Business Research Methodology: Theory Answers Assessment Answer

The research study shows that the main objective behind this research study is to analyse what kind of relationship is there in between the fee of franchisee and the rate of royalty, in respect of the average outlet sales. As per the authors, there have been varied studies that have addressed the information in respect of the forms of payments in this matter, but all these researches have failed in analysing the relationship in between the initial franchisee fee and the royalty rates. The rationale of this research study is to determine how the franchisors conclude pricing in case of royalty rate and franchisee fee. In addition to it, the research study claims that it will contribute to the educational institutes by offering a source of elaboration.

Development of Theory in the Research

This research study has reviewed many literature papers which are related with the pricing of franchisee. Some of the researchers (nmamit, 2014)  considered these payment methods as the twin parts of the payment mechanism (nmamit, 2014). This is being done to be ensured that the franchisee is receiving nothing more than the normal profits on the investment related with the franchise system. In this research study, the authors are focused towards testing the relationship in between the initial franchise fees and royalty rates. For this purpose primary data collection method has been taken up for demonstrating the values of the illustrative data for the franchisee research (nmamit, 2014). This research study starts with the brief introduction of the theoretical perspectives and developing hypothesis. After developing hypothesis, empirical testing of the hypothesis is initiated and thereafter the results of the research study are discussed in the light of franchise theory. Some of the cited works were interested in knowing one of the payment method and not the other; while some of them were interested in other payment method and not the first one.

Construction of the Research Questions

The research questions are required to be clear, precise and researchable. The questions should be accompanied by the relevant factors or variables. Academic relevance is essential for formulating the researchable question as it shows the unique study undertaken rather than reproducing any existing one.  The literature review conducted in this research study clearly portrays that the statuses and the rules in relation with the franchising and franchise contracts are mainly subjected to the regulations, which are associated with the state security laws (Lehmann, 1985). This subject was seen, as the franchisee purchase is nothing but the essence of the financial investment done by the organization (Lehmann, 1985). Franchisor carries the right of competing keeping the expectation that many of them are going to bid up the prices for showing the normal returns after the decrease in cost of operations  (Blair & Kaserman, 1982). Researchers have pointed in their research study that hypothesis is a formal statement which offers the expected relationship in between the dependent and independent variables (Sen, 1993).

Hypothesis 1: Keeping everything same in environment, the higher the fees amount of franchisee gets, the smaller the royalty goes

Hypothesis 2: Keeping everything same in the environment, the higher the fees of the franchisor gets, the higher the royalty rate gets.

Model

For testing the hypothesis in between the franchisee fees and the royalty rates, Lafontaine (Lafontaine & Shaw, 1996) shows in his research study that the franchisee fees are regressed on the rates of royalty for managing the differences related with the sales. This research study is important, as many of the previous research studies have not been successful in determining the relationship in between the franchisee fees and royalty rates. In this research mode, the researcher has tried to control the differences across the franchise system by using the sales per unit data of both the methods (MATHEWSON, 1985).

Collection of the Data

The data for this particular research study has been collected from the national mail survey, which was conducted with the fast food industry. The base for this research study was based on the research done by Lehman (Lehmann, 1985). With the help of the study done by Lehman (Lehmann, 1985), researchers of this study were able to compile the list of the fast food franchise system. After taking some preliminary steps for the development of the questionnaire, tithe authors of this research study conducted a pilot study for the questionnaire evaluation with 50 franchisors. After updating the questionnaire, survey was done with the fast food restaurant people and 152 questionnaires effective and complete questionnaire were gained.

Analysis of Data

Before testing the hypothesis, the author replicated the study of Lafontaine (Lafontaine F. , 1994), with the current study. The findings were quite persistent with the research of Lafontaine’s (Lafontaine F. , 1994) research, in which rates of royalty are not considered as significant (Lafontaine F. , 1994). The findings of the research study supports the findings related with the hypothesis 2, which focuses that the fees of franchisee are not being utilised for developing extra value from the franchisee (Lafontaine F. , 1994).

Discussion

It is observed that the selected literature reviews were focused on both kinds of fee methods. However, every author has contradictory statements because of which the motive of research is obscure. It is quite relevant to indicate that the research questions do specifies much about the research’s scope (Caves, 1976).  There are two implications related with the results of this research study. Firstly, if the organization is not using the initial fee for recovering the extra value than it should be believed that this factor does not act as the performance bond. Secondly, organization should focus on deriving high level of profits from the continuous association of the franchise system  (Caves, 1976).

Conclusion

This research study concludes that the initial fee of franchisee should not be considered as the catalyst for developing the surplus value after the royalty payment.

Bibliography

Blair, R. D., & Kaserman, D. L. (1982). Optimal Franchising. Southern Economic Journal.

Caves, R. (1976). Franchising: Firms, Markets, and Intangible Assets. Southern Economic Journal.

Lafontaine, F. (1994). The evolution of ownership patterns in franchise systems. Journal of Retailing.

Lafontaine, F., & Shaw, K. L. (1996). The Dynamics of Franchise Contracting: Evidence from Panel Data. NBER.

Lehmann, D. R. ( 1985). Market research and analysis. Richard D. Irwin.

MATHEWSON, G. (1985). The Economics of Franchise Contracts. JOURNAL OF LAW AND ECONOMICS.

nmamit. (2014). Mandatory Disclosure of the Information. nmamit.

Sen, K. C. (1993). The use of initial fees and royalties in business-format franchising. Managerial and Decision Economics.