Franchising Strategy and Competitive Advantage of International Foreign Fast Food Firms in Kenya

Abstract

Franchising is an arrangement where an organization (Franchisor) allows another organization or individual (Franchisee) to use its trade name and business concept in return for a fee. It is one of the strategies employed by multinational corporations (MNCs) to penetrate foreign markets. Franchising is considered as a low risk and low commitment foreign market entry strategy for organizations which is why it is more popular in the service industry. This study focused on franchising strategy and competitive advantage within the context of fast food industry in Kenya. There has been a revolution in the industry over the last 20 years in which well-known international fast food chains have established operations in the country. The Kenyan economy has grown over the years with a growing middle income class and a swelling urban population with tight work schedules. This has caused a change in lifestyle characterized by many people eating out and ordering packed food during working hours. The growth in the fast food industry can be attributed to the fact that Kenya is still a growing economy and investment in a basic needs industry is lucrative business. The objective of this study was to establish whether the franchising strategy contributes to competitive advantage of international foreign fast food franchises in Kenya. In order to achieve the stated objective, a survey of the various fast food franchises was carried out. The study was based on primary data collected through the questionnaire method. From the results, it was established that the competition level is quite high in the fast food industry with the dominant players being international franchises. Choice of a market entry strategy is influenced by certain factors and the findings of this study established that franchisor’s size and image, superior brands and international experience informed the choice of franchising system for the surveyed firms. The study also established that the fast food franchises gain competitive edge over their rivals by offering quality service to the customers as well as ensuring high quality of the food served in the outlets. The RBV advances the argument that a firm’s resources are the primary source of competitive advantage. The international development of resources, nature of the resources and different ways of utilizing these resources has an impact on the profitability of an organization. The outcome of this study emphasizes the importance of resources to a firm. The respondents agree that the performance of the firms has been improved through resources obtained from the franchising network. This leads to a conclusion that franchising strategy has an impact on the overall performance of the franchised business. The study recommends that the government puts in place laws and policies to govern the operations of the franchised businesses in Kenya to ensure there is fair competition in the industry. This study was confined to the international fast food franchises and further studies are required to understand the application of franchising and competitive advantage in the larger food and beverage industry.