A Study On The Success Factors Of Foreign Franchising Enterprises In China

"Franchising" is one of the most popular ways of business expansion in recent years. After getting great achievement in their domestic markets, many companies come into the Chinese market through franchising.This study defines "franchising" from the legitimacy theory perspective. According to the legal system in China and other countries,"franchising" is a "method" combined by two parts. Consequently,"franchising" has a two levels structure from this aspect. Afterwards, the study has changed the point of view from the traditional way of studying franchise models. As a result, from the position of outlets,"franchising" is a new business model in this study. The definition of "franchising" is a method to give "legitimacy" from the perspective of customers in the market. Then the factors of success in franchising outlets are divided into two parts,"external legitimacy" and "internal legitimacy".The result of empirical research shows that the higher of the external legitimacy-standardization, training system, transmission capacity, brand awareness, and the longer history of franchise owner, the higher financial gains. Internally, the main factor of the success in franchising outlets depends on the ability of the management of franchisee.This study can identify the definition of "success" by companies which adopt franchising in the Chinese market. Since the reason of using franchising is to get more financial profits from the market, the companies" success must be defined with financial success. Of course financial success comes from serving legitimacy to customers and society. This study will give theoretical background of franchising to the outlets, companies, and government.