An Empirical Evaluation of Franchisor Supply Chain Management

Emma Sharkey




Franchising is an increasingly important part of the economy; in the United States it is estimated to account for 50% of all retail sales. Franchising may be considered to be a supply chain of commodities and services underpinned by the know-how of the franchisor that commands a royalty for the use by the franchisees of the intellectual property. Basnet et al (1999) analysed Supply Chain Management (SCM) within the NZ manufacturing sector. This management can be considered to be part of the know-how. As part of the 2002 annual survey of franchising in NZ we examined SCM, expanding on this earlier work. Due to the large number of questions (36) that were posed in relation to SCM, factor analysis was applied. Eight distinct factors were derived from the 36 variables.  Factors pertaining to supply chain integration and supply chain efficiency were supply chain integration, information sharing, supply chain participation, customer needs, customer service, supply chain efficiency, just in time, and supplier distance.  Linear regression was applied to the eight factors, then the entire list of variables in turn in order to derive the best possible model predicting franchise annual turnover. Although the supply chain integration factor alone was the only significant variable, the variance explained by this model was small.  Linear regression was then applied to all 36 SCM variables. The model devised included 13 of the 36 variables, and explained 60% of the variability.