**1. Introduction**

Franchising has grown in popularity as a successful global business model. Franchising is a form of licensing in which a parent corporation, the franchisor, grants an indi-vidual person, known as the franchisee, the right to operate in a specific way [1–3]. Accordingly, franchising is a business model that allows small companies to scale up with limited capital [4]. International franchising is a method of entering a new market that enables businesses to do so with little risk and a little power. For over a century, small and medium-sized businesses have used this approach to extend their operations [5,6]. Franchising has become a common method for firms from Australia [7], Spain, and newly industrialised countries expanding domestically and internationally, and it remains one of the most popular distribution channels for US exports [8]. This business format has gained plenty of scholarly attention. Furthermore, franchising is a business model in which local entrepreneurs, known as franchisees, are given the right to run one or more franchise units at a location in exchange for putting up their own money. The franchisee pays a royalty based on gross revenue to the franchisor in exchange. As compensation,

**Citation:** Abd Aziz, N.A.; Ramdan, M.R.; Nik Hussin, N.S.; Abdul Aziz, Z.; Osman, J.; Hasbollah, H.R. The Determinants of Global Expansion: A Study on Food and Beverage Franchisors in Malaysia. *Sustainability* **2021**, *13*, 10328. https://doi.org/ 10.3390/su131810328

Academic Editors: Manuel Au-Yong-Oliveira and Maria José Sousa

Received: 14 July 2021 Accepted: 31 August 2021 Published: 16 September 2021

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**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

the franchisee receives profits after expenses, including royalties [9,10]. However, it is also seen as a strategic business model that empowers its employees and has a huge effect on the economy [11]. As franchising becomes a more well-known and prominent business strategy around the world, it has piqued the interest of researchers and policymakers. Encouragement of entrepreneurs to enter the franchising industry improves their chances of surviving in a competitive market [12–14].

In term of franchise network arrangements, international franchising has more complicated complexities than domestic franchising. While the franchisor and franchisees remain the most important players in a franchise network, foreign franchisors in the twenty-first century operate within an interconnected system of relationships that they do not always regulate, such as market and institutional powers, political restrictions, and so on. Owing to high control costs, direct franchising is only used in a small number of countries. Master franchising, for example, is a more common arrangemen<sup>t</sup> in which a third party is given the rights to establish and monitor a specific regional market [15,16]. This form of contract is very complicated, and it may necessitate more local adaptation as in the likes of royalty and franchise fees, among other things [17]. All of this adds to the complexity and makes performance assessment in international franchising more difficult [18].

Nowadays, most Malaysian franchisors have begun expanding their businesses towards the global market after witnessing the saturation in the domestic market. Franchising has grown in popularity as a successful global business model [19] . On the other hand, international franchising is a method of entering new markets that enable businesses to do so with little risk and a little "power". Thus, for over a century, small and medium-sized businesses have used this approach in extending their operations [20]. Fast food businesses are prominent sectors in franchising and thus contribute their important roles in the growth of entrepreneurship worldwide [21] Malaysian franchise brands, such as Nelson's, have over 800 outlets in 16 countries. These include "Global Art", with 600 outlets in 17 countries, "Laundry Bar", with over 500 outlets in all ASEAN countries, and "Marrybrown", with over 350 restaurants in 20 countries [22].

However, the determinants of Malaysian franchisors expanding into the global market, especially in developing countries, is not clearly understood. Future research should look at other determinants that explain the expansion and diffusion of international franchising, such as location characteristics, unique institutions, institutional distance, psychic distance, and other distance variables [4]. Furthermore, there needs to be further examination of subjective and objective indicators for global franchising expansion at the individual, organizational, and institutional levels. Abd Aziz et al. [13] suggested the exploration of other factors that relate to the expansion of local franchisors into the international market that lead to their survival in the competitive market. Furthermore, the business environment becomes more competitive day by day, such that enterprises may find it difficult to survive in the market. Therefore, it is important to explore and understand the factors and strategic actions that need to be taken for franchise businesses to remain competitive [23]. This study aims to guide by investigating the following overarching research question: "What are the determinants for Malaysian franchisors' expansion into global market?".

#### **2. Literature Review**

#### *2.1. Value Creation Theory*

Value creation is defined as the result of a combination of customer surplus and producer surplus that benefits all parties [24,25]. The value creation theory entails assessing the relationship between stakeholder surplus and producer surplus [25]. On the other hand, value development is the primary goal that encompasses the mechanism of central economic exchange [26]. Aside from that, the idea of more value-oriented value development is contingent on the company's ability in maintaining its competitive advantage [27]. According to the results of this report, the primary goal of a franchise company is to create

value in the marketplace. Customers trusted Malaysian franchisors because they are satisfied with the needs for the exclusive products and services. Furthermore, they built value for their business partners, namely master franchisees in the international market, through an existing franchise business model, well-known brand, and well-organized franchise system [28].

Mishra and Zachary [29] proposed a two-stage value creation theory that described the entrepreneurial value creation and appropriation process. In the first step, an entrepreneur recognized and developed an entrepreneurial opportunity, which is controlled by the entrepreneurial goal, and generated entrepreneurial competence, in which the entrepreneur proves the venture's market and growth potential. The entrepreneurial capacity formulated in step one is then further leveraged in the second stage of value creation by acquiring and developing complementary skills that drive a business model instrument in generating long-term value. Value creation processes investigate the behaviours, resources, and experiences that lead to the creation of value, while value outcome determination investigates how customers perceive value and what the value outcomes are. Value development processes are usually ongoing, while value outputs are usually associated with a particular point in time [30]. A company must first determine what points of value their future customer needs before developing a value-creation strategy. The company then devises a proactive plan in providing certain benefits [31].

#### *2.2. Competitive Advantage of Franchising in the Global Market*

Since the past decades, franchising has developed as an organization [32]. Franchising turns out to be one of the rapid growths of retail in the world and comprehends the causes of a business owner's survival as the key element of entrepreneurship research study [33,34]. In addition, franchising is a business format that offers many advantages compared to chain ownership [35]. Moreover, franchising is one of the most rapidly developing forms of businesses in the world, and it is valuable for studies in entrepreneurship [32].

Furthermore, franchising has experienced a rapid growth on a global scale since the early 1980s, and franchisors have seen this as opportunity to grow their existing businesses by bringing franchisees who will own the business format, which in turn enables access to human and financial capitals. Many franchising companies have increased their international presence over the last decade once the economies have become 'more open', and the international expansions have provided benefits to the companies themselves in terms of additional revenue and market shares, as well as potential opportunities for the companies' value increment and market diversification [36,37].

Explaining the phenomenal growth of franchising as a mode of expansion has been a major focus in the academic literature for over a decade. International expansion is now considered a crucial strategy for franchise firms to increase their outlets in the international market [38]. Furthermore, the international expansion of fast-food restaurants began in the early 1970- and was particularly seen in outlets from the U.S market. Later, this phenomenon continued to develop in the East Asia region, with major American brands such as McDonalds, Burger King, Pizza Hut and Kentucky Fried Chicken becoming a common sight in any cities in this region. In addition, the emergence of the global services sector has represented franchising as an important strategy for international expansion and market entry [39].

Nearly one quarter of the nations in the world have a franchise association that represents a substantial franchise sector in nations with large middle to upper income economies [40]. Besides that, international business experience is an important factor in influencing a franchising firm's decision on expansion and entry mode [41]. For example, a franchising firm such as McDonalds used their experiences to grow their businesses in similar markets. Franchising and wholly owned subsidiaries (i.e., own stores) are the most frequent expansion mode adopted by global entrepreneurs. As discussed above, franchising offers unique business relationships where the franchisors gran<sup>t</sup> a license to its franchisees and is beneficial for both parties [42].
