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UNIVERSITI PUTRA MALAYSIAFACTORS AFFECTING THE SUCCESS OF BUMIPUTRAFRANCHISEES IN BUSINESSSULAIMAN BIN HJ BAPUTEYFPP 1998 38

FACTORS AFFECTING THE SUCCESS OF BUMIPUTRAFRANCHISEE S IN BUSINESSSulaiman Bin Hj BaputeyThesis Submitted in Fulfillment of the Requirement for theDegree of Master of Science in the InstituteFor Distance Education and LearningUniversity Putra MalaysiaMarch 1998

Adalah disahkan bahawa saya telah membaca dan menyemak kertas projek inibertajuk "Factors Affecting the Success of Bumiputra Franchisees in Business" olehSulaiman Bin Hj Baputey. Dengan ini diperakui, bahawa kertas projek ini memenuhisyarat dan kelayakan bagi keperluan ljazah Master Sains (pembangunan SumberManusia)- DR.Blabatan Pen loikan PengembanganFakulti Pengajian PendidikanUniversiti Putra Malaysia(penyelia). 1 ./ . . .Tarikh/'/ DR RAJA AHMAD TAJUDIN SHAHJabatan Pendidikan PengembanganFakulti Pengajian PendidikanUniversiti Putra Malaysia(Pemeriksa)Tarikh

ACKNOWLEDGEMENTSIwish thank the Institute for Distance Education and Learning (IDEAL),Universiti Putra Malaysia for giving me the opportunity to conduct this researchstudy.Thanks are due to Encik Shamsudin Ismail and staff of Ministry ofEntrepreneur Development, who made available to me the completed questionnairesfrom which the data were extracted for this study.For the completion of this research study, I am greatly indebted to mysupervisor, Dr. Bahaman Abu Samah for his invaluable advice and guidancethroughout the duration of the study.To my family, especially my beloved wife, my two daughters, Sakinnah andSyafiqah, lowe a special word of thanks for the patience, understanding andencouragement shown during the course of my studies at the Institute for DistanceEducation and Learning, Universiti Putra Malaysia.ii

TABLE OF CONTENTSPageACKNOWLEDGEMENTSLIST OF Background of the Study.History and origin of franchising.Development of franchising in Malaysia.Franchising and Bumiputra Entrepreneurs.Statement of the Problem.Objectives of the Study.Limitations of the Study.Assumptions.Significance of the Study.Definition of Terms.1235677889I I REVIEW O F THE RELATED LITERATUREEntrepreneur and Entrepreneurship.Franchise Versus Independent Enterprise. .Research on Bumiputra Entrepreneurs .Typical Problems Faced by BumiputraEntrepreneurs.Factors Associated with Success ofBumiputra Entrepreneurs.Factors Associated with Success ofFranchisees.Concluding Summary of the LiteratureReview.10111215.15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2125. . . . . . .III RESEARCH METHODOLOGYResearch Design.Study [nstrumentation.Sampling Procedures.Population and Sample.Data Collection. .iii2828323334

35AnalysIs of DataIV FINDINGS AND DISCUSSIONSDemographic Profiles and Its ImplicationsAwareness upon entrpreneurialcharactensticsThe 4 Important Factors Why BumiputraChoose to become FranchiseesThe Respondents' Perceptions on the Degreeof Importance of Factors that Contribute tothe Success ofBumiputra FranchiseesSuccessful and Less Successful BumiputrafranchiseesSuccess Factors Mentioned by the SuccessfulBumiputra FranchiseesFactors Affecting the Poor Performance (LessSuccessful) ofBumiputra Franchisees and ItsImplicationsComparison Between Successful BumiputraFranchisees and Less Successful BumiputraFranchisees and Its ImplicationsIssues, Problems and Its Implications373943465152535456V CONCLUSIONS AND RECOMMENDATIONSThe overall perception on what makes asuccessful Bumiputra franchiseeSuccess factors highlighted by the successfulgroupsFactors contributing to the poor performance(less successful) ofBumiputra franchiseeSummary of the DiscussionsRecommendations for Future ResearchBibliography586263646466APPENDICESAppendix A-The 4 important practices ofBumiputra franchisees deemed to be reasonsfor their success in businessAppendix B-The 4 important factors whyBumiputra choose to become franchiseesAppendix C-Success factors mentioned bythe successful Bumiputra franchiseesIV686970

Appendix D-Factors Affecting the poorperformance (less successful) ofBumiputrafranchisees.Appendix E-Comparison between successfuland less successful Bumiputra franchisees byage categories. .Appendix F-Independent Sample Test. . .Sample of the Questionnairev7173

LIST OF a franchisees according to the age.Bumiputra franchisees according to gender.Bumiputra franchisees according toeducational background.Bumiputra franchisees with related previousexperience background.Definition of success.Reasons why Burniputra entrepreneurssucceed in business.The reasons for venturing into business.The distribution of working hours ofBumiputra franchisees.The breakdown of the pattern of attitudes ofBumiputra franchisee on risk taking.The distribution of communication methodsapplied by Burniputra franchisees in businessGood rapport with the franchisor.Business experience in the same product.Intensive training provided by the franchisor.Treat franchise right like own entity.Cooperation from the franchisor.Knowledge about franchise managementtechniques.Soft loan from the bank/government.Following all the policies and procedures setby the franchisors.The distribution of Burniputra franchisees bylevel of success.The percentages and Pearson Chi-squareresultsBeginning and growing stage major 55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21VI57

Abstract of the research project submitted to the labatan Pengembangan,Universiti Putra Malaysia in partial fulfillment for the degree of Master ofScience.FACTORS AFFECTING THE SUCCESS OF B UMlPUTRAFRANCHISEES IN BUSINESS.BySulaiman Bin Hj BaputeyMarch 1998Supervisor:Dr Bahaman bin Abu SamahFaculty:Jabatan Pendidikan PengembanganFakulti Pengajian PendidikanUniversiti Putra MalaysiaThis study explored factors that contribute to the success ofBumiputrafranchisees and factors that make other Bumiputra franchisees less successful insimilar industry. Using a mail survey, data were collected from sixty Bumiputrafranchisees from the list provided by Ministry of Entrepreneur Development.Simple random sampling was applied to select the respondents before sendingthem questionnaire. Perceptional questions were used to differentiate betweenvii

Bumiputra franchisees who perceived themselves as successful and Bumiputrafranchisees who perceived themselves to be less successful.The franchisor congenial relations was found to be stronger factoraffecting the success of Bumiputra franchisees. This factor was again elaboratedin terms of having good rapport with franchisor, training and developmentprovided by the franchisor and cooperation from the franchisor.viii

Abstrakprojek penyelidikan yang dikemukakan kepada labatan PendidikanPengembangan, Universiti Putra Malaysia sebagai memenuhi sebahagiandaripada keperluan untuk mendapat ijazah Master Sains.FAKTOR-FAKTOR KEJAYAAN FRANCHAISI BUMIPUTRA DALAMPERNIAGAANOlehSulaiman Bin Hj BaputeyMac 1998Penyelia:Dr Bahaman bin Abu SamahFakulti:labatan Pendidikan PengembanganFakulti Pengajian PendidikanUniversiti Putra MalaysiaTujuan kajian ini ialah bagi menyelidik faktor-faktor yang menyumbangkepada kejayaan franchaisi Bumiputra serta faktor-faktor yang menyebabkanfranchaisi Bumiputra kurang berjaya dalam pemiagaanfranchais.Tinjauansecara pos telah digunakan bagi mengumpul data berdasarkan senarai franchaisiyang diperolehi dari Kementerian Pembangunan Usahawan. Persampelan rawakmudah digunakan bagi memilih responden dari senarai franchaisi.IX

Soalan persepsi digunakan bagi rnernbedakan sarna ada franchaisitersebut betjaya atau kurang berjaya. Hasil kajian menunjukkan keperihatinanfranchisor adalah amat penting dalam menentukan kejayaanfranchaisiBumiputra, misalnya, jalinan hubungan yang baik, latihan dan pembangunanyang disediakan oleh franchaisor serta kesediaaan franchaisor mernbantufranchaisi Bumiputra.x

CHAPT E R IINTRODUCTIONBackground of the StudyFranchising,a marketing technique used to distribute products orservices, is undoubtedly the most innovative and efficient system yet devised. Inthe United States, franchising currently encompasses over one third of all retailsales and by the end of the decade it is expected to expand further with as muchasone half of retail sales turnover. In Australia, franchising is a more recentcommercial phenomenon and it is progressively taking place in every businessand trade. Currently, twenty per cent of retail sales in Australia is throughfranchise systems and as in the US, it will become the dominating force in thedistribution of goods and services.Therefore franchising is frequently been described in superlatives: ' ".one of the greatest inventions of western capitalism (USHouse of Representatives Committee on Small Business) .the dominating force in the distribution of goods andservIces(US House of Representatives Committee on SmallBusiness) . .the wave of the future (US House of Representatives.Committee on Small Business)

' ". the single most successful marketing concept ever (JohnNaisbitt)History and the origin of franchisingFranchising originated as a distribution method in the United States inthe mid-1 9th century. Isaac Singer, the founder of the Singer Sewing MachineCompany is generally credited as the founder of the of franchising. In 1 851 heinvented not only the world's first viable domestic sewing machine but also anew method of distribution under which independent salesmen paidfees toacquire exclusive territorial rights.Although distribution methods exhibitingfranchising have been utilisedvanous characteristics offor over 1 00 years, the franchising as asophisticated and specialised business arrangement in its business format modeis a relatively recent phenomenon. The contemporary style of franchising, andindeed the identification of this relationship by the name "franchise" wasrelatively unknown in the USA as recently as the early 1 950' s, but it has sincedeveloped and rapidly becominga significant part of the economy of thatcountry.It was later realisedthatcloned, which has led to theMuch of the creditsystems.elaboratemanagement systems could bedevelopment of business format franchising.goes to Ray Kroc who built the McDonald's franchiseKroc acquired the rights to McDonald from two brothers, Dick andMac McDonald, who had already attempted to exploit the remarkable success2

oftheir San Bernadino hamburger shop through franchising.However, thebrothers' attempt to franchise their concept was not successful.Ray Kroc revolutionised the system for which he acquired licensingrights in 1 954, and laterbought it outright, and consequently imposeddiscipline of a business fonnat franchise system.Later, Kroc secured thenational marketing rights to the 5-spindle Multimixers that the McDonaldKroc's initial goal was not to makebrothers used to make their milkshakes.money on franchising but to sell Multimixers to his franchisees.With theprospect of hundreds of McDonalds around the country, Kroc saw a way toreverse the decline in Multimixer sales into a very viable venture.Development of franchising in Malaysia.Singer Sewing machine Company was the first franchiseMalaysia in 1 946.early sixties when AFranchising then remained relatively stagnantto come tountil in the& W became the first American fast food employing thefranchise system to open outlets in Kuala Lumpur. Since then the acceptance ofWestern food in Malaysia has seen the introduction of Kentucky Fried Chicken,Mc Donald, Pizza Hut and many other fast food franchises.Some franchise systems have been extremely successful, such as theKentucky Fried Chicken outlet inBukit Bintang Plaza which is the world'snumber one outlet. While others, such as Red Rooster, Popeye's Famous FriedChicken and Burger King, have yet to be established locally, have neverthelessbeen introduced to the Malaysian market.3