University Of Nigeria Nsukka - DEPARTMENT OF ... Uyiosa Iriowen...Teacher Education, University of...

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Ugwoke Oluchi C.

FACULTY OF EDUCATION

DEPARTMENT OF VOCATIONAL TEACHER

EDUCATION

ASSESSMENT OF FRANCHISING PRACTICES ADOPTED

BY OIL AND GAS FIRMS (TOTAL NIGERIA PLC) AS

PERCEIVED BY RETAIL MARKETERS IN EDO STATE

EMMANUEL UYIOSA IRIOWEN

PG/M.ED/08/50192

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ASSESSMENT OF FRANCHISING PRACTICES ADOPTED BY

OIL AND GAS FIRMS (TOTAL NIGERIA PLC) AS

PERCEIVED BY RETAIL MARKETERS

IN EDO STATE

BY


PG/M.ED/08/50192

DEPARTMENT OF VOCATIONAL TEACHER EDUCATION

(BUSINESS EDUCATION)

UNIVERSITY OF NIGERIA NSUKKA

JUNE, 2014

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TITLE PAGE

ASSESSMENT OF FRANCHISING PRACTICES ADOPTED BY OIL

AND GAS FIRMS (TOTAL NIGERIA PLC) AS PERCEIVED BY

RETAIL MARKETERS IN EDO STATE

A PROJECT SUBMITTED TO THE DEPARTMENT OF VOCATIONAL TEACHER EDUCATION, UNIVERSITY OF NIGERIA, NSUKKA IN PARTIAL FULFILMENT OF

THE REQUIREMENT FOR THE AWARD OF MASTERS (M.ED) DEGREE IN BUSINESS EDUCATION

BY


PG/M.ED/08/50192

SUPERVISOR: PROFESSOR C. A. OBI

JUNE, 2014

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APPROVAL PAGE

THIS PROJECT HAS BEEN APPROVED FOR THE DEPARTMENT OF VOCATIONAL TEACHER EDUCATION (BUSINESS EDUCATION), FACULTY

OF EDUCATION, UNIVERSITY OF NIGERIA, NSUKKA

BY ---------------------------- ----------------------------

Prof. C. A. Obi Prof. C.A Igbo (Supervisor) (Head of Department) ------------------------- ---------------------------

(External Examiner) (Internal Examiner)

------------------------

Prof. U. C. Umo

Dean Faculty of Education

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CERTIFICATION

Emmanuel Uyiosa Iriowen, a postgraduate student in the Department of Vocational

Teacher Education, University of Nigeria, Nsukka with registration number

PG/M.ED/08/50192 has satisfactorily completed the requirements for the Award of

Masters Degree (M.ED) in Business Education. The work embodied in this project is

original and has not been submitted in part or full for any other diploma or Degree of

this or any other University.

…………………………… .......……………………

Emmanuel Uyiosa Iriowen Prof. C. A. Obi

(Student) (Supervisor)

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DEDICATION

This work is dedicated to my mother, Mrs. Ruth Enaruna Iriowen of Blessed Memory

whose departure was for a higher and more glorious calling. From my very heart, I say

a big thanks to you for believing in me against all the odds, most of which you knew

but your life-molding counsel and exemplary lifestyle like footprints forever on the

sands of the time, had inspired me to come through.

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ACKNOWLEDGEMENT

As the saying goes, all is well that ends well. But God Almighty, whose ways

are past finding out, makes all things well. A look at the provision of wisdom for

commencement, general guidance and good health all through the period of this

project, leaves the researcher in awe of His great acts. He thanks his Father up above.

The researcher is highly indebted to his Supervisor, Professor (Mrs.) C.A Obi, a

wonderful woman, who not only mentored him in the course of the study but also

encouraged him to take up a challenging study of this magnitude. He is very grateful to

you ma. Also, the researcher appreciates the contributions of Late Professor Festus

Iyayi, Head, Business Administration Department, University of Benin, Benin City

who before this project got to this final stage, passed on. The comments made by

Professor B. A Agbonifoh were eye-opening, the aftermath of which aided in boosting

the study. Thank you sir! The researcher wants to thank Professors (Mrs.) C.A. Igbo,

E.E Agomuo, E.C. Osuala, his content reader, Dr. E.A.C. Etonyeaku and most

especially his design reader, Dr. (Mrs.) Nnenna Ibezim, who all ensured that the best

came out of this work.

Niyi of UNIBEN will be remembered by the researcher for cleverly providing

the link just at the time he needed it. His very good friend and big brother, Godfrey

Palmer, without whom his present status would have been dicey, Oliver Okanazu, his

long time friend, Lauretta Obakpolor, Ambrose (MTN e-Library staff), Tony Onah,

Moses, Iyke, and Victor. Friday Ekara was a very strong pillar, whose combined

efforts especially at the early stage, gave boost to the study. Also not left out are

Samuel O. Omoragbon, Prosper Aibangbee, Taofeeq Amusa, Daniel Utoware and a

whole lot under this category. You all are wonderful to him. Oluwaseun Oyebanji

would not be forgotten for ensuring that his computer was fit for use in the course of

this work. Thanks must also be accorded students especially the likes of Amaechi

Ugwuibe, Hope, Ugo, Solomon, etc who allowed him to make use of their facilities in

one form or the other in the course of this project.

Many thanks also go to Teena Agbi for her understanding and love. The

researcher is particularly grateful to his parents, Mr. David & Late Mrs. Ruth Iriowen,

for their untiring efforts and support, his siblings, Elvis, Adesuwa, Nancy, Isoken (S-

Kay) and Osaro. In conclusion, he is saying a big thanks to quite a number of people

that have been his source of inspiration, making him get a go, stopping at nothing, but

vehemently aspiring for more until the fame of him goes around the globe.

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TABLE OF CONTENTS

Title Page - - - - - - - - - - i

Approval Page - - - - - - - - ii

Certification - - - - - - - - - - iii

Dedication - - - - - - - - - - iv

Acknowledgement - - - - - - - - - v

Table of Contents - - - - - - - - - vi

List of Tables - - - - - - - - - ix

List of Figures - - - - - - - - - x

Abstract - - - - - - - - - - xi

CHAPTER ONE: INTRODUCTION - - - - - - 1

Background of the Study- - -- - - - - - - 1

Statement of the Problem- - - - - - - - 9

Purpose of the Study- - - - - - -- - - 10

Significance of the Study- - - - - - - - - 11

Research Question- - - - - - - - - - 13

Null Hypothesis- - - - - - - - - - 14

Delimitation- - - - - - - - - - - 14

CHAPTER TWO: REVIEW OF RELATED LITERATURE - - 16

Conceptual Framework- - - - - - - - - 16

Franchising- - - - - - - - - - - 17

History of Franchising- - - - - - - - - 19

Franchise Arrangement/Ownership Opportunities- - - - - 31

Franchise Cost/Training and Support Components- - - - - 36

Franchise Territory Component- - - - - - - - 42

Franchise Termination and Renewal Components- - - - 44

Franchise Operating Practice Components- - - - - - 47

Theoretical Framework- - - - - - - - - 50

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Related Empirical Studies- - - - - - - - - 59

Summary of Related Literature- - - - - - - - 62

CHAPTER THREE: METHODOLOGY - - - - - 64

Design of the Study-- - - - - - - - - 64

Area of the Study- - - - - - - - - - 64

Population for the Study- - - - - - - - - 65

Sample and Sampling Technique- - - - - - - - 65

Instrument for Data Collection- - - - - - -- - 65

Validation of the Instrument- - - - - - - - 66

Reliability of the Instrument- - - - - - - - 66

Method of Data Collection- - - - - - - - 67

Method of Data Analysis- - - - - - - - - 67

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA - 69

Research Question 1 - - - - - - - - 69





Testing of Hypothesis - - - - - - - - 78

Findings of the Study - - - - - - - - 82

Discussion of Research Findings - - - - - - - 87

CHAPTER FIVE: SUMMARY, CONCLUSION & RECOMMENDATION - 92

Restatement of the Problem - - - - - - - 92

Purpose of the Study - - - - - - - - 93

Summary of the Procedure Used for the Study - - - - - 94

Major Findings of the Study - - - - - - - 95

Implications for Business Education - - - - - - 96

Conclusion - - - - - - - - - - 96

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Recommendations - - - - - - - - - 96

Suggestions for Further Research - - - - - - - 97

REFERENCES- - - - - - - - - - 98

APPENDICES - - - - - - 108

APPENDIX A: Request for Validation of Research Instrument - - - 108

APPENDIX B: Request for Response to Questionnaire- - - - 109

APPENDIX C: Questionnaire - - - - - - - 110

APPENDIX D: Nationwide Retail Outlets of Major and Independent Marketers in Nigeria- - - - - - - 116

APPENDIX E: Table of Population of Total Nig. Plc in Edo State- - - 117

APPENDIX F: Result of Reliability Test - - - - - 118

APPENDIX G: Result of Data Analysed - - - - - - 120

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LIST OF TABLES

Table 1: Frequency and Percentage Distributions of the Type of Franchise Arrangement/Ownership Opportunity the Retail Marketers of Total Nigeria Plc Service Station Run- - - 69 Table 2: Mean Ratings of the Responses of the Respondents on the

Extent to Which Franchise Cost, Training and Support Components are Adopted by Total Nigeria Plc- - - - 70 Table 3: Mean Ratings of the Responses of the Respondents on the

Extent to Which Franchise Territory Components are Adopted by Total Nigeria Plc- - - - - - - 72

Table 4: Mean Ratings of the Responses of the Respondents on the Extent to Which Franchise Termination and Renewal

Components are Adopted by Total Nigeria Plc- - - - 74 Table 5: Mean Ratings of the Responses of the Respondents on the Extent to Which Operating Practice Components in

Franchising are Adopted by Total Nigeria Plc - - - - 76 Table 6: The Analysis of Variance (ANOVA) of the Mean

Ratings of the Dependent Marketers Based on their Educational Qualification on the Extent to Which Franchise Cost, Training and

Support Components are Adopted by Total Nigeria Plc- - - 78 Table 7: The Analysis of Variance (ANOVA) of the Mean

Ratings of the Responses of Respondents Based on their Location on the Extent to Which Franchise Territory Components are Adopted by Total Nigeria Plc- - - - 79

Table 8: The Analysis of Variance (ANOVA) of the Mean

Ratings of the Responses of Respondents Based on their Experience on Extent to Which Franchise Termination and Renewal Components are Adopted by Total Nigeria Plc- - - 80

Table 9: The Analysis of Variance (ANOVA) of the Mean

Ratings of the Responses of Respondents Based on Job Positions on the extent to which Franchise Operating Practice Components are Adopted by Total Nigeria Plc- - - - 81

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LIST OF FIGURES

Figure 1: Conceptual Framework of the Study - - - - - 49

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Abstract Five research questions were answered by the study while four null hypotheses were formulated and tested at p≤ 0.05 level of significance. The study adopted descriptive survey research design and was carried out in Edo State. The population for the study was 59 retail marketers of Total Service Stations in Edo State. Due to the manageable size of the population, the entire 59 retail marketers of Total Service Stations in Edo State were involved in the study. The instrument for data collection is a structured questionnaire titled ‘Assessment of Total (Nigeria Plc) Retail Marketers’ Perception of Adopted Franchising Practices Questionnaire (ATRMPAFPQ)’. The questionnaire was subjected to face validation by three experts. These include two Lecturers from Business Education Unit of the Department of Vocational Teacher Education, University of Nigeria, Nsukka, Enugu State and one Lecturer from the Department of Business Administration, University of Benin, Benin City, Edo State. To obtain the reliability of the research instrument, the instrument was trial tested by administering 15 copies of the questionnaire to dependent marketers (retail marketers) of Oando Nigeria Plc service stations operating in Ondo State. Cronbach Alpha Reliability coefficient of 0.772 was obtained for cluster two, 0.794 for cluster three, 0.826 for cluster four while 0.759 was obtained for cluster five. The data for the study were collected by the researcher with the help of one research assistant. All the 59 copies of the questionnaire administered were retrieved representing 100% return rate. The data collected were analyzed using frequency, percentage and mean for answering the research questions while Analysis of Variance ANOVA was used for testing hypotheses at 0.05 level of significance. Based on the data analyzed, the study found that majority of about 56% of the retail marketers of oil and gas products run the single unit franchise arrangement opportunity, the study also found that retail marketers of oil and gas products in Total Nigeria Plc to a little extent adopted the franchising practices in the business. The findings of the study on hypotheses tested showed that qualification and experience of the retail marketers are significant sources of difference while location and job positions of the dependent marketers are not significant sources of difference in the franchising practices adopted by the marketers. Based on the findings, the study among others recommended that there should be effective monitoring outfit by government to ensure check and balances between the franchisees and franchisors in the oil and gas sector of the Nigerian economy and that there should be specific franchising law, appropriately enforced to aid in the conduct of franchising practices in Nigeria as it exists in South Africa, USA, Spain and other developed countries.

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CHAPTER ONE

INTRODUCTION

Background of the Study

Increased globalization has forced firms to seek entry into foreign regions as

markets are becoming more dependent on each other for exchange of resources. The

more globalization continues to play an increasing role in the world economy, the more

businesses will continue to prudently seek to expand their operations through

franchising (Osoteku, 2012).

Franchising is a contractual agreement between two legally independent firms in

which one firm, the franchisee, pays the other firm, the franchisor, for the right to sell

the franchisor’s product and/or the right to use its trademark and business format in a

given location for a specified period of time (Blair and Lafontaine in Penard and

Perrigot, 2012). According to the Petroleum Marketing Practices Act, franchising is

defined as an agreement between an oil supplier and an oil dealer in which the supplier

permits the dealer to use the supplier’s trademark in connection with the sale of motor

fuel (Corrigan, 1980).

The franchisor-franchisee relationship exists between a franchisor, the owner of

the trademark or service mark, an idea, a patent and the goodwill and know-how

associated with it and licensing of it to a franchisee in return for a service fee or royalty

(Kotler, 2000; FASA, 2002). The franchisee operates within the operating system that

is provided by the franchisor. However, the franchisee is an independent owner of the

franchised business and not a partner, an agent or representative of the franchisor

(Potgieter, 1999).

The franchising relationship is supposed to be a mutually beneficial partnership

between the franchisor and the franchisee for the generation of wealth for both parties.

The franchisor provides opportunities by selling franchises to would be entrepreneurs,

the franchisees (Mayfield, 1997). They benefit from growth, franchise fees and royalty

payments. The franchisees benefit from buying into a brand and a proven marketing

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and distribution system, the relationship could be long term with contracts running for

several years on average.

The franchisee is an important stakeholder in the franchising organization and

the franchisee in turn is affected by the franchising organization. The franchisee is a

customer of the franchisor and like any customer his satisfaction should be a priority.

The franchise and the franchising organization are independent businesses and typical

franchisees are entrepreneurs themselves and should not be looked at as hired hands of

the franchisor (Kirabira, 2002).

Franchising has proved to be a well working theory that helps companies adapt

to different cultures and business regulations (Hoffman and Preble, 2004).

Franchiselnfo (2011) agrees that franchising gives individuals the confidence to start a

business on their own. Franchising, because of increasing impacts on business studies

(compared with globalization) has also been subject of the wide variety of several

disciplines includes (Dant and Kaufmann, 2003): economic, strategic marketing,

entrepreneurship and law.

Going down in history, franchising as a business concept was fully established

in the USA in the 1850s when Isaac Singer wanted to increase the distribution of his

sewing machines. But franchising gained acceptance as a type of business at the

beginning of the 20th century. Abizadeh (2010) notes that the automobile and soft drink

industries were the first to adopt the so-called product franchising. Later, in the 1930s,

the petroleum industry franchised the gasoline (petrol) service stations. Similarly in

Nigeria, according to Industry Opinion, oil and gas firms among others began

franchising in the 1960s. Soft drink distribution alongside automobile dealers are

commonly found in product franchising as earlier revealed but filling stations, which is

our focus, represents the largest percentage to total sales (Ojo (2010), and as would be

later unveiled in the review, Total Nigeria Plc is considered vital for the study.

Petroleum (oil and gas) products are among the most valuable natural resources

abundantly available in the country. Nigerians and people everywhere use petroleum

products as a fuel in their automobiles, generating sets, industrial plants and for

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cooking purposes, thus making petroleum products an essential commodity that is

needed for the daily operation of individual, industrial and national activities

(oildealsng.com, 2012). Petroleum products dominate Nigeria’s energy consumption

mix, averaging 77 per cent of the total over the last eight years (Asaolu, Awe and

Sholotan, 2010)

The Nigerian petroleum marketing sector which falls under the downstream oil

sector, involves the import, export, sale and distribution of petroleum products such as

premium motor spirit (PMS), household kerosene (HHK), automotive gas oil (AGO),

liquefied petroleum gas (LPG), and lower-pour fuel oil (LPFO). These petroleum

products are utilized by almost everybody on daily basis at an average of 60 million

litres daily usage (oildealsng.com, 2012). Demand for petroleum products have been

driven by economic growth, increase in vehicular traffic and the inadequate supply of

energy. Oil and gas firms fall under the Nigerian Petroleum Industry.

Oil and gas firms are streamlined in this study as companies involved in the

distribution and retail marketing of oil and gas products and services at local gas

stations. Examples of oil and gas firms are Mobil, Total, Texaco, Oando, MRS, etc.

This work is only studying Total Nigeria Plc. Total Nigeria Plc started its operation on

1st of June, 1956 and was listed on exchange 20th of April, 1979

(www.nigeriagalleria.com, 2012). The local gas stations earlier referred to are service

stations. According to reports there are over a million petroleum filling stations in the

world with over ten thousand retail outlets presently located in Nigeria (Wikipedia

Encyclopedia, 2007; Nationwide Retail Outlets, 2009). Many of the service stations in

Edo State are Total Nigeria Plc. Total Nigeria Plc is seen as a company of considerable

influence and size not only in Edo State alone but in Nigeria and globally.

Operationally, service stations are franchised outlets spread across the length

and breadth of Edo State which are managed and owned by major oil and gas

marketers. Many service stations also combine small convenience stores, and some sell

propane or butane and have added shops to their primary business. Conversely some

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chain stores such as supermarkets, discount superstores, warehouse clubs, or traditional

stores, have provided service (filling) stations on their premises.

Different types of franchise ownership opportunities (franchising arrangements)

exist. Daszkowski (2011) holds that one may choose to become a multi-unit franchise

owner, an area developer or may decide to buy an existing franchise. According to the

author, each ownership opportunity has its own unique responsibility. The following is

a list of the many different ownership opportunities franchising offers:

Single unit franchising is the most place a brand new entrepreneur would begin.

In this type of franchise, the franchisee would only be responsible for running one unit.

However, he or she would be extremely involved with all of the daily operations of the

business.

Many franchise owners decide to sell their franchise after they have opened.

There are several reasons why existing franchises are listed for sale. There are pros

(advantages) and cons (disadvantages) to buying an existing franchise.

Multi-unit franchising creates the opportunity for the franchisee to open more

than one unit. In this case, multi-units are usually sold at a reduced rate per unit. In this

type of operation, the franchisee partakes less in the day-to-day operation of the unit.

Area development is similar to multi-unit franchising. The only difference is that

this type of franchising typically involves a greater number of units encompassing a

larger territorial area. The area developer is granted the right to open a pre-determined

number of outlets in a certain geographic territory.

Master franchising allows people or corporations to purchase the rights to sub-

franchise within a certain territory. A master franchisee helps the overall franchise

company by recruiting franchisees to open units within a specific territory.

A vital aspect of instrument in franchising is the franchise agreement. This

document is vital in that it encompasses all the components in a franchise. Howell

(2012) maintains that this is one of the most important components of a franchise. In

addition, FreeAdvice staff (2012), states it is the cornerstone document of the

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franchisee-franchisor relationship. According to the author, it is this document that is

legally binding on both parties, laying out the rights and obligations of each. A

franchise agreement must be signed, which makes it a secure legal document (Jojo,

2006) and the franchisee is entitled to receive it at least five business days before

signature (FreeAdvice staff, 2012). Each major marketer and multinational outfit have

their own operating standards which go along with their corporate brands and in setting

up fuel station either directly or indirectly, these operational standards become their

guiding tool (Edsearchblog, 2008).

The agreement will contain provisions covering, in considerable detail, the

training and operational support the franchisor will provide (and at what cost);

franchisee’s territory and exclusivity; the initial duration of the franchise and any

renewal rights; how much the franchisee must invest; how the franchisee must deal

with things such as trademarks, patents and signs (intellectual property); what royalties

and service fees the franchisee will pay; advertising policies; franchisee termination

issues; settlement of disputes; operating practices; cancellation and attorney fees

(FreeAdvice Staff, 2012). The explanation of most of these components will be

unraveled later in the study.

Franchising as a business model is a form of intellectual property which

comprised of trademarks, copyrights, patent, brand name and lots more (Franchise Law

Solutions, 2012). The researcher agrees with Okongwu (2004) and Jojo (2006) that

though there is dearth of legal provisions for franchising in Nigeria the Intellectual

Property rights apply. At present franchisor/franchisee relationship in Nigeria is

governed by contract, patents, trademarks/service marks, industrial designs, copyrights,

NOTAP laws, etc. (Okongwu, 2004; Jojo, 2006).

In franchising, the franchisee pays certain fees (costs) in return of the privileges

provided by the franchisor. On a general note, studies have proved that the two vital

fees are the initial franchise fees and the ongoing royalty fees. The cost describes the

franchise fees (initial fees) and other payments such as royalty fees, advertising fees,

training fees, territory fees that will have to be made by the franchisee to assess the

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elements provided for by the franchisor. Franchise fees are initial fees paid to the

franchisor to obtain the rights to the operating system of the franchise. Lederman

(2008) affirms that the franchise fee is a major constituent without which the business

is not regarded as a franchise.

Royalty fee, according to Franchoice.com (2012), is a fee paid by a franchisee

to a franchisor on a routine basis for the duration of the contract agreement.

Advertising fees on the other hand, are payments some franchise businesses require

their franchisees to pay to an advertising or marketing fund. Training fees are fees

which comprise of initial training in the franchise fee and may also include additional

training for franchisee or staff. Territory fees, according to Franchoice.com (2012) are

payments made when a franchisor allows a franchisee to purchase an additional or non-

standard territory.

The territory of the franchise is also an important component in franchising.

Territory falls under assigned franchisee’s location where the operation of the franchise

business takes place. Franchises are sold within certain defined areas (Howell, 2012).

The issue of exclusivity is also necessary here. Ofodile (2013) adds that in product

distribution franchising, the franchisee can enjoy exclusive or semi-exclusive rights

than in the supplier-dealer relationship. Furthermore, there are site selection,

termination and renewal components.

The termination and renewal components go can also be classified alongside the

duration of the agreement. Termination by the franchisor owing to the duration of the

franchise leaves room for the franchisee for renewal. The franchisee cannot easily

terminate the franchise as the franchisor who wields a lot of powers in the relationship.

However, termination must be only for “good cause” (Corrigan, 1980;

mywebcsuchico.edu, 2012). In addition, the franchise agreement explains in detail

what the franchisor expects from the franchisee, in the way he operates every facet of

the business. These show the operating practice components in the business.

A vital component of franchising is training and support services. The primary

reason for investing in franchising for a franchisee is for the training and assistance

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(smallbusinessnotes.com 2013). Pipes (2013) reveals that franchisors offer training

programs for franchisees and their staff. The franchisor provides a licensed privilege to

do business and assistance in organizing training, merchandizing and management. The

component of a successful franchising training program exists.

Coase (1937) in Ojo (2010) opines that there is link between the earlier forms of

marketing and the latter of which is franchising. According to the author, early forms

of marketing are linked to the classic argument that economic organizations follow two

general forms, viz: markets and firms. Drawing a relationship, theorists identified

franchising as a hybrid manifestation of the two forms because it has both market-like

and firm-like qualities (Norton, 1988; Brickley and Dark, 1987 in Ojo, 2010;

Matthewson and Winter, 1985). As firms the Oil and gas firms are oil businesses that

could be referred to as a subset of the Nigerian Petroleum Industry.

Marketing is the sum total of all business activities which deals with the

movement of goods and services from the producer to the ultimate consumer (Lazo,

1977 in Allen, 2010). Marketing activities are involved in getting oil and gas products

to the final consumers. These are carried out by marketers, involved in the business of

marketing of oil and gas products.

The oil and gas industry is supplied through imports and locally refined

products by both the major and the independent marketers. Dependent oil marketers

are marketers of service stations who hold the franchise of major companies. On the

other hand, independent marketers are also marketers that are owners of service

stations run under their own names, buy products directly from NNPC and have a

representative at the Petroleum Products Marketing Company (PPMC) depot by NNPC

(Omeh, 2012).

Asaolu, Awe and Sholotan (2010) maintain that the major marketers accounted

for 70 per cent of products distributed in 2008, according to data from Nigerian

National Petroleum Corporation, NNPC. They include the (Allen, 2010; Asaolu et al.,

2010) state owned NNPC-Retail, multinational petroleum marketing companies such

as Total, Mobil and Chevron, and the largest indigenous operators, Forte Oil formerly

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called African Petroleum (AP), Oando and Conoil. The independent marketers

comprise a large number of indigenous operators. But the researcher’s focus is on

major oil and gas marketing streamlined to mean dependent oil marketers who are

retail marketers of Total Nigeria Plc service stations in Edo State with various

positions such as dealers (station owners), managers and supervisors. A Total retail

marketer could operate the dealer system. The foregoing is compared to some

marketers of oil multinationals, where a staff of the company grows from a pump

attendant to become a dealer who can run and manage a station (Edsearchblog, 2008).

The dependent oil marketers have possessed some form or had attained certain

level of education while a large number of them possess Senior School Certificate

Examination and/or Primary School Leaving Certificate (SSCE/PSLC). Also, these

retail marketers of Total Nigeria in the State acquired some levels of experience in the

course of the job as a handful of them got engaged in service station business as there

are cases where the retail marketers had been engaged in similar business may be as

independent marketers. These retail marketers are spread across Edo State which is

situated in Southern Nigeria, carved out from the defunct Bendel State more than two

decades ago.

The adoption or utilization of franchising by Total Nigeria in marketing and

distribution of petroleum products in Nigeria has long existed as aforementioned. This

substantiates the fact that some form of franchising in petroleum product marketing has

been in existence for almost a century owing from the time kerosene was first

petroleum product to be marketed in Nigeria, imported under agency agreement

concluded by Socony Vacuum Oil (now Mobil) in 1907. This illustration aside, there is

no undermining the fact that there is need for some form of assessment.

Assessment, as elook.org (2012) puts it, is the act of judging a person or

situation or event. Assessment in this study refers to evaluating from Total (service

station) retail marketers’ perspectives, the franchising practices they had embarked on

with their parent bodies (franchisors) through their perception of the cost terms,

location or assigned territory, training and assistance, franchise ownership

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opportunities, termination and renewals laid down by the parent company or

franchisor. The outcomes of such agreement most especially by the low-end

distribution marketers need some form of assessment due to the fact that they had

already been parties to franchising practices and it best suits the research rather than

validating choices already made by experts or other groups on them.

Perception, according to Summers (1995), is the way a person regards

something and his/her beliefs about what it is like. Therefore the assessment of retail

marketers’ perception of franchising practices can certainly play a positive role in

narrowing the gaps inherent in the petroleum product marketing sector.

Statement of the Problem

The franchisee referred to as the retail marketer in the study, provides the

monetary and time investments necessary to establish the franchise into the new market

territory in moving into new markets. As a result, the franchisee is that who bears the

primary risk for expanding into the new territories and benefits when he or she earns a

decent living (Kotler, 2000). The conflict in the franchisor-franchisee relationship

exists because of their independent nature and the seemingly unequal balance of power

in favour of the franchisor. However, the three major problems in franchising are: the

incidence of abuses by franchisors of the franchisees, either intentionally or

accidentally; fears of potential abuses among franchisees; and corporate takeovers of

franchised companies leading to increased communication breakdowns with the

franchisees.

Franchising in Nigeria had come a long way but due to the turn of events in the

country amidst insufficient ethical franchising which is traceable to lack of specific

laws on franchising in the country compared to South Africa, USA, Spain, etc.

therefore the franchisor or the parent company is at liberty to pen down in the franchise

agreement, the way the business would be run in whatever way he chooses. This action

leaves little consideration for the franchisees in the agreement as he is meant to abide

by them. As a result the franchisor wields enough powers. This also makes the

franchisees’ satisfaction drop and there is this perception that the quality of the

10

relationship is deteriorating. Over and again the growth of the sector has been

accompanied by an increase in the incidence of unethical practices melted on the

franchisees.

We are in the era where those in the business of franchising projected that the

franchising market in Nigeria will grow at 10 per cent in Nigeria. The researcher is of

the opinion that growth is everything. Being one of the oldest in the distribution (or

retail marketing) sector, service stations are expected to have come of age. It is still a

wonder to discover that they represent the largest percentage of total sales as far as

product franchising is concerned, as studies have established (Ojo, 2010; Ofodile,

2013). The marketers have in most times been relegated to only dispensing of oil and

gas products, meeting up with the parent’s demand and nothing else. Little room is

allowed them to expand for example, ensuring that single units break into multi units

or even an area developer after a time tested relationship long enough to prove to the

parent the capability to run the service station as most of them have actually existed

long enough to move on. This creates the feeling that their efforts are not appreciated.

In any agreement between individuals say two for instance, there are conditions

placed on both parties. Partnership, as a relationship, is supposed to be mutual and

beneficial to either party involved, where both are interested in ensuring that they are

living up to the stated goals and objectives. There is this notion that the level of

awareness on the concepts and best practices on franchising is presently low. The

viability of franchising as an organizational platform has been called to question by

researchers. On average, there is the belief held by some individuals that franchise

organizations are less successful at coordinating marketing strategies, incidence of

provision of minimum support and advertising less than their wholly company

competitors.

However, the extent of franchise relationship in terms of the franchising

practices among oil marketing companies in Nigeria and their franchisors is yet

unknown and thus, formed the trust of this study.

Purpose of the Study

11

The main purpose of the study was to assess the franchising practices adopted

by Total Nigeria Plc as perceived by retail marketers of service stations in Edo State.

Specifically, the study attempted to:

1. identify the type of franchise arrangement/ownership opportunities the retail

marketers of Total Nigeria Plc service station run.

2. determine the extent to which the franchise cost, training and support

components are adopted by Total Nigeria Plc.

3. find out the extent to which the franchise territory components are adopted by

Total Nigeria Plc.

4. determine the extent to which the franchise termination and renewal


5. find out the extent to which franchise operating practice components are

adopted by Total Nigeria Plc.

Significance of the Study

The franchising practice is conceived on dyadic benefits: the franchisor achieves

rapid expansion with limited capital outlay. The individual franchisee equally benefits

by owning and operating a business which utilizes proven methods and procedures

because the franchisor makes his expertise available in a multitude of areas (Olotu and

Awoseila, 2011).

The finding of this study will be of immense benefits to dependent marketers of

Total Nigeria Plc, oil and gas firms, marketing consultants, National Directorate of

Employment (NDE), National Office of Technology Acquisition and Promotion

(NOTAP), Nigerian International Franchise Association (NIFA) and researchers.

The finding of this study will be of immense benefits to dependent marketers of

oil and gas products. Being marketers of service stations who hold the franchise of

major oil and gas companies, directly involved in the day-to-day oil and gas products

dispensing and strategically positioned at the low-end of the retail marketing and

12

distribution chain, the finding will be a most invaluable resource. These retail operators

of Total Nigeria will through the study be presented with the type of ownership

opportunities or franchise arrangement that will help assist in increasing in the

marketer and other individuals the knowledge in other specialized types other than the

common single units and who may not have known this truth about them. The study

will also open the dependent marketers to have information sufficient in cost, training

and support components sufficient enough in determining their rights so as for them to

be abreast of when or where is appropriate to place their demands on the franchisor to

be alive to their responsibility.

The finding of the study will be of help to oil and gas firms. Being the

franchisors that have drawn out the franchise agreement and had offered the business

opportunity to prospective franchisees that have chosen to buy into the business, the

study will be a useful pack for them to tackle some of the inherent challenges that

could try to impede this relationship. Assessing from the views of franchisees or

marketers (also called the retail marketers) at service stations, the franchise cost,

training and support, territory, termination and renewal and the operating practices

their perspective will help awaken in them whether or not their interests harmonize

with the provisions in the agreement and if possible provide a lasting solution to areas

yearning for change in the relationship that had been detrimental to the franchisees

once and for.

Marketing consultants will not be left out from the finding and benefits of this

study. As experts responsible for providing professional services for operators of both

start-up and emerging or time-tested businesses, a resource of this nature will be highly

significant. The study will offer the information relevant for these marketing

consultants to aid them in their lines of duties that would go a long way in assisting

their clients who consult them on franchising (in petroleum product marketing or other

fields of endeavors) and other business concepts on relating to franchising. They will

be assisted from the provisions of this study on areas such as ownership opportunities

(franchise arrangement), cost, training and support, territory, termination and renewal

13

and operating practices which are the necessary ingredients required as an instructional

pack for the consumption of their clients seeking to increase their knowledge of

franchising fundamentals. Franchising as a concept is field whose tentacles spread

beyond its root in economics into diverse areas in politics, sociology, culture and

education, and an interesting area that marketing consultants could consider worth

venturing. So there is need for a proper understanding of the practice of franchising

that could help broaden the scope of the marketing consultants in their chosen

profession.

The finding of this study will be beneficial to National Office of Technology

Acquisition and Promotion (NOTAP) and Nigerian International Franchise Association

(NIFA). Being corporate organizations, the finding of this work will be an inestimable

tool they can depend on during the organization of seminars or capacity building

workshops as measures for training and retraining on areas such as termination and

renewals, support and training, costs territory (exclusivity) etc which have been

carefully exhausted in the study.

The National Directorate of Employment (NDE) would with the aid of the

finding of the study explore the opportunities such as the ownership, their obligation in

making the franchise relationship work, training and support fundamentals, etc. in

franchising and to create an opportunity which will make them liaise with capable

businesses or preferably the downstream petroleum marketing businesses where

franchising has gained sufficient ground in recruitment, owing to the employment

situation of country. This will bring about economic gain for the common good of the

masses and increased government efforts in curbing the unemployment rate in Nigeria.

Researchers interested in the increasing impact of franchising and franchising

practices or its rudiments, will find this study useful both as a reference material and a

springboard from which they can draw from for improving or making more

contributions in the franchising oil and gas marketing sector. The researcher could dare

to conduct a study on franchising as the present study could serve as a reliable source

where other studies would be anchored judging from its originality.

14

Research Questions

The following research questions were formulated to guide the study:

1. What is the type of franchise arrangements/ownership opportunity the retail

marketers of Total Nigeria Plc service station run?

2. To what extent are the franchise cost, training and support components adopted

by Total Nigeria Plc?

3. To what extent are the franchise territory components adopted by Total Nigeria

Plc?

4. To what extent are the franchise termination and renewal components adopted


5. To what extent are the operating practice components in franchising adopted by

Total Nigeria Plc?

Null Hypotheses

The following null hypotheses based on the research questions were formulated

for the study and were tested at 0.05 level of significance:

Ho1 Educational qualification of the dependent marketers is not a significant source

of difference on the extent to which franchise cost, training and support


Ho2 Location of the service station is not a significant source of difference on the

extent to which franchise territory components are adopted by Total Nigeria Plc.

Ho3 Experience acquired in the petroleum business is not a significant source of

difference on the extent to which franchise termination and renewal components

are adopted by Total Nigeria Plc.

Ho4 Position of the marketer/position of oil and gas marketing company is not a

significant source of difference on the extent to which franchise operating

practice components are adopted by Total Nigeria Plc.

15

Delimitation

The study is delimited to the assessment of the type of arrangement/ownership

opportunities; cost and training and support; territory; operating practices; termination

and renewal franchise components spelt out by major oil and gas firms (franchisors)

for their marketers running service stations (franchisees) under the parents’ trade

names in the franchise relationship.

This study is delimited to only dependent marketers of service stations holding

the franchise of Total Nigeria Plc which is a major oil and gas company in Edo State.

This is so in that they are into franchising operation as they are already adopting the

strategy for their marketing effort.

16

CHAPTER TWO

REVIEW OF RELATED LITERATURE

This chapter is concerned with the review of related literature on the assessment

of franchising practices adopted by Total Nigeria Plc, an oil and gas firm from the

perception of marketers who, having entered into franchise relationship with the

parent, are already involved in retail marketing at service stations. The review is in

accordance with the purpose of the study and is organized under the following sub-

headings:

Conceptual Framework

� Franchising

� History of franchising

� Franchise arrangement/ownership opportunities

� Franchise cost, training and support components

� Franchise territory component

� Franchise termination and renewal components

� Franchise operating practice components

Theoretical Framework

Review of Related Empirical Studies

Summary of Related Literature

Conceptual Framework

In the 21st Century, no country is an island. The entire world has been webbed

together and everyone now live in a globalized world (Mba, 2011; Osoteku, 2012).

Globalization is the production and distribution of products and services of a

homogeneous type and quality in a worldwide basis (Hodgetts and Luthans, 2013).

However, businesses could continue to prudently seek to expand their operations in the

world economy through franchising (Brake, Walker and Walker, 1995; Daud, 2010;

Osoteku, 2012).

16

17

Franchising

Franchising is a method of business expansion and product and service

distribution (Ojo, 2010; Ofodile, 2013). It is a special form of licensing which allows

the franchisee to sell a highly publicized product or service using the parent’s brand

name or trademark, carefully developed procedures and marketing strategy. Not only is

the practice of franchising a business type, it is also a hybrid organizational

arrangement (Ojo, 2010). According to Ofodile (2013), franchising is a business model

under which a person (the franchisor) for a regular payment (royalty and other fees),

grants to another (the franchisee) the right to market a product or service using the

trademark, service mark, trade name, brand name and business methods of the

franchisor.

The Canadian Franchise Association (2011) defines franchising as a business

relationship where a franchisor (a company or individual who owns the franchise

system) grants a license to a franchisee (the company or person who contracts to use

the franchise system) the right to use the franchisor’s trademark, brand and operating

system for an initial fee (initial franchise fee). About.com in Ekwere (2011) sees a

franchise as a right granted to an individual or group to market a company’s goods and

services within a certain territory or location.

The Franchise Council of Australia in Olotu and Awoseila (2011) views

franchising as a business relationship in which the franchisor assigns to the franchisee

the right to market and distribute the franchisor’s goods and services and use the

business name for a period of time. Under the Italian Law, franchising is defined as an

arrangement between two financially independent parties where a franchisee is

granted, in exchange for consideration, the right to market goods and services under

trademarks. Legal definition of franchising in Spain is the activity in which an

undertaking, the franchisor, grants to another party, the franchisee, for a specific

market and in exchange of an economic financial compensation (either direct, indirect

or both) the right to exploit and own system to commercialize the products or services

already exploited by the franchisor with enough success and experience (Wikipedia,

2011).

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The word ‘franchise’ is of Anglo-French derivation and comes from an Anglo-

French word that means liberty. In Middle English, the term denotes a grant of legal

immunity. In Old French, the term is “franc” or “franche” meaning free. The word

franchise is also related to the English term “enfranchise” meaning to empower those

who have no right. The linguist origin of franchise is very telling and points to some

advantages of the franchising business model: economic freedom, economic

opportunity and empowerment.

The franchisor, the company that owns the brand name to product line, provides

the franchisee, the individual who purchases the rights to the franchise, with the

company name and logo, the product, the advertising and the necessary training to

operate the business. According to Encyclopedia of Business, the franchisees own their

establishments, terms of franchising agreement typically require them to share

operational responsibilities with the franchisor. The franchisor increases its number of

outlets and gains additional income. The franchisee opens an established business

without having to take all the associated risks. Hence franchising is a type of

cooperative entrepreneurship (Shane and Coy, 1996; Wiedersheim-Paul, 2007).

Franchising is not only associated with fast food businesses. In this regard

Osakwe (2009) argues that opportunities in Nigeria and indeed West Africa go well

beyond the traditional industries associated with franchising (retail and restaurants) and

include sectors such as oil and gas, telecommunications, transportation, education and

healthcare, etc. Zeidman in Osoteku (2012) submits that there is hardly a market in the

world without a significant component of franchises from other countries. It has been

revealed that there are over 120 franchise businesses available today (Ekwere, 2011;

Daszkowski, 2011).

Though franchises work particularly well for certain kinds of business concepts

(University Dissertations, 2011) but this does not undermine the fact that many types

of franchise businesses exist. These include the automotive cleaning and maintenance,

health and fitness, financial service and pet-related services. Franchising has been

observed by industry watchers as the key strategy adopted by multinationals to

19

promote and expand their trade in other untapped markets and this cut across different

sectors including the petroleum products marketing which is the focus of the study.

History of Franchising

Franchising operations as we know are not too old. The boom in franchising did

not take place until after World War II. Nevertheless the rudiments of modern

franchising date back to the Middle Ages when the Catholic Church made franchise-

like agreement with tax collectors, who retained a percentage of the money they

collected and turned the rest to the church (Sharp, in Encyclopedia of Business). The

practice ended around 1562 but spread to other endeavours. For example, in the 17th

century England, franchisees were granted the right to sponsor markets and fairs to

operate ferries. There was little growth in franchising though, until the mid 19th

century, when it appeared in the United States for the first time.

The researches bordering on the history of franchising all laid claim to the fact

that the earliest signs of franchising began in the 1850’s when Isaac Singer invented

the Singer Sewing Machines (Encyclopedia of Business and Daszkowski, 2011).

During Singer’s search for an effective and affordable way to distribute his products

for his company, the Singer Sewing Centre, he ran into problems that prevented his

company from being successful. His first problem was a lack of capital for

manufacturing his machines without first being taught how to use them, which required

efforts most traditional retailers could not provide. The Singer Company implemented

a franchising plan to distribute the sewing machines.

Singer’s solution was to charge licensing fees to business people who could own

the rights to sell his machines in certain geographical areas. They would also be

responsible for teaching consumers how to use his machines, thereby creating sales

opportunities using the licensing fees to fund his newly formed distribution network.

Singer’s ideas got noticed, and over the next several decades, many other

companies like Coca-Cola introduced franchising into their bottling and manufacturing

areas in other to reduce financial risk.

20

However, the Singer operation failed, even though the machines sold well. The

dealers, who had exclusive rights to their territories, absorbed most of the profits

because of deep discounts. Some failed to push Singer’s products, so competitors were

able to outsell the company. Under the existing contract, Singer could neither withdraw

rights granted to franchisees nor send in his own salaried representatives. So the

company started repurchasing the rights it had sold. The experiment proved to be a

failure. That may have been one of the first times a franchisor failed, but it was by no

means the last (even Colonel Sanders did not initially succeed in his Kentucky Fried

Chicken franchising efforts). Fortunately, the Singer venture did not put an end to

franchising.

One of the most successful franchising operations was started by an enterprising

druggist named John S. Pemberton. In 1886, he concocted a beverage comprising

sugar, molasses, spices, and cocaine (which is no longer an ingredient). Pemberton

licensed selected people to bottle and sell the drink, which is now known as Cola-Cola.

He was one of the earliest-most successful franchising operations in the United States.

Other companies tried in one form or another after the Singer experience. For

example, several decades later, General Motors Corporation established a somewhat

successful franchising operation in order to raise capital. Perhaps the father of modern

franchising, though, is David Liggett invited a group of druggists to join a drug

cooperative. He explained to them that they could increase profits by paying less for

their purchases, especially if they set up their own manufacturing company. His idea

was to market private label products. About 40 druggists pooled $4000 of their own

money and adopted the name, Rexall. Sales soared, and Rexall became a franchisor.

The chain’s success set a pattern for other franchisors to follow.

Although many business owners did affiliate with cooperative ventures of one

type or another, there was little growth in franchising until the early 20th century, and

what franchising then was and did not take the same form as it does today. As the

United States shifted from an agricultural to an industrial economy, manufacturers

licensed individuals to sell automobiles, trucks, gasoline, beverages and a variety of

21

other products. The franchisees did little more than sell the products though. The

sharing of responsibility associated with contemporary franchising arrangement did not

exist to a great extent. Consequently, franchising was a growth industry in the United

States.

It was not until the 1960s and 1970s that people began to take a close look at the

attractiveness of franchising. The concept intrigued people with entrepreneurial spirit.

Later companies such as McDonald’s and Burger King took franchising to whole new

level by creating some of the largest networks in the world. Ray Kroc took over a small

chain of food franchise in the world (McDonald’s). He established his franchising

operation in 1955, after obtaining exclusive franchise rights from Dick and MacDonald

who started the chain. Wendy’s founder, Dave Thomas, believed that McDonald’s

hamburgers were skimpy and decided he could improve the basic hamburger. In 1968,

Thomas received $1.7million as his share of the sale of four chicken stores by Hobby

House Restaurants, for whom he was a manager. He invested most of it into a new

chain of hamburger stands.

To checkmate the franchising industry and eliminate con artists, some

franchisors formed the International Franchise Association (IFA) in 1960. This was

necessary at a time in the United States where there were cases of abuse by hucksters

who took advantage of lack of regulation (prior to the advent of regulation of

franchising). With this primary trade association, franchising became a respectable

word again. The practice flourished, aided by the efforts of early franchisors like Ray

Kroc and Dave Thomas. From the foregoing one can deduce that franchising gained

acceptance as a business in 20th century. Applicable to the Nigerian business scene is

that petroleum industry was among the first to franchise the gasoline (petrol) service

stations as have been already spelt out.

Petroleum (crude oil) is the primary source of energy. Ekpu (2004) in Akinyele

(2010) also observes that there exist other energy sources such as hydro power, wind

energy, and coal. Coal and several natural resources are abundant in the country and

drawing from Akinyele (2010) Nigeria is in fact the only coal-producing West African

nation. According to Allen (2010) petroleum energy is the power that moves the world

22

and it would be for some years to come because of its diversified uses. The history of

petroleum in Nigeria dates back to 1956 when it was first discovered at Oloibiri, in the

present Bayelsa State, South-South Nigeria. Before this time, the mainstay of the

Nigerian economy was agricultural produce namely: Cocoa, Groundnut, Timber and

Palm Produce and the vast majority were farmers, cattle rearers and fishermen

(Agbola, 1979).

Petroleum is crude oil, a naturally occurring liquid that can be distilled or

refined to make fuels, lubricating oils, asphalt or tar (obtained from tar sands- a

mixture of tar and thick viscous heavy oils) (Ukoli, 2011). Crude oil is refined into

fuels including petrol, kerosene, jet fuel, diesel fuel, furnace oil, etc. It is also the

source of greases and waxes.

Oil and gas as products are consumables used by everyone either at home or in

companies or for vehicles (Akande-Onada, 2012). Oil and gas products are also

referred to petroleum products which include Premium Motor Spirit (PMS) or

popularly called Petrol, Dual Purpose Kerosene (DPK) which constitute Household

Kerosene (HHK) and Automotive Turbine Kerosene (ATK), Automotive Gas Oil

(AGO) or Diesel, Liquefied Petroleum Gas (LPG) or cooking gas, Low-Pour Fuel Oil

(LPFO), and High-Pour Fuel Oil (HPFO). The lack of progress in developing Nigeria’s

electrical power supply has led to a growing proportion of energy supply being

privately generated via PMS- and AGO-powered generators (Asaolu et al., 2010).

In addition, Nigeria is widely referred to as a gas province. According to Central

Bank of Nigeria (2010), it ranks 5th in gas reserves soon to becoming the 3rd in the

world as soon as the appropriate facilities are in place as recent studies have shown.

This makes the country more of a gas rather than an oil country. Indeed Nigeria is

often described as a gas zone with some oil in it. Asikhia and Orugboh (2009) reveal

that this is so much so that Nigeria’s oil fields are also the country’s gas fields. It

intertwines in that, gas discovery to date in Nigeria has been incidental to oil

exploration efforts (Aluko, 1994). Studies have revealed that about that about 43% of

23

Nigeria’s natural gas is associated with oil which is unfortunately flared to the

detriment of the economy (Akinyele, 2010; Dixton, Donald and Roger, 2005).

Petroleum industry (or business) by sector is categorized into two (Akande-

Onada, 2012; startupbizhub.com, 2012; Ehinomen and Adeleke, 2012): upstream and

downstream sectors. Upstream sector entails the searching for and the discovery of

crude oil and natural gas. It is also known as the exploration and production (E & P)

sector. This requires a large amount of capital, making it almost impossible for a single

proprietor to put up. Activities in the upstream include (Ehinomen and Adeleke, 2012):

Geodetic survey, civil works such as the site surveys and preparation of drilling

locations, seismic data acquisition, drilling operations, geological activities, crude oil

transportation and storage, exploration and production, etc.

The downstream sector on the other hand deals with the distribution of

petroleum products like AGO, DPK, PMS. These products are refined with the use of

crude oil. They are used for domestic purposes like cooking; fuelling of cars, airplanes,

generators, etc. An example of this category is gasoline stations. The marginal profit of

this type of petroleum business is lower than the upstream business above but the

frequency of the customers could bring a substantial amount of revenues. The

downstream sector of the petroleum industry is characterized by such activities as

(Ehinomen and Adeleke, 2012): Gas treatment, crude oil and gas conversion into

refined and petrochemical product, transportation and distribution of refined products,

etc.

The Nigerian petroleum marketing is under the downstream sector part of the

downstream oil (petroleum) industry (Asaolu, et al., 2010) and a sensitive one at that.

The petroleum industry is considered to be one of the largest and most powerful

industries in the global market with its operations covering every corner of the globe

and with the nation’s energy heavily dependent on oil and gas products (Amnesty

International, 2004). Today activities in the petroleum industry are composed of

various procedures including exploring, extracting, refining, transportation and

marketing of petroleum products.

24

The sensitivity of petroleum resource is clearly reflected with the fact that it has

remained or continued to be the goose that lay golden eggs for the Nigerian economy

as well as the supreme foreign exchange earner contributing over 80% of government

revenues and helps the development of Nigeria’s infrastructures and other industries

(Mathiason, 2006; Akinyele, 2010).

Nigeria is one of the biggest oil producing nations of the world with a very huge

oil deposit around the entire South-South, South-East and South-West regions of the

country, both tapped and untapped. Already Nigeria is the leading oil and gas producer

in Africa (Akinyele, 2010), the ninth producer in the world and sixth world exporter of

crude oil (Ehinomen and Adeleke, 2012). Nigeria, further to being oil producer, is one

of the biggest consumers of oil and gas products in Africa with about 40 million litres

said to be consumed everyday (Omeh, 2012).

All the millions of cars and trucks on Nigerian roads run on PMS or AGO (that

is petrol and diesel) everyday. The demand for petroleum products for domestic and

industrial uses has to a greater degree been influenced by the inadequate supply of

energy in the nation. Also factories, businesses and hospitals and in fact everything in

Nigeria depends on power generated privately from petroleum products consuming sets

and all these oil products are dispensed almost 100% through petrol service stations

(Omeh, 2012). Also part of the petroleum industry is oil and gas firms.

Oil and gas firms are companies involved in the petroleum business

(startupbizhub.com, 2012). Oil and gas firms is streamlined in the study to companies

involved in the distribution and retail marketing of oil and gas products and services to

local gas stations. Examples of oil and gas firms are Mobil, Total, African petroleum,

Oando, MRS, and Conoil plc.

Total Nigeria Plc formerly known as TOTALFINAELF Nigeria Plc is the

entity which emerged following the successful merger between TOTAL NIGERIA

PLC and ELF OIL NIGERIA on 11th September, 2001. Total Nigeria Plc with RC

1396 was incorporated as a private company on 1st June, 1956 to market petroleum

products in Nigeria. It became Total Nigeria Ltd in 1967, and Total Nigeria Plc in

25

1978 after it went public in accordance the Nigerian Enterprises Promotion Decree in

1977 (Wikipedia, 2012; www.nigeriagalleria.com, 2012).

The local gas stations from the foregoing are referred to as service stations in

the study. The term gas station represents properties whose primary function is the

fueling of motor vehicles (Gas Station Valuation Guide, 2006). A service station is a

facility which sells fuel and usually lubricants for motor vehicles (Wikipedia, 2011).

But according to the Gas Station Valuation Guide, encompassed within the term, gas

station, are two main types:

� Gas bars; and

� Service stations

Either type of property may include a car wash and a small retail operation. Gas

stations properties may have a structure used for washing motor vehicles. These car

washes may be either the drive-through type that actually pull the vehicle through the

structure (conveyor style) or the automatic style of car wash where the vehicle remains

stationery inside the structure and the car wash equipment moves around the vehicle.

On the other hand, increasingly common at gas stations are more elaborate structures

containing convenience stores and/or fast food operations. These are to be

distinguished from a simple freestanding booth that may sell automotive-related

products and snack foods (Gas Station Valuation Guide, 2006).

Operationally service stations are franchised filling stations spread across the

length and breadth of Edo State which are operated or controlled by marketers who are

the franchisees and they are their very own businesses. The Gas Station Valuation

Guide (2006) states that a service station is characterized by the presence of a building

housing one or more service bays for the repair and maintenance of motor vehicles in

addition to the fueling operation. Added to the service bays, there is also likely to be a

small interior office in the garage that is used in conjunction with the servicing and

repair operation. This shows what is found in a standard gas (fuel) station replica of

what is seen in developed countries of the world.

26

The franchisor-franchisee relationship, due to the inadequate legal provisions

for franchising in Nigeria, is governed by contract, patents, trademarks/service marks,

industrial designs, copyrights, NOTAP laws, etc (Okongwu, 2004; Jojo, 2006). These,

also known as intellectual properties, apply in the case of Nigeria.

Trademarks help distinguish the business from competition

(franchiseknowhow.com, 2012). Product distribution franchising for example, differs

from supplier-dealer relationship in that the franchisee can acquire rights to use the

franchisor’s trademark. Patents on the other hand, protect an invention that is novel and

non-obvious. While copyright is the right given to the creator, author or other person

who may own the copyright of certain types of works, not to have that work copied or

reproduced without authorization (Kayode, 2010; Brome, 2010 and Honey, 2008).

Brand name means word(s) that identify not only a product but also its manufacturer or

producer such as Apple, Coca Cola, IBM, Mercedes, Shell, Sony, Toyota

(businessdictionary.com, 2012). Brand name, according to Penard and Perrigot (2012),

is a key element in franchising.

A common feature in most ventures worldwide labeled easily by many as

franchising itself is business format franchising. Studies have shown the fact that

product franchising and business format franchising are basically the commonest (Ojo,

2010; Ofodile, 2013). Business format franchising is a more common and popular

franchise type today. Stokes (1998) in Ojo (2010) states that the business format

franchising is seen as a more in-depth relationship between the franchisor and the

franchisee than a simple product distribution or trademark licensing agreement.

Under a business format franchise, the franchisee not only acquires the right to

perform services and/or sell products using the franchisor’s trademarks but also gains

access to the franchisor’s business methods and operating systems (Ofodile, 2013).

Beshel (2001) refers to this as a complete method to conduct the business such as the

marketing plan and operations manual. In a business format franchise arrangement, a

franchisee is typically expected to conform to the business standards stipulated by the

franchisor. Business format is mostly found in the fast food industry, lodging industry

(e.g. Holiday Inn) and so on.

27

However, product franchising is like a supplier-dealer relationship but it is a

more complex business arrangement with greater interdependence between the parties.

It differs from a typical supplier-dealer relationship in at least three ways (Ofodile,

2013). In a franchising arrangement, franchisee can acquire rights to use the

franchisor’s trademark, can enjoy exclusive or semi-exclusive marketing rights and can

expect certain support services from the franchisor. From the foregoing, it can be

deduced that under the product franchising model, the franchisee simply sells the

franchisor’s products using the franchisor’s trademark and logo. Daud (2010) states

that in a product franchise the manufacturer (supplier) uses the franchise agreement to

determine how the product is distributed by the person buying the franchise

(franchisee).

Typically the franchisor does not provide the franchisees with an entire system

for running their business. Product distribution franchises can be found in the gasoline

(fuel) service stations business (e.g. Mobil, Total, Oando, Forte Oil, etc), the soft drink

industry (e.g. Coca Cola) and car dealership business (e.g. Peugeot car dealership)

(Beshel, 2001; Ojo, 2010; Ofodile, 2013). Total Nigeria Plc commissioned its first

Service (Filling) Station at Herbert Macaulay Street, Yaba, Lagos in 1956 and the

company has a network of over 500 retail outlets with organization served throughout

the country (Wikipedia, 2012; www.nigeriagalleria.com, 2012). Product franchising

commonly found in filling stations represents the largest percentage in total sales

according to Ojo (2010) hence is also considered vital for the study. Total Nigeria,

which undoubtedly, is a leading oil marketing company in Nigeria and Edo State in

particular, informed the study.

Total Nigeria Plc and Mobil Oil Nigeria Plc are two leading giants in petroleum

products marketing in Nigeria. Thenationonlineng.com (2012) asserts that Total

Nigeria Plc with Mobil Oil Nigeria Plc are the two most capitalized petroleum

marketing companies in Nigeria although they accounted for some 52 per cent of total

marketing capitalization of the downstream sector at the stock market. Total Nigeria

leads the capitalization table with 28 per cent while Mobil Oil Nigeria trailed with

some 26 per cent. The assertion also has it that Total Nigeria is a subsidiary of French

28

multinational and Europe-leading oil company-Total S.A, and that it is a company of

considerable influence and size in Nigeria and globally.

Owing to opinions from theorists franchising is described as a latter form of

marketing and as a hybrid manifestation of two forms because it has both market-like

and firm-like qualities (Coase, 1937; Norton, 1988; Brickley and Dark, 1987 in Ojo,

2010; Matthewson and Winter, 1985). Marketing seems easy to describe but extremely

difficult to practice (Kotler and Connor, 1997). Marketing as Osuagwu (1999) opines,

has been defined and conceptualized in various ways, depending on the author’s

background, interest and education. Marketing is like a river, a stream of activities.

Imagine that the time and moment an individual plans to launch a product he stands on

the banks of a river (Barzeley, 2011).

Marketing can be seen as a matrix of business activities organized to plan,

produce, price, promote, distribute, and megamarket goods, services, and ideas for the

satisfaction of relevant customers and clients (Osuagwu, 1999). Owing to relevant

sources, the researcher is of the opinion that marketing is all about needs satisfaction

and creation of exchanges. Marketing involves determining the customers’ needs and

serving them these products and services as efficiently and cheaply as possible

(Akinyele, 2010). Marketing is the sum total of all business activities which deals with

movement of goods and services from the producer to the ultimate consumers (Lazo,

1977 in Allen, 2010). Also marketing activities are involved in getting oil and gas

products to the final consumers (Allen, 2010; Ehinomen and Adeleke, 2010). These

activities are carried out by dealers or operators which are the marketers. The

marketers are in the form of dealers, managers and supervisors at the service stations as

this study is delineated.

These marketers’ position in the marketing of petroleum products is absolutely

imperative. In fact Duckett (2010) states that the position of franchisees is unique in

the field of commercial relationships. The marketers are involved in oil and gas

products marketing business. The petroleum industry can also be classified by type of

actors in constrast with the earlier categorization (by sector). The actors in the

Nigerian Oil industry consist of both private and public organizations (Ehinomen and

29

Adeleke, 2012). The public actors are government agents and functionaries such as the

Nigerian National Petroleum Corporation (NNPC) and its subsidiaries, the Department

of Petroleum Resources (DPR), the Petroleum Products Pricing Regulatory Authority

(PPPRA), among others. The private segment consists of both indigenous and foreign

actors.

The indigenous actors consist of private independent marketers (Ehinomen and

Adeleke, 2012). They are marketers that are owners of service stations run under their

own names, buy products directly from NNPC and have representatives at the

Petroleum Product Marketing Company depot by NNPC (Omeh, 2012). The dependent

marketers of oil and gas products are mostly marketers who hold franchises of big or

foreign multinationals. These multinationals are referred to as major oil marketers

comprising: Mobil Oil Nigeria Plc, MRS Nigeria Plc, Total Nigeria Plc, Con Oil Plc,

Oando Nigeria Plc and Forte Oil (formerly African Petroleum) Plc (Omeh, 2012;

Ehinomen and Adeleke, 2012).

The oil and gas industry is supplied through imports and locally refined

products by both the major and the independent marketers. According to Ehinomen

and Adeleke, 2012), petroleum marketing is a complex task that involves streams of

activities such as transporting and storing, across the country. This process is done by a

variety of players including the major marketers that transport products from the

refineries to their branded stations, independent distributors that transport products

from the depots to the service station. In terms of outlets, the major marketers have

2218 while independent marketers have 7948 outlets. Also, the NNPC has 18 mega

stations at June, 2010 nationwide (NNPC, 2010).

The major marketers accounted for 70% percent of products distributed in 2008

as stated in a data from NNPC (Asaolu et al., 2010). Today, independent marketers

account for nearly 40 percent of the volume of products marketed in the country

(NNPC, 2010 in Ehinomen and Adeleke, 2012). Although the independent marketers

comprise a large number of indigenous operators in the petroleum product marketing,

but the researcher’s concern is on major oil and gas marketing operating franchise

service stations in Edo State. The state, which is situated in the South-South geo-

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political zone, is one of the few States compared with others, which have one of the

most franchised service stations outlets in the country.

The distribution (product) franchise sector is the oldest sector (Okongwu, 2004)

as history and industry watchers had stated. The companies that were involved in

petroleum product distribution (marketing) are franchise firms operating under some

form of licensing agreement. This method of marketing remains popular in the

downstream sector of the oil and gas industry in Nigeria although ownership structures

of these stations have seen a number of changes over time.

Nigeria began exporting in 1958 with crude oil production of 5000 barrels per

day (bpd) rising by 1979 to a peak of 2.3 million bpd (Adegbulugbe, 2002; Baker,

2006). In agreement with the foregoing Onwe (2012) stated that by the late 1960s and

early 1970s, Nigeria has attained a production level of 2 million barrels of crude oil

products per day. Although production figures dropped in the eighties due to economic

slump, 2004 saw some improvements in oil production to a record level of 2.5 million

bpd. Current development strategies aim at increasing production to more than 4

million bpd (Onwe, 2012).

From the foregoing the mention of distribution, supply, and export, import etc,

used earlier depicts some form of elements of marketing in the petroleum industry. In

fact, marketing of petroleum products could be traced back to 1907 when kerosene was

first imported to Nigeria which according to NNPC (1985), was when an agency

agreement believed to be the first, was concluded by Secony Vacuum Oil Company

(now Mobil) to market its Sunflower Kerosene (Agbola, 1979; Allen, 2010). Since the

first cargo of Sunflower Kerosene by Secony Vacuum to the country in 1907 to the

time of independence in 1960, oil firms had been in full control and arrangement for

supplying petroleum products (Agbola, 1979).

Kerosene as a petroleum product was the first to be marketed in Nigeria, with

Mobil being the first to pioneer the business. The agency system much more relevant

in franchising practice continued to grow. For instance, there were two agencies in

1920, four in 1929 and by the 1950s there were six agencies marketing petroleum in

Nigeria (Allen, 2010). NNPC (1985) observes that marketing of petroleum products

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has been transferred from a modest trade in imported kerosene to a full fledge industry

distributing large and increasing quantities most of which are refined locally. It further

stated that the nature of trade, the distribution system, the pattern of consumption and

the pricing have all changed with political and economic development.

The long existence of the presence of these oil and gas firms involved at

marketing in service stations most especially the franchised (branded) ones among

them underscores the need for some form of assessment. The marketers at branded

service stations are into existing relationship with these multinationals (franchisors)

and this sprouted the researcher to embark on a study of this nature. Backing up this

notion, Ojo (2010) stated that those in the business of franchising projected that the

franchising market in Nigeria will grow at 10 percent annually by 2010. This according

to Ikeh-Okoh (2006) is premised on the level of awareness on the concepts and best

practices on franchising which is presently low. This assertion informed this study and

therefore it seeks to determine the franchise relationship practiced among oil and gas

marketing firms in Edo State with their franchisors with particular reference to Total

Nigeria Plc.

Franchise Arrangement/Ownership Opportunities

There exist different types of franchise arrangement or ownership opportunities.

According to Daszkowski (2011) an entrepreneur either chooses to become a multi-

unit franchise owner, an area developer or decides to buy an existing franchise. To the

author, each ownership arrangement has its own unique responsibility.

Single Unit Franchising

Single-unit franchising is the most common and also the simplest form of

franchising arrangement. Daszkowski (2011) avers that the entrepreneur begins with

this most times. Anderson (2011) defines that in this type, the franchisee purchases

directly from the franchisor, and is for a single business unit in one physical location.

Under a single-unit franchise arrangement, the franchisee acquires the right to

open and operate only one franchise unit (e.g. a simple unit of Total Nigeria Plc in a

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single location). However the entrepreneur or the franchisee could be extremely

involved with all of the daily operations of the business. This is what Anderson (2011)

calls “hands-on”. The franchisee is expected to be very hands-on with running his or

her one business unit.

The entrepreneur who wants to become a single-unit franchisee is recommended

to have a basic understanding of how the business works, or that the said entrepreneur

has a strong team in place for advice (Anderson, 2011). With a single unit, the

investment costs are less than operating opening up multi-units. Although most single

unit franchisees yield a nice income, there is more earning potential with multi-unit

franchises (Daszkowski, 2011).

Multi-Unit Franchising

A single unit franchise arrangement can evolve into multi-unit franchising if a

franchisee with a single-unit franchise buys additional single-unit franchises from the

same franchisor (Ofodile, 2013). A franchisor of Mobil Oil could allow the franchise

owner running the branded station under the parent company to purchase a second, and

perhaps even a third, Mobil Oil Nigeria Plc. But Anderson (2011) accentuates that

these additional franchises are granted on a one-at-a-time basis. In other words, after

establishing the second franchise, the franchise owner (franchisee) of Mobil Oil

Nigeria Plc would have to prove to the franchisor he was capable of operating both

stations before allowed a third franchise.

Daszkowski (2011) views the multi-unit franchising as a way of creating

opportunity for franchisees to open more than one unit. Ojo (2010) succinctly puts it as

an agreement whereby the franchisor grants the franchisee the rights to own and

operate more than one unit. These units can be within a specified geographical region

negotiated between the two parties, or it can be multiple units with random geographic

location. The franchisor in most cases will offer multiple units to a successful single

unit franchisee as have been shown, the offer of discounts in licensing fees to start

more locations.

In this type of arrangement, the franchisee partakes less in the day-to-day

operation of the units. The franchisee is less involved with each individual unit, but

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manages the multiple unit operations. In the illustration, the implication of this type of

ownership opportunity is that it becomes increasingly difficult for the Mobil service

station dealer to maintain direct involvement in each of the business. Therefore there

would be need to hire and manage employees to run the different stations. Although,

the initial total investment is higher than opening a single unit, the risk is typically

lower for the franchisee.

Buying an Existing franchise

Buying a new franchise does not guarantee success. It is for the most part, a

concept that has proven effective in some areas under certain conditions. Parker in

Daszkowski (2011) advises that the entrepreneur buys a resale that is already

successful, given the dismal failure of start-up businesses. Many franchise owners

decide to sell their franchise after they have opened. There are several reasons why

existing franchises are listed for sale. There are advantages and disadvantages to

buying an existing franchise (Daszkowski, 2011).

The Advantages

The business is already up and running; the entrepreneur can start doing

business immediately. The businessperson will have a business with customers,

employees and cash flow on day one. Plus, the entrepreneur will avoid all the issues of

choosing a location, having to build out a site, and reviewing demographic studies. It is

not uncommon for a new franchisee to wait a year or more until their location is ready

to start doing business.

The business has a history. Instead of guessing whether the new business will be

successful, the entrepreneur can analyze actual historical financial data to determine

whether or not it is a good business (Parker in Daszkowski, 2011).

The entrepreneur can negotiate the price. New franchises come with a set price

and terms. The franchisor is rarely flexible. With a resale, the entrepreneur can

negotiate the price, payment terms, training from the seller, and every other aspect of

the deal.

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It is far easier to investigate a known entity than a start up. Since the

entrepreneur will have access to the company’s books and records, contracts and

customer files, the entrepreneur will know what the past has been and that is the most

viable way to get a glimpse into the future.

Finally, the entrepreneur can speak with other franchisees in the system. If the

entrepreneur conducts his research discreetly, they will help provide insight about the

specific business and the franchisor that he may never be able to determine on his own.

The Disadvantages

Not all franchise companies advertise the locations that may be for sale. As

such, the entrepreneur’s search may take a bit longer than what would have been

normal experience in a non-franchise business search.

The franchisor generally has the right of first refusal to buy any individual

franchises within their system. The entrepreneur will want to get confirmation from the

franchisor whether they intend to do so. If not, the entrepreneur can go through the

entire negotiation only to learn someone else is going to buy the business.

Obtaining third-party financing may be more difficult because the better

franchisors have relationships in place with some lenders to help to finance their new

sales (Daszkowski, 2011).

The entrepreneur may be required to complete a time-consuming and costly

orientation before the franchisor gives the final approval as a franchisee. In this case,

the entrepreneur clearly needs a mechanism to extract himself from the deal if, for any

reason, he is not approved.

Overall, the negatives are quite minor, certainly when compared to the positives

of buying an existing franchise rather than a new one. By doing so, the independent

entrepreneur can marry the best that a franchise and an existing business, rather than a

start-up, has to offer.

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Area Development

Multi-unit can arise through area development agreement. Floyd (2011)

describes area development as a variation in multi-unit franchising, in that it involves a

greater number of units encompassing a larger territorial area. Under an area

development franchise arrangement, a franchisee secures the right to open a pre-

determined number of outlets within a specified geographical area during a specific

time frame (Ofodile, 2013). The geographic area can vary depending on the business

and the agreement. It can be a region or an entire state. For example a franchisee can

acquire the right to open four units of Oando in GRA, Airport Road and Ogbe environs

of Benin City, the Edo State capital anytime between 2009 and 2013.

Typically, an area development franchise agreement is clear about the territory,

the time frame and the specific number of franchise units the franchisee is authorized

to open. Once the franchise is up and running in that particular territory the franchise

fee and ongoing royalty payments sometimes may be decreased for the area developer

(Daszkowski, 2011).

Master Franchising

This is sometimes called a master or regional developer. Though rare, but it is

something that many franchisees look up to have. According to Daszkowski (2011),

master franchising allows people or corporations to purchase the rights to sub-franchise

within a certain territory. A master franchisee helps the overall franchise company by

recruiting franchisees to open units within a specific territory. A master franchisee has

the exclusive franchise rights in his or her area (usually a metropolitan area or even an

entire state).

Ofodile (2013) clearly states that under a master franchise arrangement, the

franchisee acquires two important rights. First, the franchisee acquires the right to open

and operate a specified number of franchise units in a specified area over a specific

period of time. Second, and more important, the franchisee secures the right to sell

franchise units to other people (sub-franchisees) within a specified territory.

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Floyd (2011) calls this method of franchise ownership, sub-franchising.

According to the author, sub-franchising involves two levels of franchises:

subfranchisors (often called master franchisees) and subfranchisees. Subfranchisors are

like a franchisor in that they will often be responsible for recruiting and providing

ongoing support to operating franchisees. However in contrast to the franchisor with

nationwide interests they are responsible for a smaller area.

Both area franchise arrangement and a master franchise arrangement are similar

in some aspects (compared to a single unit arrangement, both afford more rights to a

franchisee), the master franchise arrangement gives a franchisee more rights than an

area development arrangement (Ofodile, 2013). Again, both master franchise owner

and area development franchisor are similar in that the entrepreneur is given a

geographic region and cost breaks for the agreement, but master franchisee can also

sell franchises on behalf of the franchisor and collect part of the regular royalty for the

franchise as well (Anderson, 2011).

Under a master franchise agreement, the franchisee enjoys greater control,

greater opportunity for entrepreneurship and the opportunity to influence others (i.e.

subfranchisees) (Ofodile, 2013). According to Anderson (2011), the master franchise

owner speaks as the appointed representative of the franchisee for their region, which

is normally larger than the one given to an area development franchise. Buttressing

this, Ofodile (2013) also stated that with a master franchise agreement, a franchisee

essentially steps into the shoes of the franchisor and takes over the responsibilities of

the franchisor in respect to a given territory. A franchisor can from a master franchise

agreement gain brand recognition and acceptance in foreign market without getting

directly involved in the day-to-day administration of the business in such a. market.

Franchise Cost/Training and Support Components

In product franchising, the franchisor who owns the right to the trademark

simply sells that right to the franchisee. From the foregoing, franchising is a

relationship i.e. between the franchisor and the franchisee. Therefore, in return for the

privileges that will be provided, such as business assistance in organizing training etc,

the franchisee pays certain fees and accepts to be under the supervision of the

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franchisor during the term of the agreement. The cost of the franchise is all about the

initial fee and the ongoing royalty payments the franchisee will have to make. This

grants them the right to use the franchisors trademark and operating system.

The Michigan Franchise Investment Law (MFIL) as Lederman (2008) quotes

defines a franchise fee as a fee or a charge that a franchisee or subfranchisee is required

to pay or agrees for the right to enter into a business under a franchise agreement,

including but not limited to payments for goods and services. Under the MFIL, to be a

franchise, a contract must meet three requirements, including a franchisor requirement

that the franchisee pay a direct or indirect franchise fee. If this is not met, then the

franchisee does not have a franchise, as the intent of the franchise fee requirements is

to protect investing franchisees.

Understanding the franchise fees and other related financial considerations is

important, as franchise ownership may require the payment of a number of fees

(Franchoice.com, 2012). On a general note, the two vital fees are the initial franchise

fees and the ongoing royalty fees. These are what Businessballs.com (2011) calls the

initial costs and continuing costs, under which every other costs are lumped. The

following is a sample of the most common types of fees (or costs) assessed by the

franchisor (Franchoice.com, 2013; abusinessfranchise.co.uk, 2013; allbusiness.com,

2013):

� Advertising Fees/Marketing Fund

Some franchise businesses require franchisees to make payments into an

advertising or marketing fund. Payment amounts can be a percentage of sales or

a flat fee, paid weekly, biweekly or monthly. This fund could be for national or

local advertising and some companies may require contributions to both.

Advertising money may be spent on TV, radio, print media or printed materials,

depending on the franchise, the age of the system, the penetration of the

franchise in a market or other considerations. The franchisee may have input to

where or how funds are spent, or the decisions may be completely by the

franchisor.

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� Audit Fee

If the franchisor requires financial audits of the franchise location, the

franchisee may have to pay for the cost, especially if any irregularities are

found. Audit fees are common to most franchise agreements.

� Franchise Fees

The franchise fee is the initial fee paid to the franchisor to obtain the rights to

obtain the rights to the operating system of the franchise. This fee typically

covers such items as site selection assistance, training, marketing materials and

operations manuals. This is usually a one-time fee payable upon signing of the

contract and is typically based on the number of units or territories purchased or

the size of the territory.

� Product Fees

Some franchisors require that the franchisees purchase proprietary or general

products from them. The primary reason franchisors require a specific

product/equipment purchase is to insure quality control and uniformity across

the system. All the details of required product/equipment purchases are

explained in the franchise agreement.

� Renewal Fees

When it is time to renew the franchise agreement, the franchisor may require a

fee to be paid in other to renew the agreement. Sometimes the fee can be paid in

the form of remodeling or upgrades to the physical location of the franchise, but

a minimum most franchisors require from their franchisees to be paid in full

compliance with the operating system to qualify for renewal.

� Royalty Fee

This fee is paid by the franchisee to a franchisor on a routine basis for the

duration of the franchise agreement. The royalty or ongoing fee is usually a

percentage of total sales, which often is paid on a monthly basis (Pipes, 2013).

The franchise may have to pay the franchisor royalties on a percentage of his

weekly or monthly gross income typically ongoing and usually 4-8% (Parsley,

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2013; Small Business Buzz, 2013). This fee enables the franchisor to offer such

benefits as ongoing support and training, research and development, and

building of the brand.

� Territory fees

When the franchisor allows a franchisee to purchase an additional or non-

stationary territory, they may require a one-time fee for these rights. This fee is

similar to the initial franchise fee paid for the initial territory.

� Training Fees

Most franchisors include initial training in the franchise fee. Additional training

for franchisee or staff may be available and fees may apply.

� Transfer Fee

When a franchisee sells his franchise, the franchisor may require the payment of

a transfer fee as a condition for transferring the franchise agreement to the new

owner.

Several research streams have attempted to explain the existence of franchising

in general and royalty rate in particular. Cheung (1969) suggests pure risk sharing to

explain the existence of sharecropping. Assuming that both parties are risk averse, they

both benefit from the insurance that arises from a share contract. Stiglitz (1974) among

others formalizes this argument in the sharecropping context while Martin (1988) puts

forth a similar argument to explain franchising.

A second strand in the literature assumes the existence of moral hazard. In the

one-sided moral hazard literature, according to Chaudhuri, Ghosh and Spell, (2012), it

is assumed that the franchisor cannot observe the franchisee in the provision of local

inputs. It cannot be observed from the level of sales since there is a random

component involved. While it will be optimal to make the franchisee the residual

claimant in this context, if the franchisee is risk averse then a share contract arises as a

compromise between the need to provide the franchisee with the insurance as well as

the need to motivate him. Stiglitz (1974) has argued these points in the sharecropping

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context while other researchers such as Mathewson and Winter (1985) and Norton

(1988) have done so in the franchising context.

Also very vital in the franchising practice is how much training and support

services the franchisee gets in setting and running the business. The researcher upholds

the contribution of smallbusinotes.com (2013) which states that the primary reason the

franchisee invests in franchising is for the training and assistance the franchisor is

expected to provide.

Franchisors offer training and training programs for franchisees and their staff

(Pipes, 2013). The proven franchise system should include an effective and

comprehensive training program (Teixeira, 2012). The franchisor’s obligation to the

franchisee ought to encompass pre-opening assistance as well as ongoing assistance.

Franchisees need to be given the proper pre-opening training so that they can start

successfully and the right post-opening training so that this can continue into a smooth

operation (Teixeira, 2012).

Training is necessary for the franchisees that do not operate the system properly

(Kirabira, 2002). He must train the franchisees when innovations are introduced to

assist the franchisee in training his staff (Mendelsohn, 1999). Abatzoglou (2002)

concurs and argues that training must be continuous and that underlying programmes

need to be evaluated from time to time to ensure they meet not only the needs of an

ever-changing market, but also the changing training needs of the franchisees and their

key personnel.

Pipes (2013) further maintains that training may take place at corporate offices

or out in the field. Each franchisor has its own training program for franchisees and

their staff, which include training done at the franchisee’s location or at the corporate

headquarters or a combination of both (allbusiness.com, 2013). Most franchisors offer

ongoing support including administrative and technical support (allbusiness.com,

2013). All ongoing administrative and technical support will be outlined in the

agreement (Pipes, 2013).

Concerning the pre-opening and post-opening training earlier mentioned

Teixeira (2012) concurs that franchisees need to be given the proper pre-opening

41

training so they can start successfully and the right post-opening so this can continue

into a smooth operation. There is need for franchisors to construct and present quality

training to their franchisees.

Quite often, quantity takes the place of quality when it comes to franchisee

training (Kirabira, 2002; Teixeira, 2012). Since franchisees can only retain a certain

amount of information from a training session, franchisor training should focus on the

most important and critical components of franchise operation. The following below

are the components of a successful franchising training programme (Teixeira, 2012):

o Teaches the critical elements and components of how to operate the franchise

o Includes ample time for questions and answers and discussions

o The franchise operation manual and the training curriculum complement each

other

o Franchisor trainers are experienced, knowledgeable and credible

o Includes simulated and/or on-site location training to impart ‘real world’

experience

o The training is long enough to provide sufficient time to learn the necessary

business methods and requirements while avoiding information overload

o Measures trainee comprehension to insure that franchisees understand and learn

what is been taught. This could consist of follow up discussions at the end of

each training session.

o Utilizes role playing when appropriate

Franchisee training must be carefully designed, constructed and presented in

order to maximize the learning experience of new franchisees. Training results should

be measured so that enhancements can be made when needed. Franchisors should

utilize an individual with proven training skills to administer the training programme.

Using an existing staff member who does not possess the required training tools may

prove costly in the long run.

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Franchise Territory Component

To assess whether a franchise represents a sound business opportunity, one of

the factors needed to be considered is the location/territory of the franchise

(businessballs.com, 2011). This issue which also applies in real estates, also applies in

franchising and according to scramblermaries.com (2013), territory is the key to retail

success. The reason behind the territory as an essential component is for the franchisor

to protect a franchisee within a certain radius (miles) to avoid inter-company

competition (Anderson, 2011; Daszkowski, 2011).

The franchisee may already have a location in mind that will require approval

by the franchisor (Anderson, 2011). The parent company (franchisor) can help to

provide guidance with site selection and lease negotiations (University Dissertations,

2011; franchise direct.com, 2012). These can be a big boost to finding an optimal site

at the right cost. allbusiness.com (2013) opines that the franchise agreement would

designate the territory in which the franchise will operate. This according to Parsley

(2013) may increase the likelihood that the outlet will attract customers.

The territory component is a pre-opening or initial service (Kirabira, 2002).

Many franchisors assist in acquiring suitable premises and then preparing them for use

as a franchise outlet (Mendelsohn, 1999). This involves application of site selection

criteria, planning and by-law compliance, lease negotiations and the design and

modeling of premises.

Regarding site selection, the franchisor will evaluate the proposed site against

the site criteria that he has established and assess if the franchise can be accommodated

in the space available. Furthermore, the franchisor will usually be able to assist the

franchisee in obtaining the necessary approval under planning legislation, for instance

rezoning in those cases where the premises found may not comply with the

legislations. In addition, the franchisor may assist the franchisee to negotiate the lease

of premises and in some cases, become the tenant and sublet the premises to the

franchisee. The premises will have to be designated and remodeled so that they

conform to the franchisor’s requirements (Mendelsohn, 1999).

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The franchise agreement, apart from designating the territory in which the

franchise owner (franchisee) will operate, will also outline any exclusivity rights the

franchisee may have (Pipes, 2013). According to Ofodile (2013), the franchisee can

enjoy exclusive or semi-exclusive marketing rights in a franchising arrangement. A

franchisor may indeed grant territorial exclusivity to its franchisees along with the

guarantee that it will not open any other stores under the same brand name, within a

specific geographical area (Penard and Perrigot, 2012). Some franchise contracts will

give the franchisee exclusive rights or territory rights to a certain geographic territory

allotted to a particular franchise, either specifically state that the franchise is

nonexclusive or are silent on the issue of territorial rights (myweb.csuchico.edu, 2012).

However, Nieman (1998) mentions that problems occur with the quality or lack

of quality of location and that even the strongest franchise system will develop

problems in an over-saturated or under-populated market. In addition, the site may be

selected poorly yet, in retailing, location is very important (Illetschko, 1999). The

franchisee usually does not question the company’s position, assuming that the

franchisor knows best.

Penard and Perrigot (2012) reveal that a stream of literature has focused on

territorial exclusivity as well as with encroachment. Encroachment denotes a situation

where a franchisor adds new stores close to its franchisees existing stores, in using the

same brand. According to them, encroachment is the key issue in franchising.

Franchisors at times aggravate this territory problem. Mayfield (1997) concurs that

since the franchisor has relatively deep pockets; he can move into the territory and

would be within the legal limits. The franchisee’s business will be cannibalized

resulting in a lot of ill-will. According to Dickey, Knight and George (2008), when a

franchisor tries to encroach on a franchisee territory, the satisfaction of the franchisee

will drop, leading to franchisee acts of non-compliance with the franchisor directives

and a franchisee perception that the quality of their relationship is deteriorating.

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Termination and Renewal Components

The termination and renewal components in franchising are also very important

components in franchising. Compared to an independently-owned business that one

can close as when one pleases, it may be difficult to abandon a franchise business mid-

stream. Typically, a franchisee is contractually bound to carry on the franchise business

for the duration stipulated in the franchise agreement (Iwere, 2013). This duration of

the franchise agreement is a provision which states the length of the agreement

(allbusiness.com, 2013).

Howell (2012) maintains that as the franchisee is leasing his franchise from the

franchisor, the franchise agreement will contain a time limit on his initial franchise

license. According to the author, the franchisor does not have to renew the franchise,

so the franchisee should look at the franchise agreement for contingencies if this were

to happen. However, most franchisors have a fixed renewal time. According to Howell

(2012), this should not be too short as the franchisee needs time to develop his

business.

Generally a franchise relationship starts with a short trial period, such as a year,

so that the franchisee and the franchisor can determine whether they want to stay in

business with one another (myweb.csuchico.edu, 2012). The average length of a

franchise contract is about 10 years (Iwere, 2013). If the franchisee wishes to quit

before the end of the period stipulated in the agreement, he or she must find a buyer

acceptable to the franchisor. A franchisee that simply quits runs the risk of incurring

huge financial damages in the event of a law suit. This is so because unlike the

franchisor, the franchisee cannot easily terminate a franchise agreement as the

franchisor is acclaimed to wield a lot of power in the relationship (Iwere, 2013).

But Parsley (2013) has it that franchise agreements typically run for 15-20

years. According to the author, after that time, the franchisor may decline to renew the

contract, but the franchisee must also be aware that renewals need not provide the

original terms and conditions and the franchisor may impose new design standards

and sales restrictions. This development could also result to a reduction in the

45

territory, possibly resulting in more competition from company-owned outlets or other

franchisees.

A franchisor can end the franchise agreement. In addition the franchise contract

is for a limited time; there is no guarantee that the franchisee will be able to renew it

(Parsley, 2013). This is referred to as non-renewal. Though allbusiness.com (2013)

states that some franchisors have arbitration clause in the franchise agreement, which

means that if legal action on either side is warranted, an arbitrator will review the case

instead of going to court. When the franchisee fails to make royalty payments or abide

by performance standards and sales restrictions the franchisor can end the franchise

agreement. More importantly the termination of the franchise agreement is usually for

cause such as the death or disability of the franchisee, insolvency of the franchisee,

breach of the franchise agreement, or failure to meet specified sales quotas

(myweb.csuchico.edu, 2012).

Petroleum Marketing Practices Act provides a much more description on this

issue. The franchisor may terminate for only for “good cause” as defined by the statute.

Thus, the franchisor may terminate only (Corrigan 1980):

� If the franchisee fails to comply with a franchise provision that is both

reasonable and of material significance to the franchise relationship;

� If the franchisee fails to exert good faith to carry out the provisions of the

franchise. The franchisor may terminate for this reason only if the franchisee

has been apprised in writing of his failures and has been given a reasonable

opportunity to correct them;

� If an event occurs that is relevant to the franchise relationship and that makes

the termination reasonable. A list of events that will make termination

unreasonable include fraud, criminal misconduct by the franchisee, the

declaration of bankruptcy by the franchisee etc;

� If the franchisor reaches a written agreement with the franchisee to end the

franchise relationship. The agreement to terminate must be entered into not

earlier than 180 days prior to the date of termination. This is to prevent the

46

franchisor from forcing the franchisee to sign mutual termination agreement at

the inception of the franchise relationship;

� If the franchisor is withdrawing from the economic region. This provision

applies to franchisors who are withdrawing their marketing operations from an

entire geographic marketing area both in good faith and in the normal course of

business.

Corrigan also states that each of the above grounds for termination under the

Act also applies to failures to renew a franchise agreement when it expires. In addition,

under the statutory provisions that apply only to non-renewals, the franchisor may

refuse to renew:

� If the franchisor and franchisee fail to agree on terms for the new contract,

provided that the franchisor bargained in good faith;

� If the franchisor receives “numerous bonafide complaints” about the

franchisee’s operation and the franchisee is both apprised of the complaints and

given an opportunity to correct deficiencies;

� If the franchisee fails to operate clean and safe premises-again provided that the

franchisee is given an opportunity to mend his ways;

� If the franchisor (subject to certain franchise term restrictions) decides in “good

faith and in the normal course of business” to alter, convert, or sell the service

station premises or if it is “uneconomical” for the franchisor to continue the

franchise relationship.

The determination by the franchisor that the continuation of the franchise would be

uneconomical cannot be based solely on the fact that it would be more profitable for

the franchisor to operate the service station himself. The legislative history also states

that in making the determination that a franchise continuation would be uneconomical

the court should “avoid judicial scrutiny of the business judgment (of the franchisor).”

On a general note the provisions of the renewal rights and franchisee

termination/cancellation policies simply deal with how the franchise can be renewed

47

or terminated (allbusiness.com, 2013, Pipes, 2013). According to mywebcsuchico.edu

(2012), the duration of the franchise is a matter to be determined between the parties.

Under the Petroleum Marketing Practices Act, franchisors seeking to terminate

the franchisee must initiate the termination process by giving the franchisee notice at

least 90 days prior to termination. Furthermore, a franchisor must give notice of

termination with 60, 90 or 120 days (depending on the reason). Under the Act notice is

the first requirement for termination (Corrigan, 1980).

However, if termination or non-renewal does occur, and the franchisee believes

that the franchisor has not complied with the Act, the statute authorizes the franchisee

to bring a suit in federal court. According to Corrigan the action can also be brought in

state court as in the case between Ted’s Tire Serv. Inc. v. Chevron USA Inc., 470 F.

Supp. 163, 165 (D. Conn. 1979). The plaintiff-franchisee may be entitled to a

preliminary injunction to maintain the status quo until the resolution of the issue. If the

franchisee prevails on the merits, he can obtain a permanent injunction against

termination or non-renewal and can obtain actual and punitive damages.

Franchise Operating Practice Components

Many franchised companies have a say about the décor, colour scheme, menu,

pricing, uniforms, and even smaller aspects of the business because they are trying to

achieve a standardized look and feel to the company (University Dissertations, 2011).

To ensure uniformity, franchisors typically control how franchisees conduct

business. These controls may significantly restrict their abilities to exercise their

business judgment. The following are typical examples of such controls (Parsley,

2013):

� Site Approval: many franchisors pre-approve sites for outlets. This may

increase the likelihood that the outlet will attract customers. The franchisor,

however, may not approve the site the franchisee wants.

� Design or Appearance Standards: franchisors may impose design or appearance

standards to ensure customers receive the same quality of goods and services in

each outlet. Some franchisors require periodic renovations or seasonal design

changes. Complying with these standards may increase.

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� Restrictions on Goods and Services Offered for Sale: franchisors may restrict

the goods and services offered for sale. For example, a restaurant franchise

owner may not be able to add to his menu popular items or delete items that are

unpopular. In the same vein, an automobile transmission repair franchise owner

may not be able to perform other types of automotive work, such as brake or

electrical system repairs

� Restrictions on Methods of Operation: franchisors may require the franchisee to

operate in a particular manner. The franchisor might require him to operate

during certain hours, use only pre-approved signs, employee uniforms, and

advertisement, or abide by certain accounting or bookkeeping procedures.

These restrictions may impede the franchisee from operating his outlets as he

deems best. The franchisee may also be required to purchase supplies only from

an approved supplier, even if purchase can be made of similar goods elsewhere

at a lower cost.

� Restrictions of Sales Area: franchisors may limit the business to a specific

territory. While these territorial restrictions may ensure that other franchisees

will not compete with the franchisee for the same customers, they could impede

his ability to open additional outlets or move to a more profitable location.

The operating practices deals with the rules, restrictions and obligations of the

franchisor and franchisee regarding successful operation of the business from the

franchisor’s perspective (Small Business Buzz, 2013). This component details how

franchises run their outlets. Though the said franchisee has a level of autonomy with

the business, but ultimately, is not the owner. Therefore, the franchisor maintains

control over every aspect of the business the franchisee is running on his behalf

(Howell, 2010).

The franchise agreement is the founding document in the terms of which the

franchise is licensed to operate the franchised business in accordance with a

predetermined business and it allows the franchisor to have control over all aspects of

the franchisee’s business to maintain effectiveness (Potgieter, 1999). The following:

design décor, layout, stock inventory; which are essentials of retail operations, apply

49

to franchising. However Kirabira (2002) buttresses that certain operating practice such

as stock inventory should not be extensive.

Included in the franchise agreement is everything the franchisee needs to know

in order to operate the business, from the moment he or she opens the doors until

closing time, as well as pre-opening and post-opening procedures (Johnson, 1999;

Kirabira, 2002). Again the franchise agreement explains in detail what the franchisor

expects from the franchisee, in the way he operates every facet of the business. These

show the operating practice components in the business. But according to Pipes (2013),

there are no standard forms of franchise agreement because the terms, conditions, and

methods of various franchises vary widely depending on the type of business.

A Schematic diagram showing the Variables in the Study

Figure 1: Conceptual Framework of the Study.

Source: The Researcher

Owner Trademark or Trade name User of Trademark or Trade name (Total Nigeria Plc) Provides training and support Expands the service station with franchisor’s Support Specifies the territory of the station Could have territory in mind subject to the franchisor’s approval

Provides termination and renewal/ Abides by the termination and renewal/

Operating practices as disclosed in operating practices of the franchisor’s the agreement

Receives costs (fees) Pays costs (fees) Initial cost and ongoing (royalty) costs

Franchising

Franchisor Franchisee

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The schema above represents the franchise agreement existing between the two

parties in franchising: the franchisor and the franchisee. The franchisor is the parent

company and the owner of the trademark while the franchisee is the individual who

uses the trademark or trade name, Total Nigeria Plc. The researcher calls the users of

the trademark, marketers operating service stations of Total Nigeria Plc in Edo State,

Nigeria, further splinted into dealers or franchise owners, managers and supervisors

obtainable in a service station.

The parent provides the necessary training and support expected in the

relationship. The parent wields enough power in the agreement on operating practices

and on termination and renewal clauses in the contract as the owner of the trademark.

But in the territory component, the franchisee may be allowed to come up with a

geographical area which is also subjected to the franchisor’s approval as the location of

most filling stations are provided by the franchisors. Lastly in the schema, it is

expected of the franchisee to pay initial and ongoing costs (fees) received by the

franchisors without which a franchise would not have existed.

Theoretical Framework

A lot of theories have been developed alongside what leads the firm to

franchise, making the subject a considerable empirical research over the years.

Unfortunately little consensus has emerge (Shane, 2001). For example whereas some

several studies report that small firms emphasize franchising more than large firms,

others report the reverse. Some studies suggest lack of capital leads a firm to franchise

(Combs and Ketchen, 1999) while others do not (Michael, 1996). One explanation for

the lack of consensus is that research on franchising generated interest quite too long

and new companies that are involved are completely different in their attitude and size

compared to the previous one (Combs and Ketchen, 1999). A second possible reason is

that the franchising form has been studied from several different points of view and

disciplines.

Empirical support for all the theories are mixed, presumably reflecting the fact

that there is probability no single explanation for franchising (Combs and

Castrogiovanni (1994) in Dicerto, 2008). However, all of them, if sometimes, at least

51

apparently, are in constrast one to another (Dant and Kaufmann, 2003), can offer

precious insights into the matter been explored. The next paragraphs will explore the

different theories trying to figure out what they propose in terms of understanding the

issue the researcher is trying to define

Resource Scarcity Theory

The basis of this theory has been posed in the 60’s by Oxendfelt and Kelly and

enhanced by others. This theory was propounded by Oxendfelt and Kelly, 1968.

Oxendfelt and Kelly described the franchising form as a temporary one leading to the

phenomenon of the ownership requisition. In other words, they argue that the reason

relying on the basis of franchising decision is the lack of resources that a firm has at

the very early stage of its development. The most obvious links of this theory can be

tracked to the resource-based view of the firm (Penrose, 1959; Wernerfelt, 1984) and

the resource-dependence theory (Pfeffer and Salancik, 1978), even if Hunt (1999)

considers it is possible to find in there six well delineated school of thought.

Resource scarcity theory proposes that companies are motivated to franchise

primarily as a means of raising capital (Oxenfeldt and Kelly, 1968). Franchising allows

the franchisor to overcome internal resource constraints by providing access to

franchisees’ resources. The franchisees pay an initial fee to join the system, and also

provide a constant and on-going stream of finance to the franchisor, via royalty

incomes or management fees, in return for continual support.

Following the rationale of this study, it is argued that, confronted by resource

limitations, firms are predicted to opt for strategic organizational and

interorganizational governance choices that ensure the availability or resources critical

for the furtherance of their business (Dant and Kaufmann, 2003) and in other words,

the entrepreneurs use franchising to gain access to significant resources that are short

and early stages of the development of their chains, such as financial, managerial and

informational resources (Oxendfelt and Kelly, 1968; Caves and Murphy, 1976;

Norton,1988).

The franchisor will require information regarding desirable locations,

information regarding sources of labour and site managers to implement the business

52

concept. As franchisees operate typically in markets and communities of which they

are themselves members and have considerable local knowledge, they can provide such

information. Thus, franchisees bring to the franchise system not just financial capital,

but also knowledge of geographic locations and labour markets, and their own

managerial labour; that is they represent an efficient bundled source of financial,

managerial and information capital (Dant and Kaufmann, 2003).

This resource scarcity view would suggest that in the long-term franchised

chains will revert to company owned networks (Oxenfeldt and Kelly, 1968) and has

prompted a number of studies who have attempted to test this proposition. It is argued

that companies are motivated to franchise primarily as a means of raising capital. For

firms with limited resources, the financial capital franchisees provide enables them to

expand. Thus, those companies lacking in resources will favour franchising compared

to firms that are relatively resource rich, a proposition supported by research

undertaken by Carney and Gedajlovic (1991) also cited in the works of Watson (2005).

Capable managers may be co-opted through franchising to overcome this human

capital constraint. The particular feature of resource constraints explanations is the

implicit view that franchising is a second-best solution forced upon the company by

temporary circumstances.

Franchising may be perceived as a short-term strategy for expansion in the face

of resource constraints, with the longer-term intention of a reduced role for franchising.

Even when franchising is not initially conceived as a temporary strategy, franchisors’

resource constraints will recede and with them the need to rely upon franchisee

resources will decrease.

It should be noticed that validity of the resource scarcity has been questioned

(Kaufmann and Dant, 1996). It is argued that as franchisees have their financial risk

concentrated in a single or at least limited number of outlets, they will demand a high

rate of return on their investment to compensate them for the risk they bear. As such it

would be more efficient to sell shares in the whole chain, thus diversifying the risk. In

addition, if franchising were simply a means to overcoming capital market

imperfections, then it would be expected that, as franchisors mature, they would

53

reduce their reliance on franchising. However there appears to be no empirical

evidence to support this (Watson, 2005).

Chaudhuri, et al., (2012) referred to resource scarcity theory as capital market

imperfections. Capital market imperfections theory argues that firms begin to franchise

to overcome capital constraints that restricts the growth of company owned chains.

There are several difficulties with this explanation. First, this would imply that as the

franchise begins to mature and become more established they should reduce their

reliance on franchising as a source of capital. As a result there should be a trend

towards more company-owned stores. But no such trend is apparent (Lafontaine,

1992).

Second it is not unusual for franchisors to provide financing to their franchisees.

Chaudhuri, et al., (2012) in an illustration states that out of the 157 fast food franchises

listed in the Entrepreneur Magazine’s 21st Annual Franchise 500 for 2000, 89

franchisors provide financing to their franchisees. Such financing involves and/or loans

for buying equipment. These franchisors certainly do not use franchising as a source of

capital.

Resource Constraints Theory is particularly related to this work in that the

entrepreneur (franchisor) with successful business-oil and gas firm (Total Nigeria Plc)

who is the major marketer of the products would in one time or the other be faced with

the inability or unwillingness to access all the resources most especially when

expanding into new markets. A business of this kind and in fact, in general, is no way

an entity. So there is a form of cooperation as other independent entrepreneurs

(franchisees) running the stations provide a constant and on-going stream of finance to

the franchisor.

Signalling Theory

Signalling theory is focused on the externalities of the market imperfections and

knowledge asymmetries to explain organizational choice was propounded by Dant and

Kaufmann (2003). The fundamental question at the base of this theory is how

franchisors manage the adverse effect of the information asymmetries of the market. In

other words, “bad” franchisors have the incentive to misinterpret their quality in

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attempt to sell franchises, and good franchisors have to face the problems related to the

misinterpretation in order to attract suitable franchisees.

Firms can counter the deleterious effects of such asymmetries using a variety of

signaling device. Signaling is particularly important in franchising context because the

transfer of trade names and operational know-how is a transfer of intangible assets

whose assessment is not easy. This is overall true in business format franchising,

considering that potential franchisees and franchisors can evaluate each other only

from an external point of view.

The most common signals are warranties, pricing, advertising and promotion,

but this kind of signal can be presented (and misrepresented) both by good companies

and bad companies. Leland and Pyle in Dicerto (2008) suggest that firms can more

easily convince potential investors of their subject’s viability by making direct and

personal investments in their enterprises. In the same way, franchisors can convince

potential franchisees of the security of the investments by the direct operation of a

critical mass of units. In other words the first things a company should do in other to be

reliable is to start its own business by itself and then enlarge it via franchised units.

This concept is completely opposite to that indicated by the resource scarcity

theory. In this theory, in fact it is assumed that the company has to run first its own

business, and then it has established a credible marketplace, operate through a

franchised channel. The resource scarcity theory suggests, instead, that the company

has to run before a franchised channel and then, when it has the adequate resources,

buy back the entire channel.

Time based comparison between resource scarcity theory and signaling theory

Resource scarcity theory Signaling theory

Start-up The company, facing constraints in acquiring adequate resources, uses franchisee in order to expand.

The company runs its own business in order to create a credible marketplace.

Development The company acquires the The company creates a

55

capital (financial, human and informational) through its franchisees.

credible marketplace.

Maturity The company buys back all the franchised outlets.

The company sells franchise units in order to expand its business

Source: Dicerto, 2008

The implications for the organizational choices are obviously completely

different. It has been argued before that young and fragile company is more likely to

use franchised units than owned ones. In this paragraph instead, it is proposed the

opposite reasoning, the younger and more fragile have to develop by themselves and

only in a second step they can evolve into a franchised form. Dant and Kaufmann

(2003), discussing this issue, demonstrate the straightness of the resource scarcity

approach over the fragility of the signaling theory finding out the larger, the older and

the more resource flush systems appear more likely to exhibit a strategic tendency

towards company ownership of outlets rather than franchisee-operated units.

However, Dicerto (2008) indicates that no researches have been carried out

applying signaling theory to single-unit and multi-unit organizational forms. This

theory is related to the study in that it undermines the notion of financial constraints as

a motive and factor that influence the decision of major oil and gas firm which the

parent company, Total Nigeria Plc, to engage in franchising with the service station

operators that are the franchisees. Marketing of the products is created by both the

franchisor and the franchisee in a credible market place.

Agency Theory

The concept originated from the work of Adolf Augustus Berle and Gardiner

Coit Means, who were discussing the issues of the agent and principal, in 1932. Berle

and Means explored the concepts of agency and their applications toward the

development of large corporation. They saw how the interests of the directors and

managers of a given firm differ from those of the owner of the firm, and used the

concepts of agency and principal to explain the origins of those conflicts. The

enhancement of the theory was done by Michael C. Jensen and William Meckling in

56

1976. They shaped the work of Berle and Means in the context of the risk-sharing

research popular in the 1960s and '70s to develop agency theory as a formal concept.

Jensen and Meckling formed a school of thought arguing that corporations are

structured to minimize the costs of getting agents to follow the direction and interests

of the principals.

Agency theory exists in any effort, in which one party (the principal), delegates

authority to a second (the agent). The link between them is the reciprocal interest they

have even to ensure that the agent(s) act(s) in the principal’s best interest (Jensen and

Meckling, 1976). Usually the principal has two basic tools at its disposal to ensure the

agent cooperation such as observation of the agents’ behaviour and incentives tied to

agent outputs.

In franchising agreement, franchisors act as principal and franchisees as agents,

because the franchisor (the principal) licenses others (the franchisees) the right to

distribute goods and services. Franchisors use the above mentioned tools aimed to

reduce deviation in the behaviour of the franchisees. Even if the franchisor sets in at a

systematic observation of the franchisees’ behaviour, making several controls over the

quality and respect of the procedures, franchising largely alleviates franchisors’ need

for costly observation of outlet managers, because the franchisees are the residual

claimants on their outlets’ profits. Moreover, franchisees typically make substantial

investments in their outlets, and the anticipated profit stream from these investments

depends on franchisees continued best efforts. Eventually, franchisees are highly

motivated to maximize the performance of their outlets and franchisors need to monitor

franchisees via reduced and direct observation.

In the standard theory of the firm, under the divorce of ownership from control,

stakeholders represent the principals in the relationship and management of the agents.

In the context of the principal-agent relationship, agency theory highlights the

importance of the information transfer process, the information asymmetry problem

and associated monitoring costs. The information asymmetry problem arises in the

principal-agent relationship because agents being in day-to-day control of a company

have detailed knowledge of its operations. The principals have neither access to this

57

knowledge, nor, in many cases, the ability to interpret information, if access was

perfect.

The franchisor-franchisee relationship parallels the principal-agent relationship,

thus allowing agency theory to provide insights into international retail franchise

activity. According to Castrogiovanni, Combs and Justis in Engman and Thornlund

(2008), the agency theory favors franchising when companies want to expand their

market. The theory has direct connection with the study judged from its relationship:

the principal, who in our case is the major marketer (franchisor) of Total Nigeria Plc,

gives right to the agent, who is his dependent marketer (franchisee) to the said

marketing major but at service stations in different outlets, to operate the petroleum

product marketing business.

Transaction-Cost Theory

In 1937, R Coase propounded the transaction cost theory which was further

expanded by Williamson in 1996. Transaction cost refers to the costs incurred in

making an economic exchange or cost of participating in the market. Transaction cost

analysis has been used to explain the adoption of franchising. Transaction cost refers to

the costs arising during some forms of economic exchange, primarily due to

uncertainty and opportunism. Transaction costs can be categorized as being bargaining;

maladaption or monitoring cost, but it is this latter category upon which the majority of

the franchise literature has focused to explain the incidence of franchising.

Monitoring costs is principally incurred due to opportunistic behaviour by

agents and it is argued that franchising provides incentives by making franchisees

residual claimants, to reduce opportunistic behaviour and therefore monitoring cost

(Watson, 2005). Transaction cost economics is widely used alongside agency

explanations of franchising (Williamson, 1991 in Abizadeh, 2010). Transaction cost

economics relates the choice of firm governance structure to the comparative cost

economics: bounded rationality (the inability to predict all future states); and

opportunism (the tendency to act for personal benefit). Transaction-costs economics

highlight the investment in transaction-specific assets, which in effect creates hostages

58

within inter-organizational relationships. The effectiveness of inter-organizational

arrangements depends upon the appropriate use of hostages to limit rather than

encourage opportunism. Transaction cost economics contributes to the development of

franchising theory.

Contractual safeguards are created to protect against moral hazard (opportunist

exploitation). Many of the contractual clauses within the franchise agreement are

interpreted as ex ante safeguards. In this way, the contract is not seen as an arbitrary

use of unilateral power by the franchisor. The contract is seen instead as a complex

monitoring agreement, within which each side posts hostages, in other to facilitate

effective centralized monitoring and to prevent externality costs (Hopkinson and

Hogarth-Scott, 1999).

The relevance of transaction cost theory to the present study is underscored by

the need to acquaint both the franchisor and the franchisee on the costs that could arise

from administration attributed to diversification. The franchisor-franchisee relationship

is on a general note greeted with certain costs in running it. So the transaction cost

theory makes available to the entrepreneur these costs. The Transaction Cost Theory

contributes to a high degree the development of franchising theory hence it clearly

spells out the contract which is seen as a complex monitoring agreement for both

parties.

Other relevant theories that had not been accorded much importance in the study

are the search cost theory and the monitoring theory. Search Cost Theory developed by

Minkler in 1992. It argues that firms franchise to gain access to local market

knowledge. This assumes that franchisees are better aware of local conditions than the

corporate headquarters and franchising provides a way of tapping into this source of

superior knowledge. Monitoring Theory developed by Rubin (1978) suggests that

franchising helps reduce costs of monitoring. By making outlet managers residual

claimants on retail outlets, monitoring costs can be reduced.

Both the search cost and monitoring theory are relevant to the present study as

they accentuate that firms enter into franchising to gain access to the knowledge of the

59

local market and the other reason is for the practice of franchising is for putting a check

to the barest minimum, the cost of monitoring.

Related Empirical Studies

Olotu and Awoseila (2011) conducted a study on Reinventing business growth

through franchising in developing economies: a study of the Nigerian fast food sector.

The purpose of the study was to examine the place of franchising in a developing

economy with emphasis centred on some food sector firms operating in two Nigerian

cities: Lagos and Port Harcourt. In addition, the study covered mainly the aspect

relating to the application of franchising in the Nigerian fast food firms with its

implications on the socio-economic values of the service business environment.

The population of the study included all the franchised fast food restaurant

business operating in Nigeria. The study had 10 firms selected through the Nigerian

Franchise Association (NIFA) report and a random sampling exercise. In these firms, a

sample element of 250 respondents i.e. 25 respondents which means 25 respondents

from each selected fast food companies through a probabilistic sampling technique.

The stated hypotheses were further analyzed for confirmations. It was therefore

hypothesized that fast food franchising in Nigeria is not accepted, does not yield good

profit in the business environment and that adaptation does not influence the propensity

of the fast food franchising.

The result proved that there is enormous interest in fast food franchising among

entrepreneurs. The study showed that out of the 100 branded players in the Nigerian

fast food industry only 10 could be said to be major players which accounted for about

75% of the market with Mr. Bigg’s having the majority market share of 45% and

Tantalizers coming second with only a 10% share. Olotu and Awoseila’s study

revealed that the Nigerian fast food industry is a profitable market largely due to her

population and other economic indices such as profitability. The present study is

related to that of Olotu and Awoseila because both studies agree that franchising is

necessary in reinventing business growth and both focused on service sectors.

However the present study chooses to assess the franchising practices adopted by oil

60

and gas firms as perceived by the marketers of service stations in Edo State already

involved with the Total Nigeria Plc as their major marketer.

Ojo (2010), in his part, conducted a study on franchising using the case of

hybrid organizational arrangement for firm’s growth and national development. The

study examines the practice of franchising as a strategy by which entrepreneurs can

expand their ventures and make substantial return from their investments. It also tried

to explore the extent to which franchising is being practiced in Nigeria and the

resultant effect of franchising on the national economy. The study was done by taking

intensive study of Nigerian business world to see the extent of the practice of

franchising system of business. The results of the study show that franchising is not

well known in Nigeria. Also indicated is that only a handful of business entities such as

fast foods companies and Nigerian Bottling Company have been engaged in

franchising. The present study is related to that of Ojo because both are focused on the

practice of franchising for the growth of Nigerian firms. Ojo’s study seemed to lack a

focus as no specific firm or line of business was clearly stated. However, the present

study is more specific as it has chosen franchising practices in a specific firm which is

an oil and gas marketing firms (Total Nigeria Plc).

Nnagbo (2009) conducted a study on the Change of entry mode-A study of

Swedish retail firm in the United Arab Emirate (UAE). The purpose of the study was to

investigate what factors (such as internal or external) caused or was responsible for

Swedish firm change of entry mode. The study which only focused on the internal

factors, comprises of resources commitment as well as external factors, consists of

target country laws and regulations. Different theories on factors causing entry mode

change together with empirical data were analyzed. The analysis clearly indicates that

Swedish retail firm has sufficient resources to compete and operate in UAE and that

the nature of UAE law on foreign investment demands that this firm must use UAE

laws to establish in the country. The paper however concludes that Swedish retail firm

change of entry mode was as a result of constraints placed by the United Arab Emirate

laws or policies on other normal entry mode. The present study is related to that of

Nnagbo in that both focused on franchising as a contractual mode. The practice of

61

franchising is a special form of licensing that operates on a contract as is the case with

the Nigeria situation. However the present study assesses franchising practices adopted

by an oil and gas firm with their outlet operators in Edo State.

Kirabira (2002) also conducted a study on the development of a model on which

to base franchise relationship. The study aimed at developing a model for which to

base good quality franchise relationships. The population of the study was limited to

business format franchising in the fast moving consumer goods (FCMG) sector in

greater Buffalo City and Amathole Districts of South Africa, an area that encompasses

the metropolitan areas of East London, King William’s Town, Alice and Peddie. The

fast moving consumer goods (FMCG) sector comprised of supermarkets and

automotive parts fitment centres such as those that fit shock absorbers, silencer boxes

and tyres, for example Super Quick. An investigation was commissioned into the

sector with the purpose of uncovering problems in the quality of the relationships in the

sector.

The obligations of both the franchisees and franchisors were stipulated. Aspects

of quality were then considered to lay a foundation upon which improvements in the

relationships could be based. This was followed by a survey to find the performance

gap between the quality of service that was expected from the franchisor and what the

franchisees are actually receiving. Five dimensions of service quality-tangibles,

reliability, responsiveness, assurance and empathy-were empirically investigated. The

findings of this research work revealed that the quality of service of franchisors fell

short in all dimensions. From the study conducted by Kirabira, it is arguable that

certain aspects of quality are neglected by franchisors.

Kirabira’s proposed model to improve the quality of service in the franchise

relationship incorporates contemporary ideas on quality: the principles of total quality

management, quality function deployment, customer satisfaction and self assessment.

The present study is related to this particular study in that there is a close relationship

in some aspects of obligation of the two parties in a franchise relationship, especially

on the franchisees’ perspective about the expected services from the franchisor and

what they are actually getting in return. However the present study focuses on

62

assessing the franchising practices adopted by an oil and gas firm involved in the

product marketing deviating from the supermarkets and automotive parts fitment

centres of the FCMG sector which is the business format franchising revealed in

Kirabira’s study.

Summary of Related Literature

A way of expansion and means of accomplishing the object of globalization is

through franchising. Franchising is an ideal way to tap into the business potential of the

huge Nigerian market. The sector is growing quickly and attracting the attention of

both local and internationally established companies.

Franchising, however, is essentially a marketing concept and as a concept, it is

an innovative method of distributing goods and services. Franchising is a form of

marketing in which the franchisor grants to an individual or company (the franchisee)

the right to run a business selling a product or providing a service under the franchisor

or identified by the franchisor’s trademark or brand. Due to the nature of Nigerian

business environment, the franchise system growth has a comparative advantage over

its neighboring West African countries as the hub of oil and gas activities and the

major destination of foreign direct investment in the region. Oil and gas firms, as had

already been established, are/have been involved in petroleum business (i.e. petroleum

product marketing) in Nigeria. This directly gave rise to the marketing in the

downstream oil and gas sector. Also, authors revealed that since the advent of

marketing of kerosene to Nigerian Independence in 1960, oil and gas firms were/had

been in full control for supplying petroleum products. This is where operators

(marketers) at service (filling stations) relevant to the study, came into play as they

come in contact on constant basis with multifarious consumers, making oil and gas

products available to them. These operators are at the low-end of the oil and gas

marketing chain whose roles cannot be overemphasized and perceptions, the researcher

considered vital.

These marketers of service stations with particular reference to the study are

dependent marketers, as aforementioned, into contract (agreement) with the major

marketer of oil and gas products which is Total Nigeria Plc in our case. So therefore,

63

the study specifically reviewed franchising concept, history, the type of

arrangement/ownership opportunities, the franchising components which include

costs/training and support, territory, operating practices, termination and renewal. The

literature reviewed reveals certain consensus of opinions by researchers and writers on

concepts under consideration as presented in the discussions that follow.

The theoretical framework for the study discussed at length in the literature

review consists of resource scarcity, signaling theory, agency theory and transaction

cost. These theories go to ascertain the rationale behind franchising and the commonest

of which as revealed in several studies is the resource and agency theories. The use of

franchising has been explained by resource argument which proposes that companies,

also called franchisors, are motivated to engage in starting franchises so as to enable

franchisees, i.e. the dependent marketers in our case, to buy as to enable the former in

raising capital. On the other hand, the agency controversy is based on the concept of

the principal-agent relationship whereby the principal delegates work to the agents who

performs the work on a daily basis. The principal could rightly be referred to as the

franchisor while the agents are the franchisees.

The various authors consulted dwelt on some aspects of franchising as a

marketing strategy or for business expansion. Most of the work of the writers

buttressed the merits and demerits of franchising in contemporary Nigeria. Moreover

the literatures were tailored to business format franchising mostly in fast food sector

still yet new in the country’s setting, seemed to have been overemphasized. Effort to

stress franchising in the petroleum product marketing of any major oil and gas firm in

the Nigeria at the low-end of the distribution i.e. service stations earlier mentioned, are

far-fetched. Hence, none of the authors or studies consulted dealt fully with the

assessment of franchising practices adopted by marketers of oil and gas firms from the

perspective of marketers at service stations in Edo State, Nigeria. This indicates a gap

in literature that this present study attempted to fill.

64

CHAPTER THREE

METHODOLOGY

This chapter describes the procedures that were used in the study which includes

design of the study, area of the study, population for the study, sample and sampling

technique, instrument for data collection, validation and reliability of the instrument,

method of data collection and method of data analysis.

Design of the Study

The study adopted a descriptive design. A survey research design according to

Ofo (2005) asserts, focuses on certain variables such as leadership styles, attributes,

attitudes, job satisfaction, opinions which lead to the gathering of information about a

group of people. The survey design was therefore deemed suitable for this study since

perceptions of dependent service station marketers/operators of Total Nigeria Plc, a

major oil and gas firm in Edo State, was sought on the franchising practices adopted by

them, using a structured questionnaire.

Area of the Study

The study was conducted in Edo State spanning across the 18 Local

Government Areas where Total Nigeria Plc service station is found. The State which is

located in Southern Nigeria is made of three Senatorial Districts: Edo South, Edo

Central and Edo North Senatorial Districts. Edo State informed the study because it has

witnessed the presence of franchise businesses. The 2009 census of Nationwide Retail

Outlets revealed that the State is one of the States in the country that has one of the

most oil and gas franchise retail outlets in the country. Appendix D provides a table for

the nationwide retail outlets to accentuate this fact.

Edo State has creative and enterprising individuals as notable traces of

entrepreneurship are evident in a myriad of sectors such as transport, manufacturing,

information technology, small and medium-scale enterprises, education and most

importantly the petroleum product marketing which forms the basis of this study.

68

65

Population for the Study

The population for the study consisted of 59 retail marketers of Total Service

Stations in Edo State. These retail marketers are made up of 17 dealers, 17 managers

and 25 supervisors. Total retail outlets as revealed by the Retail Outlets Nationwide

2009 available at pppra-nigeria.org, 2012, and the Ministry of Oil and Gas, Benin City

(2012) are 17 in number made up of 17 dealers with 17 managers and 25 supervisors.

The decision to use 59 dependent retail marketers holding the franchise of Total

Nigeria Plc was influenced by the understanding that there is similarity in their

operations, as they are already adopting the franchise strategy for their marketing

efforts and that this will yield a more reliable and unbiased results. Appendix E

provides a table for the population for the study.

Sample and Sampling Technique

Due to the manageable size of the study, the entire 59 population of the

dependent marketers (retail marketers) of Total Service Station in Edo State was

involved in the study. Therefore, there was no sampling.

Instrument for Data Collection

A structured questionnaire based on the purpose of the study, with the title,

Assessment of Total (Nigeria Plc) Retail Marketers’ Perception of Adopted

Franchising Practices Questionnaire (ATRMPAFPQ), was used to collect data from the

respondents. The questionnaire was divided into two parts (1 and 2). Part 1 sought for

information from the respondents on their personal data while part 2 was divided into

five sections (A-E) and contained item statements used for answering the research. The

questionnaire items were developed through the review of literature for each section.

Appendix B shows the respondents’ request for response to questionnaire. In

Appendix C, part 1 deals with general information about the respondents. This part

contains questionnaire items with options and blank spaces that enabled the

respondents to tick or fill as appropriate. Section A containing research question 1

(item 1) is a checklist, which sought to ascertain the franchise arrangement or

66

ownership structure run by Total Nigeria Service Stations Edo State. Items from 2 to

62 in Part 2 sought for the extent of the adoption of the franchise components. Thus,

Section B items statements (2-21) in Research Question 2 sought for information from

retail marketers of Total oil and gas service stations on the franchise cost/training and

support components adopted by major oil and gas firm (Total) as perceived by retail

marketers at service stations in Edo State. Section C item statements (22-31) in

Research Question 3 was used to elicit information on the territory components

adopted by major oil and gas firm of Total as perceived by retail marketers at service

stations in Edo State. Section D item statements (32-48) of Research Question 4 sought

for information from marketers of licensed oil and gas service stations on the

termination and renewal components adopted by Total Nigeria Plc as perceived by

their marketers (retail marketers) at service stations in Edo State. While Section E item

statements (49-62) of Research Question 5 was used to extract information on the

operating practice components adopted by major oil and gas firm of Total Nigeria Plc

as perceived by marketers at service stations in Edo State. Response options for all the

sections (A-E) were structured on a five point rating/Likert scale.

Validation of the Instrument

The questionnaire was subjected to face validation by three experts. The experts

involved are two from Business Education Unit, Department of Vocational Teacher

Education, University of Nigeria, Nsukka, Enugu State and one from the Department

of Business Administration, University of Benin, Benin City, Edo State. Each validate

was given a copy of the questionnaire to validate. Based on their corrections,

suggestions or amendments, a final copy was produced and used for data collection for

the study.

Reliability of the Instrument

To obtain the reliability of the research instrument, the instrument was trial

tested by administering 15 copies of the questionnaire to dependent marketers (retail

marketers) of Oando Nigeria Plc service stations operating in Ondo State. Oando is a

strong competitor as Total as the marketing type for the both are major marketers. The

choice of Ondo State was informed by the fact that being a neighboring state, they are

67

both in the Niger-Delta region, are located in Southern Nigeria and as such share a

common geographical divide and business characteristics. For the purpose of obtaining

the internal consistency of the four clusters in the research instrument, Cronbach Alpha

Reliability Method was used. Reliability coefficient of 0.772 was obtained for cluster

two, 0.794 for cluster three, 0.826 for cluster four while 0.759 was obtained for cluster

five. An overall reliability coefficient of 0.787 was obtained for the entire instrument.

Note: cluster one in the instrument was not structured in rating scale, hence, reliability

coefficient of the cluster could not be determined.

Method of Data Collection

The data for the study were collected by the researcher with the help of one

research assistant. The research assistant covered administration and collection of the

instrument to respondents in locations outside the City centre while researcher himself

covered administration and collection of the questionnaire to marketers/operators of

Total service stations at the city centre being where there is a large concentration of

franchise businesses, with the oil and gas marketing service stations inclusive. The

retrieval of the questionnaire took one week. This helped a lot in monitoring and

curbing delays in the completion or non-retrieval as well as enhances the return rate of

the questionnaires that were distributed.

Method of Data Analysis

The data that were collected from the respondents were analyzed using

frequency, percentage and mean for answering the research questions while Analysis

of Variance ANOVA was used for testing hypothesis at 0.05 level of significance. A

five point rating scale was used to analyze all the research questions two to five.

Therefore, any item that obtained a mean rating of 3.50 and above was accepted as

Great Extent/Agree while any item with a mean score below 3.50 was considered as

Little Extent/Disagree. The mean was computed and interpreted for each item as

indicated below:

68

Response categories

Very Great Extent/Strongly Agree (VGE/SA) 4.50-5.00

Great Extent/Agree (GE/A) 3.50-4.49

Moderate Extent/Undecided (ME/U) 2.50-3.49

Little Extent/Disagree (LE/D) 1.50-2.49

Very Little Extent/Strongly Disagree (VLE/SD) 1.00-1.49

Using SPSS version 16 package, the null hypothesis of no significant difference

was accepted for any item whose p-value was greater than 0.05 level of significance

while the hypothesis was rejected for items whose p-values were less than 0.05 level of

significance.

69

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF DATA

This chapter presents the analysis, interpretation of data and discussion of

findings for answering the research questions and testing the research hypotheses at

p≤0.05 level of significance.

Research Question 1

What is the type of franchise arrangement/ownership opportunity the retail

marketer of Total Nigerian Plc service station run?

The data for answering the research question one is presented in Table 1 below.

Table 1: Frequency and Percentage Distributions of the Type of Franchise

Arrangement/Ownership Opportunity the Retail Marketers of Total Nigerian

Plc Service Station Run.

S/N Types of Arrangement Frequency Percentage (%)

1 Single unit franchise 33 55.9 2 Multi unit franchise 8 13.6 3 Bought the franchise business 12 20.3 4 Area development franchise 4 6.8 5 Master franchise 2 3.4 Total 59 100.0

The data presented in table 1 showed the percentage distribution of types of

franchise arrangement opportunity run by the retail marketers of Total Nigerian Plc

service stations. The data in the table revealed that, majority of about 56% of the retail

marketers run the single unit franchise arrangement opportunity, followed by about

20% of the retail marketers who bought the franchise business. About 14% of the retail

marketers run multi unit franchise, about 7% run area development franchise while

only 3% run master franchise type of arrangement opportunity. This indicated that

majority of the retail marketers of Total Nigeria Plc run the single unit franchise

arrangement opportunity in Edo State.

73

70

Research Question 2

To what extent are the franchise cost, training and support components adopted


The data for answering the research question two is presented in Table 2 below.

Table 2: Mean Ratings of the Responses of the Respondents on the Extent to Which

Franchise Cost, Training and Support Components are Adopted by Total Nigeria

Plc. N=59

SN

Item Statements

X

SD

Rmks

1 There are provisions for specific projections by the franchisors 3.68 0.85 GE

2 Provision of assistance in obtaining finances 2.34 0.99 LE

3 There is provision of actual figures for existing operations 3.63 0.86 GE

4 There is huge sum of working capital needed. 3.07 0.92 LE

5 The total cost to be paid by the franchisee is fair enough. 2.39 0.96 LE

6 Provision of on-going training in form of courses, workshops, conferences, seminars, refreshers or follow-on/advanced courses, regional meetings

2.46 0.88 LE

7 Offer of advice and guidance 2.18 0.92 LE

8 There is franchisors’ commitment to support 2.41 0.90 LE

9 Having knowledgeable people to answer any type of calls 3.15 0.97 LE

10 Assisting the franchisee with the challenges they might come across in the business relationship

3.31 0.96 LE

11 Working with the franchisee to set goals and develop business strategies

2.39 0.81 LE

12 Provision for training for any staff employed by the franchisee. 2.37 0.95 LE

13 Holding meetings, providing continual communication and getting feedback from operators of retail outlets.

3.89 0.64 GE

14 Planning weekly, monthly or quarterly meetings with franchisees to use the support and counsel of the franchise firm’s staff

2.41 0.92 LE

15 The two vital fees in the agreement are the initial fees and ongoing royalty costs

3.05 0.68 LE

16 The initial training lasts for a sufficient time. 2.28 0.98 LE

17 In the event where the franchisee is found unsuitable, there is provision for refunding of the money.

3.36 0.93 LE

18 An understanding of franchisee fees and other related financial considerations is important in relationship with the franchisor.

3.20 0.76 LE

19 There is more earnings potential in the franchise business than if it were to be your own business

2.36 0.99 LE

20 In critical situations, the necessary assistance from parent company is sure.

3.50 0.93 GE

71 Note: X = Mean. GE = Great Extent SD = Standard Déviation. LE = Little Extent

N = Number of Respondents.

The data presented in Table 2 on franchise cost, training and support

components adopted by Total Nigeria Plc revealed that the mean ratings of the

responses of the respondents on 4 out of the 20 items in the table had mean values that

ranged from 3.50 to 3.89. These are greater than the cut-off point value of 3.50 on a 5-

point rating scale. This indicated that Total oil and gas firms in Edo state to a great

extent adopt the identified 4 items of franchise cost, training and support components

in their daily operations in the state.

The data presented in the Table further revealed that, the mean ratings of the

responses of the respondents on the remaining 16 items had mean values that ranged

from 2.18 to 3.36 which are all less than the cut-off point of 3.50 on a 5-point rating

scale. This finding implied that Total oil and gas firms in Edo state to a little extent

adopt the remaining 16 items of franchise cost, training and support components.

72

Research Question 3

To what extent are the franchise territory components adopted by Total Nigeria

Plc?

The data for answering the research question three is presented in Table 3

below.


Franchise Territory Components are Adopted by Total Nigeria Plc. N=59

SN

Item Statements

X

SD

Rmks

1 There is the grant of exclusive rights to operate the franchise in a specified geographical area.

1.86 0.92 Disagree

2 The location already nursed by the franchisee that require approval by the parent company (franchisor) is granted

4.32 0.65 Agree

3 Additional franchises are granted on a one-at-a-time basis 4.17 0.67 Agree

4 There is likelihood that the franchisor will grant the franchisee the rights to own and operate more than one unit.

4.38 0.61 Agree

5 The units can be within a specified geographical region negotiated between the two parties

4.22 0.62 Agree

6 The units may be multiple with random geographical locations. 2.39 0.91 Disagree

7 There is strict adherence to the development schedule for the number of units the marketer must open.

2.37 0.96 Disagree

8 Before allowing the dealer to operate another franchise, the franchisor much emphasis is placed on dealer’s capability on operating more than one unit.

4.16 0.67

Agree

9 The parent company enjoys the privilege of been directly responsible for obtaining zoning variances.

4.22 0.62 Agree

10 Defined clearly in the agreement, is the boundary of the business or franchise (exclusivity).

2.85 0.94 Disagree

Note: X = Mean. SD = Standard Déviation.


From the data presented in Table 3 on franchise territory components adopted

by Total Nigeria Plc, it was revealed that the mean ratings of the responses of the

respondents on 6 out of the 10 items in the table had mean values that ranged from 4.16

to 4.38 which are greater than the cut-off point value of 3.50 on a 5-point rating scale.

This finding showed that the respondents agreed that to a great extent, Total oil and gas

73

firms in Edo state adopt the 6 identified franchise territory components in their daily

operations in the state.


responses of the respondents on the remaining 4 items, specifically items 1, 6, 7 and 10

were 1.86, 2.39, 2.37 and 2.85 respectively which are all less than the cut-off point of

3.50 on a 5-point rating scale. This finding indicated the respondents disagreed with

the 4 items as franchise territory components adopted by Total oil and gas firms in the

state.

74

Research Question 4

To what extent are the franchise termination and renewal components adopted


The data for answering the research question four is presented in Table 4 below.


Franchise Termination and Renewal are Adopted by Total Nigeria Plc. N=59

SN

Item Statements

X

SD

Rmks

1 The duration of the franchise is determined by both parties. 4.17 0.75 GE

2 The franchise relationship started with a short trial period 4.32 0.57 GE

3 The franchise agreement specifies that termination must be for a good cause.

2.46 0.90 LE

4 Should the business wind up the marketer is given a reasonable time to wind up.

2.12 0.85 LE

5 Cases of claims of wrongful termination by the parent company abound every now and then.

2.32 0.93 LE

6 There is provision for notice of termination. 4.24 0.65 GE

7 The courts generally try to balance the rights of both parties of the contract on the issues surrounding renewal and termination

2.40 0.87 LE

8 On termination, the franchisee receives little or nothing from the business as compensation.

2.28 0.97 LE

9 There is provision of remedy for wrongful termination. 2.29 0.88 LE

10 On the winding up of the business, upgrading of facilities forms a crucial part of the renewal process.

2.38 0.93 LE

11 The franchisor wields more powers as far as the terminations and renewals are concerned which lives little room for the franchisee.

3.93 0.69 GE

12 There is provision for a get-out clause (option) for the dealer. 2.16 0.90 LE

13 When the franchisee wishes to quit before the end of the period as against the time stipulated on the agreement, there is the provision for him to find a buyer acceptable to the franchisor.

2.34 0.89 LE

14 After the duration of the said contract, the dealer is allowed renewal.

2.13 0.84 LE

15 The original terms and conditions on renewal is not provided for 3.08 0.97 LE

16 The parent imposes new design standards and sales regulations on renewal.

2.33 0.92 LE

17 The end of a franchise most of the time puts the marketer in a position where he or she is unable to renew the contract.

3.86 0.81 GE

Note: X = Mean. GE = Great Extent SD = Standard Déviation. LE = Little Extent


75

The data presented in Table 4 on franchise termination and renewal components

adopted by Total Nigeria Plc showed that the mean ratings of the responses of the

respondents on 5 out of the 17 items in the table had mean values that ranged from 3.86

to 4.32. These are greater than the cut-off point value of 3.50 on a 5-point rating scale.

This indicated that Total oil and gas firms in Edo state have to a great extent adopted

the 5 identified items of franchise termination and renewal components for their daily

operations in the state.

The data presented in the Table further showed that, the mean ratings of the

responses of the respondents on the remaining 12 items had mean values that ranged

from 2.12 to 3.08 which are all less than the cut-off point of 3.50 on a 5-point rating

scale. This finding implied that Total oil and gas firms in Edo state have to a little

extent adopted the remaining 12 items of franchise termination and renewal

components for their daily business operations in the state.

76

Research Question 5

To what extent are the operating practice components in franchising adopted by

Total Nigeria Plc?

The data for answering the research question five are presented in Table 5

below.


Operating Practice Components in Franchising are Adopted by Total Nigeria

Plc. N=59

SN

Item Statements

X

SD

Rmks

1 The franchisee is extremely involved with all of the daily operations of the business.

2.12 0.96 Disagree

2 The dealer has the contractual rights to the franchisor’s latest products or innovations.

2.15 0.97 Disagree

3 The franchisee also has the right to select the site for the service station business he chooses to operate.

2.42 0.75 Disagree

4 The franchisor has greater control over the franchise operations in maintaining franchise identity and product quality.

4.69 0.46 Agree

5 The continuing management aid, training and assistance provided by the franchisor or parent company are covered by the royalty fee or service.

2.20 0.88 Disagree

6 Operating hours and days are set forth in the franchise contract. 2.37 0.80 Disagree

7 Certain aspects of local advertising is left, but managed by franchisor, in the hands of the franchisees.

2.29 0.97 Disagree

8 There are no limits to what is or can be sold. 2.37 0.93 Disagree

9 Incidence of mass purchasing, mandatory for the franchisee to be a participant buyer of the products of Total.

4.39 0.61 Agree

10 The franchisee is expected to be very hands-on in the business operation.

4.22 0.62 Agree

11 The franchise owner abides by certain accounting and bookkeeping procedures.

2.39 0.69 Disagree

12 The franchisee is restricted to purchase supplies only from an approved supplier

4.27 0.72 Agree

13 The operation of the business is for the franchisor to have control over all aspects of the franchisee’s business.

4.32 0.73 Agree

14 The control over the operation makes for effectiveness. 2.44 0.70 Disagree

Note: X = Mean. SD = Standard Déviation.

77


From the data presented in Table 5 on the extent to which operating practice

components in franchising are adopted by Total Nigeria Plc, it was revealed that the

mean ratings of the responses of the respondents on 5 out of the 14 items in the table

had mean values that ranged from 4.22 to 4.69 which are greater than the cut-off point

value of 3.50 on a 5-point rating scale. This finding revealed that the respondents

agreed that Total oil and gas firms in Edo state have to a great extent adopted the 5

identified operating practices in franchising for their daily operations in the state.


responses of the respondents on the remaining 9 items ranged from 2.12 to 2.44 which

are all less than the cut-off point of 3.50 on a 5-point rating scale. This finding implied

the respondents disagreed with the 9 items as the extent to operating practice

components in franchising are adopted by Total Nigeria Plc in Edo state.

78

Testing of Hypothesis

Hypothesis One Educational qualification of the dependent marketers is not a significant source

of difference on the extent to which franchise cost, training and support components

are adopted by Total Nigeria Plc.

The data for answering hypothesis one are presented in table 6 below.

Table 6: The Analysis of Variance (ANOVA) of the Mean Ratings of the Dependent

Marketers Based on their Educational Qualification on the Extent to Which

Franchise Cost, Training and Support Components are Adopted by Total

Nigeria Plc.

Sources of

Variance

Sum of

Squares

DF

Mean

Square

F-cal

p-

value

Level

of Sig.

Rmks

Between Groups

1.735

2

3.57

5.42

0.00

0.05

S* Within Groups 40.913 55 0.04

Total 42.648 58

The analysis of variance (ANOVA) presented in Table 6 above showed that the

p-value of 0.00 is less than 0.05 level of significance. This implied that educational

qualification of the dependent marketers is a significant source of difference on the

extent to which franchise cost, training and support components are adopted by Total

Nigeria Plc. Therefore, the null hypothesis of no significant difference for hypothesis

one is rejected.

79 Hypothesis Two

Location of the service station is not a significant source of difference on the

extent to which franchise territory components are adopted by Total Nigeria Plc.

The data for answering hypothesis two are presented in table 7 below.

Table 7: The Analysis of Variance (ANOVA) of the Mean Ratings of the Responses of

Respondents Based on their Location on the Extent to Which Franchise

Territory Components are Adopted by Total Nigeria Plc.

Sources of

Variance

Sum of

Squares

DF

Mean

Square

F-cal

p-

value

Level

of Sig.

Rmks

Between Groups

0.013

2

0.51

0.79

0.29

0.05

NS

Within Groups 54.227 56 0.06

Total 54.239 58

The analysis of variance (ANOVA) presented in Table 7 above revealed that the

p-value of 0.29 in the table is greater than 0.05 level of significance. This indicated that

location of service station of the dependent marketers is not a significant source of

difference on the extent to which franchise territory components are adopted by Total

Nigeria Plc. Therefore, the null hypothesis of no significant difference for hypothesis

two is accepted.

80 Hypothesis Three

Experience acquired in the petroleum business is not a significant source of

difference on the extent to which franchise termination and renewal components are


The data for answering hypothesis three are presented in table 8 below.


Respondents Based on their Experience on the Extent to Which Franchise

Termination and Renewal Components are Adopted by Total Nigeria Plc.

Sources of

Variance

Sum of

Squares

DF

Mean

Square

F-cal

p-

value

Level

of Sig.

Rmks

Between Groups

5.626

2

7.31

8.32

0.00

0.05

S*


Total 39.747 58

The analysis of variance (ANOVA) presented in Table 8 above showed that the

p-value of 0.00 is less than 0.05 level of significance. This indicated that years of

experience acquired by the dependent marketers is a significant source of difference on

the extent to which franchise termination and renewal components are adopted by

Total Nigeria Plc. Therefore, the null hypothesis of no significant difference for

hypothesis three is rejected.

81 Hypothesis Four

Position of the marketer/position of oil and gas marketing company is not a

significant source of difference on the extent to which franchise operating practice


The data for answering hypothesis four are presented in table 9 below.


Respondents Based on Job Positions on the Extent to Which Franchise

Operating Practice Components are Adopted by Total Nigeria Plc.

Sources of

Variance

Sum of

Squares

DF

Mean

Square

F-cal

p-

value

Level

of Sig.

Rmks

Between Groups

0.188

2

0.09

0.62

0.54

0.05

NS


Total 18.680 58

The analysis of variance (ANOVA) presented in Table 9 above revealed that the

p-value of 0.54 in the table is greater than 0.05 level of significance. This implied that

job positions of the dependent marketers is not a significant source of difference on the

extent to which franchise operating practice components are adopted by Total Nigeria

Plc. Therefore, the null hypothesis of no significant difference for hypothesis four is

accepted.

82

Findings of the Study.

Based on the presentation and interpretation of the data analyzed, the findings

that emanated from the research questions answered and hypotheses tested are

presented below:

Type of franchise arrangement/ownership opportunity run by the retail

marketers of Total Nigeria Plc

The study on research question one found out that, majority of about 56% of the

retail marketers run the single unit franchise arrangement opportunity, followed by

about 20% of the retail marketers who bought the franchise business. The least

franchise type of arrangement run by the dependent marketers is master franchise

which account for only 3%.

Franchise cost, training and support components adopted by Total Nigeria Plc

The study on research question two found that the respondents agreed that 4 out

of the 20 items of franchise cost, training and support components were to a great

extent adopted by Total Nigeria Plc. The 4 items include the following:

1. There are provisions for specific projections by the franchisors

2. There is provision of actual figures for existing operations

3. Holding meetings, providing continual communication and getting feedback

from operators of retail outlets.

4. In critical situations, the necessary assistance from parent company is sure.

The study also found that the remaining 16 items of franchise cost, training and

support components were to a little extent adopted by Total Nigeria Plc. The 16 items

include:

1. Provision of assistance in obtaining finances

2. There is huge sum of working capital needed

3. The total cost to be paid by the franchisee is fair enough.

4. Provision of on-going training in form of courses, workshops, conferences,

seminars, refreshers or follow-on/advanced courses, regional meetings

5. Offer of advice and guidance

6. There is franchisors’ commitment to support

7. Having knowledgeable people to answer any type of calls

83

8. Assisting the franchisee with the challenges they might come across in the

business relationship

9. Working with the franchisee to set goals and develop business strategies

10. Provision for training for any staff employed by the franchisee.

11. Planning weekly, monthly or quarterly meetings with franchisees to use the

support and counsel of the franchise firm’s staff

12. The two vital fees in the agreement are the initial fees and ongoing royalty costs

13. The initial training lasts for a sufficient time.

14. In the event where the franchisee is found unsuitable, there is provision for

refunding of the money.

15. An understanding of franchisee fees and other related financial considerations is

important in relationship with the franchisor.

16. There is more earnings potential in the franchise business than if it were to be

your own business

Franchise territory components adopted by Total Nigeria Plc

The study as regards to research question three found that the respondents

agreed that 6 out of the 10 items of franchise territory components were to a great

extent adopted by Total Nigeria Plc. The 6 items of franchise territory components

adopted include the:

1. The location already nursed by the franchisee that require approval by the parent

company (franchisor) is granted

2. Additional franchises are granted on a one-at-a-time basis

3. There is likelihood that the franchisor will grant the franchisee the rights to own

and operate more than one unit.

4. The units can be within a specified geographical region negotiated between the

two parties

5. Before allowing the dealer to operate another franchise, the franchisor much

emphasis is placed on dealer’s capability on operating more than one unit.

84

6. The parent company enjoys the privilege of been directly responsible for

obtaining zoning variances.

The study also found that the remaining 4 items as franchise territory

components were to a little extent adopted by Total Nigeria Plc. The 4 items include:

1. There is the grant of exclusive rights to operate the franchise in a specified

geographical area.

2. The units may be multiple with random geographical locations.

3. There is strict adherence to the development schedule for the number of units

the marketer must open.

4. Defined clearly in the agreement, is the boundary of the business or franchise

(exclusivity).

Franchise termination and renewal components adopted by Total Nigeria Plc

The study on research question four found that the respondents agreed that 5 out

of the 17 items of franchise termination and renewal components were to a great extent

adopted by Total Nigeria Plc. The 5 items include:

1. The duration of the franchise is determined by both parties.

2. The franchise relationship started with a short trial period

3. There is provision for notice of termination.

4. The franchisor wields more powers as far as the terminations and renewals are

concerned which lives little room for the franchisee.

5. The end of a franchise most of the time puts the marketer in a position where he

or she is unable to renew the contract.

The study also found that the remaining 12 items of franchise termination and

renewal components were to a little extent adopted by Total Nigeria Plc. The 12 items

include:

1. The franchise agreement specifies that termination must be for a good cause.

2. Should the business wind up the marketer is given a reasonable time to wind up.

3. Cases of claims of wrongful termination by the parent company abound every

now and then.

85

4. The courts generally try to balance the rights of both parties of the contract on

the issues surrounding renewal and termination

5. On termination, the franchisee receives little or nothing from the business as

compensation.

6. There is provision of remedy for wrongful termination.

7. On the winding up of the business, upgrading of facilities forms a crucial part of

the renewal process.

8. There is provision for a get-out clause (option) for the dealer.

9. When the franchisee wishes to quit before the end of the period as against the

time stipulated on the agreement, there is the provision for him to find a buyer

acceptable to the franchisor.

10. After the duration of the said contract, the dealer is allowed renewal.

11. The original terms and conditions on renewal is not provided for

12. The parent imposes new design standards and sales regulations on renewal.

Operating practice components in franchising adopted by Total Nigeria Plc

The study as regards to research question five found that the respondents agreed

that 5 out of the 12 items of operating practice components were to a great extent

adopted by Total Nigeria Plc. The 5 items of operating practice components adopted

include the:

1. The franchisor has greater control over the franchise operations in maintaining

franchise identity and product quality.

2. Incidence of mass purchasing, mandatory for the franchisee to be a participant

buyer of the products of Total.

3. The franchisee is expected to be very hands-on in the business operation.

4. The franchisee is restricted to purchase supplies only from an approved supplier

5. The operation of the business is for the franchisor to have control over all

aspects of the franchisee’s business.

The study also found that the remaining 4 items as franchise territory

components were to a little extent adopted by Total Nigeria Plc. The 4 items include:

86

1. The franchisee is extremely involved with all of the daily operations of the

business.

2. The dealer has the contractual rights to the franchisor’s latest products or

innovations.

3. The franchisee also has the right to select the site for the service station business

he chooses to operate.

4. The continuing management aid, training and assistance provided by the

franchisor or parent company are covered by the royalty fee or service.

5. Operating hours and days are set forth in the franchise contract.

6. Certain aspects of local advertising is left, but managed by franchisor, in the

hands of the franchisees.

7. There are no limits to what is or can be sold.

8. The franchise owner abides by certain accounting and bookkeeping procedures.

9. The control over the operation makes for effectiveness.

H01: The analysis of variance (ANOVA) on hypothesis one showed that the p-

value of 0.00 is less than 0.05 level of significance. This implied that educational

qualification of the dependent marketers is a significant source of difference on the

extent to which franchise cost, training and support components are adopted by Total

Nigeria Plc.

H02: The analysis of variance (ANOVA) on hypothesis two revealed that the p-

value of 0.29 in the table is greater than 0.05 level of significance. This indicated that

location of service station of the dependent marketers is not a significant source of

difference on the extent to which franchise territory components are adopted by Total

Nigeria Plc.

H03: The analysis of variance (ANOVA) on hypothesis three showed that the p-

value of 0.00 is less than 0.05 level of significance. This indicated that years of

experience acquired by the dependent marketers is a significant source of difference on

the extent to which franchise termination and renewal components are adopted by

Total Nigeria Plc.

87

H04: The analysis of variance (ANOVA) on hypothesis four revealed that the p-

value of 0.54 in the table is greater than 0.05 level of significance. This implied that

job positions of the dependent marketers is not a significant source of difference on the

extent to which franchise operating practice components are adopted by Total Nigeria

Plc.

Discussion of Research Findings

The findings of this study were discussed under the following sub-headings in

line with the specific purposes of the study:

1. Type of franchise arrangement/ownership opportunity run by the retail


2. Franchise cost, training and support components adopted by Total Nigeria Plc

3. Franchise territory components adopted by Total Nigeria Plc

4. Franchise termination and renewal components adopted by Total Nigeria Plc

5. Operating practice components in franchising adopted by Total Nigeria Plc

Type of franchise arrangement/ownership opportunity run by the retail


The findings of this study on research question one showed that majority of the

retail marketers of Total Nigeria Plc run the single unit franchise arrangement

opportunity while only few of them run master franchise arrangement opportunity.

Single-unit franchising is the most common and also the simplest form of franchising

arrangement. This as found out by Daszkowski (2011) has less investment costs than

operating opening up multi-units. In addition, Daszkowski reported that most single

unit franchisees yield a nice income, there is more earning potential with multi-unit

franchises.

Franchise cost, training and support components adopted by Total Nigeria Plc

The findings of this study on research question two showed that independent

marketers of Total Nigeria Plc to a great extent adopted 4 out of the 21 items of

franchise cost, training and support components. These include: provisions for specific

88

projections by the franchisors, provision of actual figures for existing operations,

holding meetings, providing continual communication and getting feedback from

operators of retail outlets and assurance of necessary assistance from parent company.

The findings of the study on research question two further showed that the

remaining 16 items of franchise cost, training and support components were to a little

extent adopted by Total Nigeria Plc. Some of these items include: provision of

assistance in obtaining finances, provision of huge sum of working capital needed, fair

cost for franchisee, provision of on-going training in form of courses, workshops,

conferences, seminars, refreshers or follow-on/advanced courses, regional meetings,

offering of advice and guidance, franchisors’ commitment to support, having

knowledgeable people to answer any type of calls, assisting the franchisee with the

challenges they might come across in the business relationship, working with the

franchisee to set goals and develop business strategies, provision for training for any

staff employed by the franchisee and planning weekly, monthly or quarterly meetings

with franchisees to use the support and counsel of the franchise firm’s staff among

others. The findings of this study on franchise cost, training and support components

adopted by total Nigeria plc agreed with that of the study of Amoda (2004) who found

that most merchandising companies in the country fail in business due to many factors

among which are the inability to take note of transaction cost in fixing cost of

commodity produced. In addition, the findings of this study corroborated the report of

Ojo (2010) whose results showed that franchising is not well known in Nigeria which

indicated that only a handful of business entities such as fast foods companies and

Nigerian Bottling Company have been partially engaged in franchising.

Franchise territory components adopted by Total Nigeria Plc

The findings of this study on research question three showed that the dependent

marketers to a great extent agreed they adopted 6 out of the 10 items of franchise

territory components. The 6 items of franchise territory components adopted include:

the location already nursed by the franchisee that require approval by the parent

company (franchisor) is granted, additional franchises are granted on a one-at-a-time

basis, likelihood that the franchisor will grant the franchisee the rights to own and

89

operate more than one unit, units can be within a specified geographical region

negotiated between the two parties, allowing the dealer to operate another franchise,

the franchisor much emphasis is placed on dealer’s capability on operating more than

one unit and parent company enjoys the privilege of been directly responsible for

obtaining zoning variances.

The findings of the study on research question three further showed that the

dependent marketers to a little extent adopted the remaining 4 items as franchise

territory components by Total Nigeria Plc. The 4 items include: granting of exclusive

rights to operate the franchise in a specified geographical area, multiplying units with

random geographical locations, strict adherence to the development schedule for the

number of units the marketer must open and clear definition of agreement boundary of

the business or franchise.

The findings of this study agreed with the submission of Mendelsohn (1999)

who reported that, the franchisor assist the franchisee to negotiate the lease of premises

and in some cases, become the tenant and sublet the premises to the franchisee. In

affirmation, Penard and Perrigot (2012) also reported that the premises of business

operation a times have to be designated and remodeled so that they conform to the

franchisor’s requirements. That a franchisor may indeed grant territorial exclusivity to

its franchisees along with the guarantee that it will not open any other stores under the

same brand name, within a specific geographical area.

Franchise termination and renewal components adopted by Total Nigeria Plc

The findings of this study as regards to research question four showed that the

dependent marketers of Total Nigeria Plc to a great extent adopted 5 out of the 17

items of franchise termination and renewal components. These include: determining

the duration of the franchise by both parties, starting franchise relationship with a short

trial period, provision for notice of termination, wielding more powers as far as the

terminations and renewals are concerned which lives little room for the franchisee and

putting the marketers in a position where he or she is unable to renew the contract.

The findings of the study on research question four further showed that the

remaining 12 items of franchise termination and renewal were to a little extent

90

adopted by Total Nigeria Plc. Some of these items include: specified agreement of

franchise that termination must be for a good cause, giving reasonable time to the

marketers to wind-up should the business wind up, cases of claims of wrongful

termination by the parent company abound every now and then, balancing the rights of

both parties of the contract on the issues surrounding renewal and termination by court,

receiving little from the business as compensation by franchisee when business

terminates, provision of remedy for wrongful termination, winding up of the business,

upgrading of facilities forms a crucial part of the renewal process and provision for a

get-out clause (option) for the dealer.

The findings of this study is in conformity with the result of the study of

Awosipe (2007) who investigated strategies for enhancing business success in Ogun

State and found among that determining the duration of business by the parties

involved in business helps in business success and that this situation helps business

partners to earn more powers in business operations. The findings of the study also

agreed with part of the result of Okoye (2005) whose findings showed that some

reasons for business failure in Nigeria environment include lack of compensations

when the need arise and inadequate infrastructural facilities to support business which

often times result to increase cost of production. These are to little extent taken care of

in Nigerian business environment which is further substantiated by the findings of this

study.

Operating practice components in franchising adopted by Total Nigeria Plc

The findings of this study on research question five showed that the dependent

marketers to a great extent adopted 5 out of the 12 items of operating practices

components for oil and gas products by Total Nigeria Plc in Edo state. The 5 items

which were agreed upon include: having greater control by franchisor over the

franchise operations in maintaining franchise identity and product quality, incidence of

mass purchasing, mandatory for the franchisee to be a participant buyer of the products

of Total, the franchisee is expected to be very hands-on in the business operation,

franchisee restrictions to purchase supplies only from an approved supplier

91

and operation of the business is for the franchisor to have control over all aspects of the

franchisee’s business.

The findings of the study on research question five further showed that the

dependent marketers to a little extent adopted 9 items as operating practice components

by Total Nigeria Plc. Some of the 9 items which were disagreed upon include: extreme

involvement of franchisee with all of the daily operations of the business, having

contractual rights to the franchisor’s latest products or innovations by the dealers,

franchisee having the right to select the site for the service station business he chooses

to operate, continuing management aid, training and assistance provided by the

franchisor or parent company are covered by the royalty fee or service, operating hours

and days are set forth in the franchise contract, no limits to what is or can be sold,

abiding by certain accounting and bookkeeping procedures on the part of the franchise

owner and control over the operation makes for effectiveness.

The findings of this study on the adopted operating practice components in

franchising corroborated that of Honey (2008) who found that high involvement of

franchisee in operations of the business, overwhelming right for site selection for

business operation, maintaining certain accounting and bookkeeping procedures by the

franchise and control over the operation, makes for effectiveness are less employed in

business management by most entrepreneurs. In addition and agreement with the

findings, Howell (2010) submitted that the franchisor maintains control over every

aspect of the business the franchisee is running on his behalf. Potgieter (1999) found

that the franchise agreement is the founding document in the terms of which the

franchise is licensed to operate the franchised business in accordance with a

predetermined business and it allows the franchisor to have control over all aspects of

the franchisee’s business to maintain effectiveness. The findings of the study also

conformed to that of Kirabira (2002) whose report buttressed the findings of this study

that certain operating practice such as stock inventory should not be extensive.

92

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

This chapter presented the summary of the restatement of the problem, purpose

of the study, procedure used for the study, major findings of the study, conclusion

based on the findings, implications of the study, recommendation for implementation

and suggestions for further study.

Restatement of the Problem

Franchising in Nigeria had come a long way but due to the turn of events in the

country amidst insufficient ethical franchising which is traceable to lack of specific

laws on franchising in the country compared to South Africa, USA, Spain, etc.

Therefore the franchisor or the parent company is at liberty to pen down in the

franchise agreement, the way the business would be run in whatever way he chooses.

This action leaves little consideration for the franchisees in the agreement as he is

meant to abide by them. As a result, the franchisor wields enough powers. This also

makes the franchisees’ satisfaction drop and there is this perception that the quality of

the relationship is deteriorating. Over and again the growth of the sector has been

accompanied by an increase in the incidence of unethical practices melted on the

franchisees.

We are in the era where those in the business of franchising projected that the

franchising market in Nigeria will grow at 10 per cent in Nigeria. The researcher is of

the opinion that growth is everything. Being one of the oldest in the distribution (or

retail marketing) sector, service stations are expected to have come of age. It is still a

wonder to discover that they represent the largest percentage of total sales as far as

product franchising is concerned according to studies. The marketers have in most

times been relegated to only dispensing of oil and gas products, meeting up with the

parent’s demand and nothing else. Little room is allowed them to expand for example,

ensuring that single units break into multi units or even an area developer after a time

tested relationship long enough to prove to the parent the capability to run the service

92

93

station as most of them have actually existed long enough to move on. This creates the

feeling that their efforts are not appreciated.

In any agreement between individuals say two for instance, there are conditions

placed on both parties. Partnership, as a relationship, is supposed to be mutual and

beneficial to either party involved, where both are interested in ensuring that they are

living up to the stated goals and objectives. There is this notion that the level of

awareness on the concepts and best practices on franchising is presently low. The

viability of franchising as an organizational platform has been called to question by

researchers. On average, there is the belief held by some individuals that franchise

organizations are less successful at coordinating marketing strategies, incidence of

provision of minimum support and advertising less than their wholly company

competitors.

However, the extent of franchise relationship in terms of the franchising

practices among oil marketing companies in Nigeria and their franchisors is yet

unknown and thus, formed the trust of this study.

Purpose of the Study

The main purpose of the study was to assess the franchising practices adopted

by Total Nigeria Plc as perceived by retail marketers of service stations in Edo State.

Specifically, the study:

1. Identified the type of franchise arrangement/ownership opportunities the retail

marketers of Total Nigeria Plc service station run.

2. Determined the extent to which the franchise cost, training and support


3. Found out the extent to which the franchise territory components are adopted by

Total Nigeria Plc.

4. Determined the extent to which the franchise termination and renewal


5. Found out the extent to which the franchise operating practice components are


94

Summary of the Procedure Used for the Study

Five research questions were developed and answered by the study while four

null hypotheses were formulated and tested at p ≤ 0.05 level of significance. The study

adopted descriptive survey research design and was carried out in Edo State. The

population for the study was 59 retail marketers of Total Service Stations in Edo State.

These retail marketers are made up of 17 dealers, 17 managers and 25 supervisors. Due

to the manageable size of the population, the entire 59 retail marketers of Total Service

Stations in Edo State were involved in the study. Therefore, there was no sampling in

the study.

The instrument for data collection is a structured questionnaire titled

‘Assessment of Total (Nigeria Plc) Retail Marketers’ Perception of Adopted

Franchising Practices Questionnaire (ATRMPAFPQ)’. The questionnaire was

subjected to face validation by three experts. These include two Lecturers from

Business Education Unit of the Department of Vocational Teacher Education,

University of Nigeria, Nsukka, Enugu State and one Lecturer from the Department of

Business Administration, University of Benin, Benin City, Edo State. To obtain the

reliability of the research instrument, the instrument was trial tested by administering

15 copies of the questionnaire to dependent (major) marketers (retail marketers) of

Oando Nigeria Plc service stations operating in Ondo State. Cronbach Alpha

Reliability coefficient of 0.772 was obtained for cluster two, 0.794 for cluster three,

0.826 for cluster four while 0.759 was obtained for cluster five. The data for the study

were collected by the researcher with the help of one research assistant. The research

assistant covered administration and collection of the instrument to respondents in

locations outside the City centre while researcher himself covered administration and

collection of the questionnaire to marketers/operators of Total service stations at the

City centre being where there is a large concentration of franchise businesses. All the

59 copies of the questionnaire administered were retrieved representing 100% return

rate. The data collected from the respondents were analyzed using frequency,

percentage and mean for answering the research questions while Analysis of Variance

ANOVA was used for testing hypothesis at 0.05 level of significance.

95

Major Findings of the Study The study found out that:

1. Majority of about 56% of the retail marketers of oil and gas products in Total

Nigeria Plc in Edo state run the single unit franchise arrangement opportunity.

2. Franchise cost, training and support components were to a little extent adopted

by retail marketers of oil and gas products in Total Nigeria Plc in Edo State.

3. The retail marketers of oil and gas products agreed that they adopted to a great

extent 6 out of the 10 Franchise territory components identified in the study

while the remaining 6 Franchise territory components were disagreed upon by

the retailers.

4. Franchise termination and renewal components adopted were to a little extent

adopted by retail marketers of oil and gas products in Total Nigeria Plc in Edo

State.

5. The retail marketers of oil and gas products agreed that they adopted to a great

extent 5 out of the 14 operating practice components in while the remaining 12

operating practice components were disagreed upon by the retailers.

6. Qualification of the dependent marketers is a significant source of difference on

the extent to which franchise cost, training and support components are adopted

by Total Nigeria Plc.

7. Location of service station of the dependent marketers is not a significant source

of difference on the extent to which franchise territory components are adopted

by Total Nigeria Plc.

8. Experience acquired by the dependent (major) marketers is a significant source

of difference on the extent to which franchise termination and renewal


9. Job position of the dependent marketers is not a significant source of difference

on the extent to which franchise operating practice components are adopted by

Total Nigeria Plc.

96

Implications for Business Education

The success of franchisees (retail marketers) in oil and gas industry will be

based on effective franchising practices adopted by the parent companies. Therefore,

the findings of this study have positive implications for business education students

and lecturers in the sense that the findings of the study will provide the required

information and knowledge on the principles and practices of franchising which can be

utilized by the lecturers for equipping learners and to the students who may wish to get

involved in oil and gas business on graduation.

The findings of the study also have significant implication to retail marketers of

oil and gas products, franchisees, franchisors, marketing consultants and Nigerian

International Franchise Association (NIFA) in the sense that the study will create the

awareness and knowledge of the importance of application of franchising practices for

enhanced product distribution and income generation of the major stake holders in the

Nigerian oil and gas industry.

Conclusion This study was conducted to investigate the franchising practices adopted by

Total Nigeria Plc as perceived by retail marketers of service stations in Edo State. It

was found out that the identified franchising practices identified were to a little extent

practiced by retail marketers of oil and gas products in Total Nigeria Plc. Therefore, it

can be concluded that the findings of this study is a major factor in the three major

problems of franchising which include: incidence of abuses by franchisors of the

franchisees, either intentionally or accidentally; fears of potential abuses among

franchisees; and corporate takeovers of franchised companies leading to increased

communication breakdowns with the franchisees.

Recommendations Based on the findings and conclusions drawn from the study, the following

recommendations were made that:

1. There should be effective monitoring outfit by government to ensure checks and

balances between the franchisees and franchisors in the oil and gas sector of the

Nigerian economy.

97

2. Considering the important role played by the franchisees in oil and gas products

distribution in the Nigerian economy, there should be regular workshops

organized by experts and academics to sensitize major actors in the Nigerian oil

and gas sector on effective application of franchising practices.

3. There should be specific franchising laws appropriately enforced to aid in the

conduct of franchising practices in Nigeria as it exist in South Africa, USA,

Spain and other developed countries.

4. The federal and state government should ensure the provision of enabling

business environment and security for effective growth and development of

franchisees (retail marketers) of oil and gas products in the country.

Suggestions for Further Research

The following suggestions were made for further research:

1. Strategies for enhancing the application of franchising practices among oil and

gas firms in Edo State.

2. The challenges facing operators of small and medium scale enterprises in

effective application of working capital management practices for enterprise

management in Enugu State.

3. Strategies for enhancing smooth relationship between franchisees and

franchisors in the oil and gas industry in South-South Nigeria.

4. This study should be replicated in other South-Southern States such as Delta,

Akwa Ibom, Rivers, Cross River and Bayelsa States where there are high

prevalence of oil and gas franchising practices due to the bulky oil deposits in

the area.

5. Assessment of franchising practices adopted by Oil and Gas firms (Agip Nigeria

Plc) as perceived by the retail operators in Edo State.

98

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APPENDICES

Appendix A

Department of Vocational Teacher Education (Business Education Unit) University of Nigeria, Nsukka Enugu State. 7th April, 2013

____________________________

_____________________________

_____________________________

_____________________________

Dear Sir/Madam,

REQUEST FOR VALIDATION OF RESEARCH INSTRUMENT

I am a postgraduate student of the above-named department carrying out a study on the Assessment of Franchising Practices Adopted by Oil and Gas Firms (Total Nigeria Plc) as Perceived by Retail Marketers in Edo State. Attached herewith are draft copies of instrument. Kindly vet the instrument for content, clarity and suitability for use in collecting data for the study. Specifically, you are requested to reward/delete/add items as appropriate and make general comments and suggestions for improving the instrument toward meeting the purpose for the study.

Thanks for your assistance. Yours faithfully, Emmanuel Uyiosa Iriowen

Validate’s Name ……………………………………………………………………………

Signature……………………………………………………………………………………

Comments…………………………………………………………………………………..

109

Appendix B

Department of Vocational Teacher Education (Business Education Unit) University of Nigeria, Nsukka Enugu State. 7th April, 2013

Dear Sir/Madam,

REQUEST FOR RESPONSE TO QUESTIONNAIRE

I am a postgraduate student of the above-named department carrying out a study on the

Assessment of Franchising Practices Adopted by Oil and Gas Firms (Total Nigeria Plc)

as Perceived by Retail Marketers in Edo State.

The attached questionnaire schedule is designed to elicit the necessary information for

the study. You are please requested to respond to the questionnaire items as objectively

as possible. The information supplied will be strictly for the study and will be treated

confidentially.

Thanks for your anticipated cooperation.

Yours sincerely,

Emmanuel Uyiosa Iriowen

(Researcher)

110

Appendix C

QUESTIONNAIRE

University of Nigeria, Nsukka Department of Vocational Teacher Education (Business Education Unit)

Project Topic: Assessment of Franchising Practices Adopted by Oil and Gas Firms

(Total Nigeria Plc) as Perceived by Retail Marketers in Edo State

Part 1: General Information

Please complete the following by ticking [√] as appropriate:

1. Position of the Retail Marketer at the Station:

(a) Dealer [ ]

(b) Manager [ ]

(c) Supervisor [ ]

2. Highest Educational Qualification of the Retail Marketer:

(a) Postgraduate [ ]

(b) B.Sc/HND [ ]

(c) NCE/OND [ ]

(d) SSCE/PSLC [ ]

3. Years of Experience in the Business:

(a) 0-5 years (low) [ ]

(b) 6-10 years (moderate) [ ]

(c) 11 and above (high) [ ]

4. Location of the Business:

(a) Edo South [ ]

(b) Edo Central [ ]

(c) Edo North [ ]

111 Part 2:

Please indicate by ticking [√] as appropriate:

Section A

1. Type of Arrangement/Ownership Opportunities which the Franchise runs:

(a) Single Unit franchise [ ]

(b) Multi Unit franchise [ ]

(c) Bought the Franchised Business [ ]

(d) Area development franchise [ ]

(e) Master Franchise [ ]

Section B: Extent to which franchise cost, training and support components are adopted

by Total Nigeria Plc:

The response options for this section also applicable to Section D, under-listed, are

abbreviated as follows:

Very Great Extent (VGE) = 4.50-5.00

Great Extent (GE) = 3.50-4.49

Moderate Extent (ME) = 2.50-3.49

Little Extent (LE) = 1.50-2.49

Very Little Extent (VLE) = 1.00-1.49

S/N Item Statements VG

E

GE ME LE VLE

2. There are provisions for specific projections by the franchisors

3. Provision of assistance in obtaining finances

4. There is provision of actual figures for existing operations

5. There is huge sum of working capital needed.

6. The total cost to be paid by the franchisee is fair enough.

7. Provision of on-going training in form of courses, workshops, conferences, seminars, refreshers or follow-on/advanced courses, regional meetings

112

8. Offer of advice and guidance

9. There is franchisors’ commitment to support

10. Having knowledgeable people to answer any type of calls

11. Assisting the franchisee with the challenges they might come across in the business relationship.

12. Working with the franchisee to set goals and develop business strategies

13. Provision for training for any staff employed by the franchisee.

14. Holding meetings, providing continual communication and getting feedback from operators of retail outlets.

15. Planning weekly, monthly or quarterly meetings with franchisees to use the support and counsel of the franchise firm’s staff

16. The two vital fees in the agreement are the initial fees and ongoing royalty costs

17. The initial training lasts for a sufficient time.

18. In the event where the franchisee is found unsuitable, there is provision for refunding of the money.

19. An understanding of franchisee fees and other related financial considerations is important in relationship with the franchisor.

20. There is more earnings potential in the franchise business than if it were to be your own business

21. In critical situations, the necessary assistance from parent company is sure.

Section C: Extent to which Franchise territory components are adopted by Total Nigeria

Plc:

The response options also applicable to Section E, under-listed, are abbreviated as follows: Strongly Agree (SA) = 4.50-5.00

Agree (A) = 3.50-4.49

Undecided (U) = 2.50-3.49

Disagree (D) = 1.50-2.49

Strongly Disagree (SD) = 1.00-1.49

113

S/N Item Statement SA A U D SD

22. There is the grant of exclusive rights to operate the franchise in a specified geographical area.

23. The location already nursed by the franchisee that require approval by the parent company (franchisor) is granted

24. Additional franchises are granted on a one-at-a-time basis

25. There is likelihood that the franchisor will grant the franchisee the rights to own and operate more than one unit.

26. The units can be within a specified geographical region negotiated between the two parties

27. The units may be multiple with random geographical locations.

28. There is strict adherence to the development schedule for the number of units the marketer must open.

29. Before allowing the dealer to operate another franchise, the franchisor much emphasis is placed on dealer’s capability on operating more than one unit.

30. The parent company enjoys the privilege of been directly responsible for obtaining zoning variances.

31. Defined clearly in the agreement, is the boundary of the business or franchise (exclusivity).

Section D: Extent to which franchise termination and renewal components are adopted

by Total Nigeria Plc:

S/N Item statement VGE GE ME LE VLE

32. The duration of the franchise is determined by both parties.

33. The franchise relationship started with a short trial period

34. The franchise agreement specifies that termination must be for a good cause.

35. Should the business wind up the marketer is given a reasonable time to wind up.

36. Cases of claims of wrongful termination by the parent

114

company abound every now and then.

37. There is provision for notice of termination.

38. The courts generally try to balance the rights of both parties of the contract on the issues surrounding renewal and termination

39. On termination, the franchisee receives little or nothing from the business as compensation.

40. There is provision of remedy for wrongful termination.

41. On the winding up of the business, upgrading of facilities forms a crucial part of the renewal process.

42. The franchisor wields more powers as far as the terminations and renewals are concerned which lives little room for the franchisee.

43. There is provision for a get-out clause (option) for the dealer.

44. When the franchisee wishes to quit before the end of the period as against the time stipulated on the agreement, there is the provision for him to find a buyer acceptable to the franchisor.

45. After the duration of the said contract, the dealer is allowed renewal.

46. The original terms and conditions on renewal is not provided for

47. The parent imposes new design standards and sales regulations on renewal.

48. The end of a franchise most of the time puts the marketer in a position where he or she is unable to renew the contract.

Section E: Extent to which Franchise operating practice components are adopted by

Total Nigeria Plc:

S/N Item statement SA A U D SD

49. The franchisee is extremely involved with all of the daily operations of the business.

50. The dealer has the contractual rights to the franchisor’s latest products or innovations.

51. The franchisee also has the right to select the site for the service

115

station business he chooses to operate.

52. The franchisor has greater control over the franchise operations in maintaining franchise identity and product quality.

53. The continuing management aid, training and assistance provided by the franchisor or parent company are covered by the royalty fee or service.

54. Operating hours and days are set forth in the franchise contract.

55. Certain aspects of local advertising is left, but managed by franchisor, in the hands of the franchisees.

56. There are no limits to what is or can be sold.

57. Incidence of mass purchasing, mandatory for the franchisee to be a participant buyer of the products of Total..

58. The franchisee is expected to be very hands-on in the business operation.

59. The franchise owner abides by certain accounting and bookkeeping procedures.

60. The franchisee is restricted to purchase supplies only from an approved supplier

61. The operation of the business is for the franchisor to have control over all aspects of the franchisee’s business.

62. The control over the operation makes for effectiveness.

116

Appendix D

Nationwide Retail Outlets of Major and Independent Marketers in Nigeria

State

Number of Outlets

Major Independent Total

Abia 46 461 507

Adamawa 42 104 146

Akwa-Ibom 25 484 508

Anambra 27 141 168

Bauchi 23 49 172

Bayelsa 5 45 50

Benue 54 255 309

Borno 37 253 290

Cross River 26 148 174

Delta 10 250 260

Ebonyi 13 98 111

Edo 75 307 382

Ekiti 28 123 151

Enugu 53 269 322

Federal Capital Territory 42 110 152

Gombe 19 58 77

Imo 55 258 313

Jigawa 24 75 99

Kaduna 75 258 333

Kano 75 201 276

Katsina 31 165 196

Kebbi 24 158 182

Kogi 42 169 211

Kwara 53 245 298

Lagos 462 306 768

Nasarawa 37 118 155

Niger 76 208 284

Ogun 193 560 753

Ondo 89 285 374

Osun 83 359 442

Oyo 162 502 664

Plateau 51 213 264

Rivers 83 285 368

Sokoto 18 99 117

Taraba 23 91 114

Yobe 19 71 90

Zamfara 18 67 85

TOTAL 2218 7948 10166

Source: 2006 Census of Nationwide Retail Outlets; NNPC (2010); Available at www.pppra-

nigeria.org

117

Appendix E

Table of Population of Total Nig. Plc in Edo State

S/N Location Address Dealers Managers Supervisors

1. Odo Roundabout, Ibillo 1 1 1

2. 167B Uselu-Lagos Road, Benin City 1 1 2

3. 234 Uselu-Lagos Road, Ugbowo S/S, Ugbowo, Benin City

1 1 2

4. New Bode-Auchi Road, Bode 1 1 1

5. 40 Otaru Market Road, Auchi 1 1 2

6. Total Service Station Mission Road, Benin City

1 1 1

7. 21 Sapele Road, Benin City 1 1 2

8. 10 Akpakpava Road F/S, Benin City 1 1 2

9. 138 Akpakpava Road F/S, Benin City 1 1 1

10. 138 1st East Circular Road, Benin City 1 1 1

11. Km 8 Benin Sapele Road, Benin City 1 1 2

12. 59 Wire Road, Benin City 1 1 1

13. Total Filling Station, New Lagos Road, New Benin, Benin City

1 1 2

14. 18B Urubi Street, Iyaro, Benin City 1 1 2

15. Akpalapwus Street/Road 1 1 1

16. Former Benin Toll Gate 1 1 1

17. Oluku Junction Along Lagos Road, Benin 1 1 1

Total 17 17 25

Grand Total

59

Source: Head office, Total Nig. Plc, Benin City, 2012; Ministry of Oil & Gas, Benin City (2012) and also culled from www.pppra-nigeria.org

N.B: The researcher withheld the names of the different dealers of the Total Nigeria Plc service stations in Edo State. This is done with the intention to observe the rules in research and to earn the trust of the respondents as the researcher has earlier promised that the information provided by them, necessary for the study, will be strictly treated confidentially.

118

APPENDIX F

RESULT OF RELIABILITY TEST

Cluster Two

N %

Cases Valid 15 100.0

Excludeda 0 .0

Total 15 100.0

Reliability Statistics

Cronbach's

Alpha N of Items

.772 20

Cluster Three

N %


Excludeda 0 .0

Total 15 100.0


Cronbach's

Alpha N of Items

.794 10

Cluster Four

N %


Excludeda 0 .0

Total 15 100.0


Cronbach's

Alpha N of Items

.826 17

119

Cluster Five

N %


Excludeda 0 .0

Total 15 100.0


Cronbach's

Alpha N of Items

.759 14

OVERALL RELIABILITY COEFFICIENT

N %


Excludeda 0 .0

Total 15 100.0


Cronbach's

Alpha N of Items

.787 61

120

APPENDIX G

RESULT OF DATA ANALYSED Research Question One

Type of Arrangement

Frequency Percent

Valid Percent

Cumulative Percent

Valid Single unit franchise 33 55.9 55.9 55.9

Multi unit franchise 8 13.6 13.6 69.5

Bought the franchise business 12 20.3 20.3 89.8

Area development franchise 4 6.8 6.8 96.6

Master franchise 2 3.4 3.4 100.0

Total 59 100.0 100.0

Research Question Two

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

BItem1 59 2.00 5.00 3.6780 .85985

BItem2 59 1.00 5.00 2.3390 .99245

BItem3 59 2.00 5.00 3.6271 .86897

BItem4 59 2.00 5.00 3.0678 .92747

BItem5 59 1.00 5.00 2.3898 .96488

BItem6 59 1.00 5.00 2.4576 .88118

BItem7 59 1.00 5.00 2.1864 .91928

BItem8 59 1.00 5.00 2.4068 .90144

BItem9 59 2.00 5.00 3.1525 .97933

BItem10 59 2.00 5.00 3.3051 .96943

BItem11 59 1.00 5.00 2.3898 .81329

BItem12 59 1.00 5.00 2.3729 .95805

BItem13 59 3.00 5.00 3.8983 .63504

BItem14 59 1.00 5.00 2.4068 .91936

BItem15 59 2.00 5.00 3.0508 .68036

BItem16 59 1.00 4.00 2.2881 .98350

BItem17 59 2.00 5.00 3.3559 .92994

BItem18 59 2.00 5.00 3.2034 .76066

BItem19 59 1.00 4.00 2.3559 .99590

BItem20 59 2.00 5.00 3.4068 .93068

SummaryB 59 2.15 4.65 2.8669 .85750

Valid N (listwise) 59

121 Research Question Three



CItem21 59 1.00 4.00 1.8644 .91835

CItem22 59 3.00 5.00 4.3220 .65497

CItem23 59 3.00 5.00 4.1695 .67345

CItem24 59 3.00 5.00 4.3898 .61636

CItem25 59 3.00 5.00 4.2203 .61778

CItem26 59 1.00 5.00 2.3898 .91329

CItem27 59 1.00 5.00 2.3729 .95805

CItem28 59 3.00 5.00 4.1695 .67345

CItem29 59 3.00 5.00 4.2203 .61778

CItem30 59 1.00 4.00 2.8475 .94346

SummaryC 59 3.00 4.00 3.4966 .27035


Research Question Four Descriptive Statistics


DItem31 59 3.00 5.00 4.1695 .74631

DItem32 59 3.00 5.00 4.3220 .57056

DItem33 59 1.00 5.00 2.4576 .90413

DItem34 59 1.00 5.00 2.1186 .85296

DItem35 59 1.00 5.00 2.3220 .93167

DItem36 59 3.00 5.00 4.2373 .65229

DItem37 59 1.00 5.00 2.4068 .87618

DItem38 59 1.00 5.00 2.2881 .97519

DItem39 59 1.00 5.00 2.2881 .87519

DItem40 59 1.00 5.00 2.3898 .92656

DItem41 59 3.00 5.00 3.9322 .69144

DItem42 59 1.00 5.00 2.1695 .90384

DItem43 59 1.00 5.00 2.3390 .89263

DItem44 59 1.00 4.00 2.1356 .83650

DItem45 59 1.00 5.00 3.0847 .97004

DItem46 59 1.00 5.00 2.3390 .92629

DItem47 59 2.00 5.00 3.8644 .81912

SummaryD 59 2.00 4.24 2.8744 .82783


122

Research Question Five



EItem48 59 1.00 4.00 2.1186 .96641

EItem49 59 1.00 4.00 2.1525 .97933

EItem50 59 1.00 4.00 2.4237 .74749

EItem51 59 4.00 5.00 4.6949 .46440

EItem52 59 1.00 4.00 2.2034 .88629

EItem53 59 1.00 4.00 2.3729 .80726

EItem54 59 1.00 5.00 2.2881 .97519

EItem55 59 1.00 4.00 2.3729 .92659

EItem56 59 3.00 5.00 4.3898 .61636

EItem57 59 3.00 5.00 4.2203 .61778

EItem58 59 1.00 4.00 2.3898 .69523

EItem59 59 3.00 5.00 4.2712 .71512

EItem60 59 3.00 5.00 4.3220 .72968

EItem61 59 1.00 4.00 2.4407 .70151

SummaryE 59 2.36 3.71 3.0472 .38685


123 Testing of Hypothesis

Hypothesis One: ANOVA

Sum of Squares df Mean Square F Sig.

BItem1 Between Groups 27.313 3 9.104 13.164 .000

Within Groups 15.568 55 .283

Total 42.881 58

BItem2 Between Groups 5.460 3 .153 .272 .123


Total 69.220 58

BItem3 Between Groups 1.351 3 .117 1.440 .130


Total 43.797 58



Total 73.729 58



Total 142.034 58

BItem6 Between Groups 34.899 3 .300 .048 .271


Total 110.644 58



Total 100.949 58



Total 98.237 58



Total 55.627 58

BItem10 Between Groups .508 3 1.169 .220 .271


Total 54.508 58



Total 100.034 58



Total 91.797 58

124 BItem13 Between Groups 10.132 3 3.377 14.011 .000


Total 23.390 58



Total 86.237 58

BItem15 Between Groups .647 3 .549 .302 .642


Total 26.847 58



Total 56.102 58

BItem17 Between Groups .925 3 1.308 .991 .413


Total 61.525 58



Total 33.559 58



Total 57.525 58

BItem20 Between Groups .237 3 3.146 6.946 .002


Total 50.937 58

Summary B Between Groups 1.735 3 3.578 5.424 .000


Total 42.648 58

125 Hypothesis Two

ANOVA


CItem21 Between Groups 2.485 2 1.242 1.498 .232


Total 48.915 58



Total 24.881 58

CItem23 Between Groups 1.032 2 .516 1.144 .326


Total 26.305 58

CItem24 Between Groups .933 2 .467 1.239 .298


Total 22.034 58

CItem25 Between Groups .258 2 .129 .330 .721


Total 22.136 58



Total 100.034 58

CItem27 Between Groups .100 2 2.550 .081 .054


Total 91.797 58



Total 26.305 58

CItem29 Between Groups 1.715 2 .857 2.351 .105


Total 22.136 58



Total 55.627 58

Summary C Between Groups .013 2 .506 .789 .286


Total 54.239 58

126 Hypothesis Three

ANOVA


DItem31 Between Groups 5.373 2 2.686 5.586 .006


Total 32.305 58

DItem32 Between Groups 1.332 2 .666 2.126 .129


Total 18.881 58



Total 98.644 58



Total 106.169 58



Total 118.881 58



Total 24.678 58



Total 80.237 58



Total 80.102 58



Total 80.102 58



Total 118.034 58

DItem41 Between Groups .571 2 .285 .589 .558


Total 27.729 58



Total 114.305 58


127


Total 129.220 58



Total 74.915 58



Total 54.576 58



Total 87.220 58



Total 38.915 58

Summary D Between Groups 5.626 2 7.313 8.324 .000


Total 39.747 58

Hypothesis Four ANOVA


EItem48 Between Groups 10.712 2 5.356 .902 .222


Total 54.169 58

EItem49 Between Groups 4.027 2 2.014 2.185 .122


Total 55.627 58

EItem50 Between Groups .842 2 .421 .747 .478


Total 32.407 58

EItem51 Between Groups .444 2 .222 1.031 .363


Total 12.508 58



Total 45.559 58



Total 37.797 58



128

Total 80.102 58

EItem55 Between Groups 1.539 2 .770 .893 .415


Total 49.797 58

EItem56 Between Groups .884 2 .442 1.170 .318


Total 22.034 58



Total 22.136 58



Total 28.034 58

EItem59 Between Groups 9.454 2 4.727 .100 .400


Total 29.661 58



Total 30.881 58



Total 28.542 58

Summary E Between Groups .188 2 .094 .620 .542


Total 18.680 58

University Of Nigeria Nsukka - DEPARTMENT OF ... Uyiosa Iriowen...Teacher Education, University of...

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