7280 | 0.7787 | 1 | 0.7787 | 0.9350 | IRS | ◯ | ||
Fsee_A(03) | 0.3020 | 0.3907 | 0.7728 | 0.4539 | 0.4539 | 1 | 0.6652 | DRS | ◯ | ||
Fsee_A(04) | 0.1963 | 0.2625 | 0.7477 | 0.2584 | 0.2964 | 0.8718 | 0.7597 | DRS | ◯ | ||
Fsee_A(05) | 0.1508 | 0.2216 | 0.6805 | 0.3060 | 0.3060 | 1 | 0.4928 | DRS | ◯ | ||
Fsee_A(06) | 0.1626 | 0.2181 | 0.7454 | 0.2713 | 0.2713 | 1 | 0.5991 | DRS | ◯ | ||
Fsee_A(07) | 0.3603 | 0.5032 | 0.7160 | 0.6287 | 0.6680 | 0.9412 | 0.5731 | DRS | ◯ | ||
Fsee_A(08) | 0.6165 | 0.8224 | 0.7497 | 1 | 1 | 1 | 0.6165 | DRS | ◯ | ||
Fsee_A(09) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | |||
Ave. | 0.4030 | 0.5070 | 0.7672 | 0.5557 | 0.5889 | 0.9546 | 0.6671 | DRS: 87.5%, IRS: 12.5% | |||
2 | Fsee_B(01) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | ||
Fsee_B(02) | 0.3636 | 0.3636 | 1.0000 | 0.4944 | 0.6262 | 0.7894 | 0.7354 | DRS | ◯ | ||
Fsee_B(03) | 0.3712 | 0.3777 | 0.9830 | 0.4082 | 0.4332 | 0.9421 | 0.9096 | DRS | ◯ | ||
Fsee_B(04) | 0.5381 | 0.5501 | 0.9782 | 0.5648 | 0.5755 | 0.9814 | 0.9527 | IRS | ◯ | ||
Fsee_B(05) | 0.7399 | 0.7441 | 0.9943 | 0.8668 | 0.9580 | 0.9049 | 0.8535 | DRS | ◯ | ||
Fsee_B(06) | 0.4621 | 0.4621 | 1.0000 | 0.5177 | 0.5245 | 0.9871 | 0.8925 | DRS | ◯ | ||
Fsee_B(07) | 0.5107 | 0.5253 | 0.9723 | 0.5478 | 0.5711 | 0.9592 | 0.9324 | DRS | ◯ | ||
Fsee_B(08) | 1 | 1 | 1 | 1 | 1 | 1 | 1 | CRS | |||
Fsee_B(09) | 0.3236 | 0.3236 | 1.0000 | 0.3416 | 0.3437 | 0.9941 | 0.9473 | DRS | ◯ | ||
Fsee_B(10) | 0.8067 | 0.8296 | 0.9723 | 1 | 1 | 1 | 0.8067 | IRS | ◯ | ||
Fsee_B(11) | 0.1749 | 0.1749 | 1 | 0.2032 | 0.2032 | 1 | 0.8605 | DRS | ◯ | ||
Fsee_B(12) | 0.2859 | 0.2900 | 0.9858 | 0.2930 | 0.2979 | 0.9837 | 0.9757 | DRS | ◯ | ||
Fsee_B(13) | 0.4099 | 0.4101 | 0.9994 | 0.4126 | 0.4142 | 0.9962 | 0.9933 | DRS | ◯ | ||
Fsee_B(14) | 0.2140 | 0.2173 | 0.9845 | 0.2300 | 0.2406 | 0.9559 | 0.9302 | DRS | ◯ | ||
Fsee_B(15) | 0.1057 | 0.1057 | 1 | 0.1712 | 0.2856 | 0.5996 | 0.6173 | DRS | ◯ | ||
Fsee_B(16) | 0.2312 | 0.2312 | 1 | 0.2904 | 0.2986 | 0.9727 | 0.7960 | DRS | ◯ | ||
Fsee_B(17) | 0.4408 | 0.4534 | 0.9723 | 0.4573 | 0.4683 | 0.9765 | 0.9639 | DRS | ◯ | ||
Fsee_B(18) | 0.6038 | 0.6038 | 1 | 0.7281 | 0.8202 | 0.8877 | 0.8293 | DRS | ◯ | ||
Fsee_B(19) | 0.2868 | 0.2868 | 0.9999 | 0.3112 | 0.3112 | 1 | 0.9213 | IRS | ◯ | ||
Ave. | 0.4668 | 0.4710 | 0.9917 | 0.5178 | 0.5459 | 0.9437 | 0.8904 | DRS: 82.4%, IRS: 17.6% |
DMU Code | CRS-Based | VRS-Based | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Franchisor | Franchisee | Diff. (A)-(B) | Franchisor | Franchisee | Diff. (A)-(B) | |||||
ME | BME (A) | ME | BME (B) | ME | BME (A) | ME | BME (B) | |||
A(01) | 0.0932 | 0.0775 | 0.1104 | 0.0998 | (0.0223) | 0.1602 | 0.1383 | 0.3043 | 0.2638 | (0.1254) |
A(02) | 0.2168 | 0.1837 | 0.7280 | 0.6459 | (0.4622) | 0.3133 | 0.2848 | 0.7787 | 0.5923 | (0.3075) |
A(03) | 0.4564 | 0.3833 | 0.3020 | 0.2698 | 0.1135 | 1 | 0.7293 | 0.4539 | 0.4036 | 0.3256 |
A(04) | 0.5730 | 0.4272 | 0.1963 | 0.1785 | 0.2487 | 1 | 0.8292 | 0.2584 | 0.2353 | 0.5939 |
A(05) | 0.2176 | 0.1893 | 0.1508 | 0.1313 | 0.0580 | 0.3527 | 0.3247 | 0.3060 | 0.2598 | 0.0649 |
A(06) | 0.6448 | 0.4631 | 0.1626 | 0.1475 | 0.3156 | 0.8319 | 0.7084 | 0.2713 | 0.2266 | 0.4818 |
A(07) | 0.4903 | 0.3621 | 0.3603 | 0.3184 | 0.0437 | 1 | 0.7408 | 0.6287 | 0.5583 | 0.1825 |
A(08) | 0.1685 | 0.1503 | 0.6165 | 0.5612 | (0.4109) | 1 | 0.7526 | 1 | 0.8289 | (0.0762) |
A(09) | 0.2004 | 0.1797 | 1 | 0.9080 | (0.7284) | 0.7321 | 0.6376 | 1 | 0.8422 | (0.2047) |
B(01) | 1 | 0.8100 | 1 | 0.5790 | 0.2311 | 1 | 0.8412 | 1 | 0.5235 | 0.3177 |
B(02) | 0.4658 | 0.3995 | 0.3636 | 0.3312 | 0.0683 | 0.7006 | 0.6364 | 0.4944 | 0.4438 | 0.1926 |
B(03) | 0.3283 | 0.2748 | 0.3712 | 0.3378 | (0.0630) | 0.3494 | 0.3058 | 0.4082 | 0.3750 | (0.0692) |
B(04) | 0.3319 | 0.2882 | 0.5381 | 0.4896 | (0.2014) | 0.3353 | 0.2965 | 0.5648 | 0.4594 | (0.1629) |
B(05) | 0.7803 | 0.6512 | 0.7399 | 0.6667 | (0.0155) | 1 | 0.7800 | 0.8668 | 0.7929 | (0.0129) |
B(06) | 1 | 0.6142 | 0.4621 | 0.4210 | 0.1933 | 1 | 0.7081 | 0.5177 | 0.4624 | 0.2457 |
B(07) | 1 | 0.6585 | 0.5107 | 0.4657 | 0.1928 | 1 | 0.7442 | 0.5478 | 0.5020 | 0.2422 |
B(08) | 0.5137 | 0.4539 | 1 | 0.8927 | (0.4388) | 1 | 0.7887 | 1.0000 | 0.8126 | (0.0239) |
B(09) | 0.3999 | 0.3459 | 0.3236 | 0.2935 | 0.0523 | 0.4429 | 0.4000 | 0.3416 | 0.2968 | 0.1032 |
B(10) | 1 | 0.8291 | 0.8067 | 0.7359 | 0.0932 | 1 | 0.7179 | 1 | 0.5289 | 0.1891 |
B(11) | 0.6135 | 0.4979 | 0.1749 | 0.1012 | 0.3966 | 0.6356 | 0.5618 | 0.2032 | 0.1344 | 0.4274 |
B(12) | 0.5928 | 0.5167 | 0.2859 | 0.2598 | 0.2570 | 0.7138 | 0.6243 | 0.2930 | 0.2581 | 0.3662 |
B(13) | 0.8584 | 0.6730 | 0.4099 | 0.3664 | 0.3066 | 1 | 0.7229 | 0.4126 | 0.3420 | 0.3808 |
B(14) | 0.4324 | 0.3788 | 0.2140 | 0.1946 | 0.1842 | 0.4702 | 0.4325 | 0.2300 | 0.2096 | 0.2229 |
B(15) | 0.2301 | 0.1627 | 0.1057 | 0.0963 | 0.0664 | 0.5767 | 0.5269 | 0.1712 | 0.1435 | 0.3835 |
B(16) | 0.5963 | 0.4688 | 0.2312 | 0.2062 | 0.2625 | 0.7972 | 0.6971 | 0.2904 | 0.2631 | 0.4340 |
B(17) | 0.5614 | 0.4549 | 0.4408 | 0.4006 | 0.0543 | 0.6314 | 0.5381 | 0.4573 | 0.4107 | 0.1274 |
B(18) | 1 | 0.6729 | 0.6038 | 0.5489 | 0.1240 | 1 | 0.7315 | 0.7281 | 0.6566 | 0.0748 |
B(19) | 0.4995 | 0.4395 | 0.2868 | 0.2561 | 0.1834 | 0.5364 | 0.4947 | 0.3112 | 0.2516 | 0.2431 |
(A) CRS-Based | (B) VRS-Based |
---|---|
Mann–Whitney U = 334.0, Wilcoxon W = 740.0, S.E = 61.025, Asymptotic Sig. = 0.342 | Mann–Whitney U = 221.0, Wilcoxon W = 627.0, S.E = 61.025, Asymptotic Sig. = 0.005 *** |
CRS-Based | VRS-Based | |||
---|---|---|---|---|
Franchisor | Franchisee | Franchisor | Franchisee | |
Total n | n = 28 (Premium = 9, Mainstream = 19) | |||
Mean Rank * | P = 8.00, M = 17.58 | P = 12.78, M = 15.32 | P = 14.67, M = 14.42 | P = 15.67, M = 13.95 |
Mann–Whitney U | 144.000 | 101.000 | 84.000 | 75.000 |
Wilcoxon W | 334.000 | 291.000 | 274.000 | 265.000 |
Standardized Test | 2.878 | 0.762 | −0.074 | −0.517 |
Asymptotic Sig. | 0.004 *** | 0.446 | 0.941 | 0.605 |
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Kim, S.B.; Choi, K. Bridging the Operational Efficiency Differences between Franchisors and Franchisees: A Metafrontier Approach. Processes 2022, 10, 2021. https://doi.org/10.3390/pr10102021
Kim SB, Choi K. Bridging the Operational Efficiency Differences between Franchisors and Franchisees: A Metafrontier Approach. Processes. 2022; 10(10):2021. https://doi.org/10.3390/pr10102021
Chicago/Turabian StyleKim, Seung Beom, and Kanghwa Choi. 2022. "Bridging the Operational Efficiency Differences between Franchisors and Franchisees: A Metafrontier Approach" Processes 10, no. 10: 2021. https://doi.org/10.3390/pr10102021