Difference Between Franchisers with and without Direct Retail Stores

The new regulation was introduced to the franchise market of South Korea in that an applicant who wants to be a franchiser must set up direct retail stores and run them for at least one year before recruiting franchisees. Considering the purpose of the regulation, it is inferred that once franchisers run their own stores, their franchisees would be better off than otherwise. Thus, this paper investigates whether franchisees would have the more likelihood to make profit in the case of that franchisers operate their own stores. The result demonstrates that this case could be true. Furthermore, the result also shows that one plausible reason is that the operation of franchiser owned stores could be helpful in reducing cost of franchisees.