Online Marketing Channel in Selling Franchise Business

in Indonesia

 

Erwin Halim and Hendry Hartono School of Business Management

Bina Nusantara University, INDONESIA

Introduction

Franchise business gives more impact to the economic growth in the United States compare to non-franchise business based on the International Franchise Association report (2013).

In the year 2008 up to 2009 when the United States experienced the economic crisis, franchise business absorbed more employability compare to non-franchise business.

Introduction ( cont’)

In Indonesia, as well as in the US, franchise system is used as business expansion strategy for Small Medium Enterprises (SMEs).

In 2012, there are 1.700 franchise-format companies. (AFI, 2013).

Franchisors are looking the appropriate marketing channels

The objective of this paper is to see the ways of online marketing channel offer by franchisors are absorbed or not by prospective franchisees or investors.

Literature ReviewFranchise Sectors Categories and Majority IFA (2014): Automotive, Business Services, Commercial and

Residential Services, Lodging, Personal Services, Quick Service Restaurants, Table/Full Service Restaurants, Real Estate, Retail Food and Retail Products and Services.

Yodle (2013): Automotive, Business Services, Cleaning & Maintenance, Education, Home Services, Medical, Retail and Other. No F&B as one sector.

Franchise Update (2013): Automotive, Baked Goods, Ice Cream or Yogurt, Business Related, Child Related, Cleaning & Maintenance, Education Related, Fast Food Restaurants, Health & Fitness, Home Services, Restaurants (Dine in), Retail Food, Retail Stores and Senior Care.

Criteria in Asia

In Indonesia, 69.51% prospective franchisees are looking for Food and Beverage or Culinary sector (including: dine in restaurants, fast food restaurant, retail food & beverages (booth), ice cream and yogurt, and bakery).

In Malaysia, Food and Beverage sector as majority commands for more than 30 percent of the market share and remains the franchise best prospect for Malaysia. (Yeoh, 2009).

Online Marketing for Franchising

Pamecha (2008) found that more than 90 percents customers are looking for franchisors websites.

Yodle’s (2013) survey shown that 87%  of respondent agree that online  marketing for franchising are important

89% of respondent agree the importance of

online marketing in choosing a franchise business.

MethodologyA survey was conducted in Jakarta on December

2013 with 82 respondents of franchise exhibition visitors (prospective franchisee) and 27 franchise exhibitors (franchisors).

t-test and qualitative comparison to compare the answer from franchisors and franchisees.

Results

86% of respondents from the franchisors use information systems for most activities.

92% of these respondents have websites 96% of them update the websites.

Indonesia Franchise Business Sector

Fig.1. Percentage of Business Sector to Buy in Indonesia (2013) by Prospective Franchisee

Source of information

Fig.2. Source of Franchise Information Gathered by Prospective Franchisee

Fig.3. Franchise Information Channel Proposed by Franchisor (Exhibitor)

Fig.4. Channel of Franchise Information on Internet use by Prospective Franchisee

Fig.5. Channel of Franchise Information on Internet Proposed by Franchisor

Information Mean (1-7 Likert Scale)

Franchisee FranchisorFranchise Fee 5.44 5.70Royalty fee 5.01 5.22Investment 5.44 6.44Advertisement Fee 5.07 4.69Contract Duration 4.89 5.59Years Established 5.57 6.07Years Franchised 5.37 6.04Payback Period 5.80 6.44Employee Support 5.76 6.00Training Duration 5.37 5.48Profit 5.90 6.30Money guarantee 5.88 4.89Site Selection Support 5.83 5.67Self Operator 5.46 5.48Open Same business after Contract 5.47 4.37Own Supplier 5.10 4.30Change Supplies 5.00 3.56Run other Business 5.15 5.15Use Own Building 5.79 6.11

Prospective franchisee less need of information compare to the willingness of franchisors to propose information such as financial information, legal and company profile legal

Prospective franchisees are more interest relate to the information of their rights open same business after contract, own supplier, change supplies, site selection support and money back guarantee.

Conclusions

Mostly Indonesia prospective franchisee seeks for the Food & Beverages business sector (69% of respondents), so it also a signal for foods and beverages franchisors to follow a franchise exhibition and give attention to the online information content.

Franchisors have inappropriate marketing channel priority. They have to give more attention on online marketing than exhibition or printed advertising.

Conclusions (cont’)

Franchisors have to make digital advertisement on search engine and on online portal beside social media.

Franchisors should give attention to the online information of franchise: the system quality, information quality and service quality (DeLon Model - DeLon et al, 2003)

Further research will be related to the franchise information systems proposed by franchisor, which is already confirmed by the prospective franchisees as comprehensive model.

THANK

YOU