Why Did Pizza Hut in China Quit Franchise
Why did Pizza Hut Quit Franchise
Team 9 1. Introduction:
In 1993, Pizza Hut made a 10-year agency contract with Hong Kong’s famous agent, Jardine Matheson. It gave power of agency and its market expansion business in southern part of China to Jardine, which became the only agent of Pizza Hut in China. And from then on, Pizza Hut went on a hard way of expansion.
However, in late May, 2004, Yum Brands declared that they had taken back the management and administrative powers of all 130 branch canteens of Pizza Hut in China, and from then on, Pizza Hut would be managed and operated by Yum Brands directly instead of taking the pattern of franchise . 1.1 Research question:
Why did Pizza Hut quit franchising in China? 1.2 Sub-questions: (1) What is the explanation given by Yum Brands and what are other guesses of why Pizza Hut quit franchise? (2) What are the changes of Pizza Hut after it quit franchise? (3) Why did Pizza Hut quit franchise in China but still continues franchise abroad? (4) Are there similarities between Pizza Hut and other firms quitting franchise? 1.3 Motivate:
Since the franchisor can use franchise to expand the scale of his firm with lower cost than using directly management, franchise becomes the most popular business model among catering services. And thus, it’s such a strange and rare adverse action that Pizza Hut quit franchise. What caused it to do so? Is it problem of franchisee, Jardine Matheson or the problem of the franchise pattern itself? And what does it want to do? We want to find out the answer.
2. Theoretical framework:
2.1 Explanation of Porter’s 5 Force Model.
Porter’s five-force framework is an important tool for ensuring systematically using these principles to assess the current status and likely evolution of an industry.
The five-force model contains internal rivalry, entry, substitutes, supplier power and buyer power, which is presented as following:
Also, the model
Team 9 1. Introduction:
In 1993, Pizza Hut made a 10-year agency contract with Hong Kong’s famous agent, Jardine Matheson. It gave power of agency and its market expansion business in southern part of China to Jardine, which became the only agent of Pizza Hut in China. And from then on, Pizza Hut went on a hard way of expansion.
However, in late May, 2004, Yum Brands declared that they had taken back the management and administrative powers of all 130 branch canteens of Pizza Hut in China, and from then on, Pizza Hut would be managed and operated by Yum Brands directly instead of taking the pattern of franchise . 1.1 Research question:
Why did Pizza Hut quit franchising in China? 1.2 Sub-questions: (1) What is the explanation given by Yum Brands and what are other guesses of why Pizza Hut quit franchise? (2) What are the changes of Pizza Hut after it quit franchise? (3) Why did Pizza Hut quit franchise in China but still continues franchise abroad? (4) Are there similarities between Pizza Hut and other firms quitting franchise? 1.3 Motivate:
Since the franchisor can use franchise to expand the scale of his firm with lower cost than using directly management, franchise becomes the most popular business model among catering services. And thus, it’s such a strange and rare adverse action that Pizza Hut quit franchise. What caused it to do so? Is it problem of franchisee, Jardine Matheson or the problem of the franchise pattern itself? And what does it want to do? We want to find out the answer.
2. Theoretical framework:
2.1 Explanation of Porter’s 5 Force Model.
Porter’s five-force framework is an important tool for ensuring systematically using these principles to assess the current status and likely evolution of an industry.
The five-force model contains internal rivalry, entry, substitutes, supplier power and buyer power, which is presented as following:
Also, the model