DIRECTLY OPERATED STORES VS FRANCHISE BUSINESS MODEL - A COMPARATIVE ANALYSE OF STARBUCKS AND DUNKIN’

Abstract The purpose of this article is to identify differences, similarities, advantages and disadvantages of directly operated stores and franchises. Both are successful business models. Differences can not only be described about traditional variables and context, such as capital structure and agency costs, but also about new technologies and strategies. In addition to theoretical review, a comparative analyse was made through the examples of Starbucks and Dunkin’s, showing that both models are successful, even with specific strength and weaknesses in relation with nowadays challenges such as e-commerce encroachment and increased competition. Franchising has been constantly evolving in recent decades, with gradual evolution towards the dominance of multi-unit solutions and structured formats that can enable consistent national and international replication. One of biggest challenges that franchisors will face in the future due to the development of e-commerce is the alternative between establishing an “e-profit sharing” system and strengthening the franchise or reducing the readiness for growth and thus investing more in directly operated stores. On the other hand, one important challenge of a premium price directly operated store like Starbucks comes from low entry barriers and price competition.