Franchise business sustainability model: Role of conflict risk management in Indonesian franchise businesses

Abstract

Franchising is one of the most trustworthy strategic alliance formations to start or expand businesses. Like many other business formations, franchise businesses need sustainable and long-term running; these objectives can be reached by a proper relationship between partners – the franchisor and the franchisee – in the alliances. Both partners’ perspectives are valuable inputs to provide insight into understanding the sustainability of Indonesian franchise businesses. Furthermore, in any type of strategic alliances conflict is a risk that needs to be managed properly. This study aims to examine the relationships of determinants that influence franchise business sustainability. The determinants are risk management, trust, satisfaction, and sustainability. The study applies confirmatory factor analysis using structural equation modeling (SEM) AMOS software. Respondents in this study are franchisors and franchisees in the Indonesian retail and food and beverages (F&B) sectors, the study accommodates 204 respondents. Based on the analysis the study reveals that there is a positive relationship between risk management and satisfaction. Risk management also has a positive relationship with survivability; trust and satisfaction also have a positive relationship. Meanwhile, there is no relationship between satisfaction and survivability and the last relationship is between trust and survivability that has no positive relationship between the determinants. This study provides clearer insight to understand the relationships between determinants that influence franchise business survivability in Indonesia, especially based on both parties’ perspectives.