Global E-Business, Franchising, and Multi-Language
Entity-Relationship Diagrams1
Ye-Sho Chen
Department of Information Systems and Decision Sciences
E.J. Ourso College of Business Administration
Louisiana State University, Baton Rouge, LA 70803, USA
Email: qmchen@lsu.edu; Fax: (01) 225-578-2511
Peter P. Chen
Computer Science Department
Louisiana State University, Baton Rouge, LA 70803, USA
Email: chen@bit.csc.lsu.edu; Fax: (01) 225-578-1465
Guoqing Chen
School of Economics and Management
Tsinghua University, Beijing 100084, P.R. China
Email: chengq@em.tsinghua.edu.cn; Fax: (8610) 62785876
by Peter Chen, can be used as a powerful data modeling
tool to address those issues.
Abstract
Although there is a rich literature of e-business, most of Keywords: Global E-Business, Franchising,
the studies are for developed countries, not developing Multi-Language Entity-Relationship Diagrams
countries. As globalization is unavoidable, there is an
urgent need to converge e-business development
perspectives from developed to developing countries.
Franchising has been shown to be an effective strategy
to transfer technology and emerging markets from
developed into developing countries. In this paper, we
use China as an example to show how franchising,
1. Introduction
There is a rich literature of e-business, as can be
evidenced from the large number of publications on
e-business. However, most of the e-business
publications are for developed countries, not developing
besides being a global e-business growth strategy, can be countries. As globalization is unavoidable, there is an
used to narrow the e-business knowledge gap between urgent need to converge e-business development
developed and developing nations. We also discuss the perspectives from developed to developing countries [1].
issues of international franchising and show that the
Franchising has been shown to be an important and
multi-language entity-relationship diagrams, proposed
effective strategy to transfer technology and emerging
markets from developed into developing countries [2-4].
This franchising approach can also be used as a global
1
Presented at the International Conference on E-Business, May 23-26, 2002, Beijing, P.R. China
(http://www.iceb2002.org)
1

e-business growth strategy [5]. A recent Jupiter report
[6] said it the best: “The gap in global Web development
Sina.com, a well-known web portal, allies with
a large auto franchise system Yafei Auto Chain
will ignite a fierce battle for leadership in the
to market its newly launched car leasing
international Internet development and service
business.
space…While it is imperative for sites to gain foothold
in these markets, they need to avoid a ‘must build’
mentality, and enter these markets through strategic
Thus a sound growth strategy for multinational
companies to do e-business in China is to have a
partnerships such as joint ventures and franchises.” A Chinese-style Web present globally and a
good example is Online bank Juniper’s allowing its
franchisee/company brick-and-mortar store present
customers to deposit checks at the franchise chain Mail locally [18]. Consider Eastman Kodak as an example.
Box Etc [7].
Kodak has no franchise outlets in its home country
U.S.A., however Kodak knows quite well the
In this paper, we use China as an example to show how importance of the Chinese market and this
franchising, besides being a global e-business growth
e-business/franchising “marriage” phenomenon in China.
strategy, can be used to narrow the e-business
knowledge gap between developed and developing
According to George Fisher [19], Eastman Kodak’s
Chairman, “To be the leader in the world, you have to be
nations. We also discuss the issues of international
franchising and show that the multi-language
entity-relationship diagrams, proposed by Peter Chen
the leader in China.” Kodak’s e-business/franchising
strategy in China can be seen from the Chinese-style
Kodak China Web site (www.kodak.com.cn) and the
[8-12], can be used as a powerful data modeling tool to successful Kodak Express franchise outlets [19]:
address those issues.
“Revenues of China’s operation in 1999 grew 36% while
profits mushroomed 58%, which compares favorably
2. Franchising As a Global E-Business Growth with Kodak’s global growth of 5% and 13%,
respectively. Kodak is the best selling film in China,
Strategy: An Example in China
Despite increased Mobile Internet subscription [13],
with a 40% market share. Kodak Express with 5,500
information technology infrastructure improvements,
buying power increases, and trade liberalization, the size
of e-business in China is still very small [14], due to the
so called “three mountains” major obstacles [15]: online
payment, certificate authority, and product distribution.
Franchising is being shown to be an effective strategy to
outlets in 500 cities is the largest retail chain in China…
Kodak signs up entrepreneurs at the rate of three per day
and is planning to grow its franchising system to 8,000
outlets by 2001 [20].”
deal with the obstacles [16]. Consider the following
three examples given in “China Ecommerce &
Franchising: A Heavenly Marriage?” [17]:
Kodak in China is its ability to help solve the
unemployment problem, a burning issue in China,
through the joint franchise loan program with the


Leyou.com, an online children’s goods store,
uses franchising to deliver and serve the goods
offline. By doing so, it is able to save the
marketing expanses.
One final, but very important, reason for the success of
Industrial and Commercial Bank of China's Shanghai
branch [21]. Through the help of the loan, Chinese
entrepreneurs, including unemployed workers, will be
able to start up with their own Kodak Express franchises.
Jingqi.com, an online bookstore, teams up with In addition, the franchise loan program also helps curb
a large franchise chain Xi Shu Bookstore to
the fear of “Westernization” and competition from
promote its e-business.
developed countries [22], which is reported to be a
2
major concern after the accession of WTO.
Sina.com to create a new car leasing business.
Paswan, et. al. [27] investigate franchising as a
Although the e-business examples given above are
network organization which incorporates
mainly B2C businesses, business opportunities, e.g.,
e-business systems, e.g., Intranet, Extranet, and
B2B, under such an e-business/franchising model are
plenty. Here are some examples:
Internet, as a catalyst of franchise system’s
movement towards network organization.
Their work may help Web portals plan the


Franchise solutions providers, providing
franchise business solutions in many areas, e.g.,
training, legal, products, and marketing, for the
network solutions to their franchise customers.

franchise companies. For example,
Application Service Providers (ASP), providing
information technology applications on a
www.franchise.com.cn provides training
subscription basis. The concept of subscribing
courses on franchising and online marketing for
information technologies through ASP has
various franchise companies. As the
special appeal in the franchising industry
e-business/franchising model gets more popular,
because an ASP can duplicate success for other
there will be legal and commercial issues
arising from the franchisors and the franchisees
similar franchises quickly and inexpensively
[28]. For example, wecoo.com is an ASP [29]
[23]. Law firms specializing in
e-business/franchising, e.g., [24], will be
helping forward-looking companies to develop
offering comprehensive operational and
management services to small and
medium-sized companies, including franchise
e-business/franchising strategies to prevent
from misstepping, instead, survive and grow.
chains.
Internet service providers (ISP), providing the
Web present and e-business solutions for the
Using China as an example, we can see that franchising
is more than just a global e-business growth strategy. It
companies using the e-business/franchising
strategy. For example, NetStar installed
also generates many e-business opportunities and helps
to solve some social problems, e.g., unemployment, in
e-business infrastructure for Kodak at its
China's outlets [25]. Mehta, etc [26] provide a
comprehensive study on the franchising
industry’s use of Internet technology, which
may help ISP to plan what services they can
provide to their franchise clients. In order to
the hosting countries. Thus the e-business/franchising
strategy is indeed a very good approach to narrow the
e-business knowledge gap between developed and
developing nations.
example for using such a strategy.
and business are becoming inextricably interwoven. I
3. Franchising: Developing the
grow the business quickly, an ISP, on the other Franchisor/Franchisee Relationship
hand, may use franchising as a way to expand In his 1999 best-seller book Business @ The Speed of
the market. Nihao.net serves as a good
Thought, Bill Gates [30] wrote “Information Technology

don’t think anybody can talk meaningfully about one
Web portals, e.g.., Sina.com, serving as a
one-stop-shopping hub for various franchise
without talking about the other.” When it comes to
chains. Basing on the allied franchise systems, e-business in franchise organizations, Gates’ point is
the portals may create value-added services to especially true. A case in point is the well-known
the targeted customers. For example, the
franchise giant McDonald’s and its real moneymaking
alliance with Yafei Auto Chain enables
engine, but little-known real estate business Franchise
3

Realty Corporation [31]: “What converted McDonald’s
into a money machine had nothing to do with Ray Kroc
The “We”-Phase: The relationship starts to
deteriorate, but the franchisee still values the
or the McDonald brothers or even the popularity of
relationship. It happens typically in the 2nd
McDonald’s hamburgers, French fries, and milk shakes.
year;

Rather, McDonald’s made its money on real estate and
on a little-known formula developed by Harry J.
Sonneborn.” Just months before he died, Ray Kroc, the
The “Me”-Phase: The franchisee starts to
question the reasons for payments related
issues, e.g., ongoing royal and marketing fees,
founder of McDonald’s, further commented [31]: “Harry
alone put in the policy that salvaged this company and
with the attitude that the success so far is purely
of his/her own hard work. It happens typically
made it a big-leaguer. His idea is what made
in the 3rd year.

McDonald’s rich.” The lesson from McDonald’s is that
the ability to leverage the assets of franchise operations,
The Rebel Phase: The franchisee starts to
challenge the restrictions placed upon them and
real estate in the case of McDonald’s, into profitable
demand for more independence. It happens
products or services is at the heart of a successful
typically in the 4th year.
franchise. Thus, any effort to build a “meaningful”
e-business in franchise organizations must take this
The issues in the first three phases of the franchisee life
lesson at heart as well.
cycle are typically related to the daily operations
environment the franchisee is in [34,35], including the
According to Justis and Judd [32], franchising is defined franchisee business outlet, the franchisor headquarters,
as “a business opportunity by which the owner (producer and the franchise community. A well-designed
or distributor) of a service or a trademarked product
e-business infrastructure [36], including the use of
grants exclusive rights to an individual for the local
Internet, Intranet, and Extranet, deployed by low-cost
distribution and/or sale of the service or product, and in ASPs [37] may help build the relationship between the
return receives a payment or royalty and conformance to franchisor and the franchisee. For the franchisor, the
quality standards. The individual or business granting biggest challenge dealing with a franchisee in the Rebel
the business rights is called the franchisor, and the
individual or business granted the right to operate in
accordance with the chosen method to produce or sell
the product or service is called the franchisee.”
Developing the good relationship between the franchisor
and the franchisee is believed to be the most important
Phase of the life cycle is to convenience the franchisee
that there are good rewarding reasons to continue paying
the royalty fee monthly, typically 5-8%. Although
granting multi-units in certain territories [38-40] is a
common approach to cool down the “rebellious” attitude
of the franchisee, more innovative approaches of asset
factor for the success of a franchise system [32].
For the franchisor, the focus of the relationship
leveraging are often needed to continue the expansion of
the franchise system. The above-mentioned Franchise
Realty Corporation of McDonald’s is an example. For
management with the franchisee depends on the four
more examples and a model of franchise asset
phases of the life cycle the franchisee is in [33]:
leveraging, see the discussions in Chen [41].

The Courting Phase: Both the franchisee and
the franchisor are excited with the relationship
and will try very hard to maintain it. This
happens typically in the 1st year.
4. Data Modeling in International Franchising
As we can see now, for e-business to be useful in
franchise organizations, the databases in the e-business
system shall be able to capture the data residing in the
4
franchise daily operations and the process of asset
leveraging. Data modeling in the franchise daily
major reason why Subway can expand so quickly,
15,816 restaurants in 74 countries! (www.subway.com).
operations should include activities in [34]:
Thus the MILE information system shall be at the core

of the asset leveraging data modeling at Subway.
The franchisor headquarters, with six major
entity types: employees; business outlets owned
by franchisees or companies; prospective
A franchise system typically expands from its home state,
franchisees; product development; suppliers,
to the neighboring states and then the country. The
(e.g., marketing agents, accountants, insurance franchise system remains basically the same while it
providers, attorneys, real estate agents); and
grows within the home country, however the system has


government offices, (e.g., taxes and worker
to be changed and adapted when it goes abroad. When
compensation).
the franchisor starts franchising internationally, many
The franchisee business outlet, with six major
entity types: customers, employees, contacts
barriers demand the changes and adaptations of the
with the headquarters, product inventory,
marketing, and employment.
suppliers, and government offices.
several ways of franchising in other countries,
establishing a master franchisee is the most popular
The franchise community, with three major
entity types for relationship management:
relationship within the franchise system, the
relationship with customers, and the
relationship with suppliers.
system [43], including language, culture, laws,
Although there are
approach [32]. The master franchisee, assuming the
role of the franchisor, will work closely with the
franchisor to develop the following areas in the host
country [44]: franchisee recruiting, site selection,
marketing, training, standards enforcement, and office
Daily operations data modeling for most of the franchise management. The master franchisee receives the
companies are typically the same, which is the reason
royalty from the sub-franchisees, keep up to 50% of the
why using ASPs [28] to host the e-business database
system makes most economically sense. Asset
payments, and submit the rest to the franchisor [32].
leveraging data modeling, on the other hand, is more
complicated and different among franchise companies
[37]. For example, at McDonald’s, real estate
management [31] is the major part of the asset
leveraging strategy. Thus, developing a real estate
information system shall be a major goal of the asset
Since international franchising is a relatively new
phenomenon [43], most of the literature shows you
mainly how to choose a country to franchise and how to
adapt your franchise system to the local needs. Once
the system is up and running, it is up to the master
franchisee to deal with the data modeling issues related
leveraging data modeling. Consider Subway, ranked as to daily operations and asset leveraging. Since the
#1 franchisor in 2001 and 2002 by Eentrepreneur.com, master franchisee will be very busy on expanding the
as another example. The Micro Investment Lending
franchise system in the local market, the data modeling
Enterprise (MILE), developed by Subway’s founder
issues are usually dealt with loosely, if they are ever
Fred DeLuca [42], shall be the major part of the asset
leveraging strategy. In the process of recruiting
hard-working franchisees, DeLuca found getting a loan
from banks is very hard for them. MILE is set up to
lend money to those qualified people to start their own
small businesses. The MILE program might be one
done at all. As the system continues growing in the
host country, more and more sub-franchisees will be in
the Rebel Phase of the franchisee life cycle, and the
same challenging question as in the home country will
occur again and again: “I have learned all you have
taught me, why should I continue paying you the royalty
5
fee?” If the franchisor doesn’t deal with this
fore-seeing issue wisely, the whole franchise chain may
translation techniques [11,12]. This will help
the franchisor and the master franchisee great
disappear totally from the host country [44]. Bud
deal to translate effectively and quickly the
Hadfield [45], the founder of Kwik Kopy franchise and
franchise materials into the corresponding
the International Center of Entrepreneurial Development
(www.iced.net), said it the best: “Obviously, one of the
satisfactions of expanding overseas is the fact that you
language in the host country.

can now be sued in different languages.”
Adopting modeling methodologies and
techniques to local environments [11,12].
This will help the franchise system to adapt to
the local market effectively and quickly.

Thus, a formal, rigorous, and timely approach to
transforming the data modeling techniques of franchise
Building better interfaces between the host
language and DBMS/repositories [11,12].
daily operations and asset leveraging from the home
This will help develop effective e-business
country to the host country is not just a strategy for the
databases for franchise daily operations and
franchise to grow and expand, it also is a necessity for
asset leveraging.
the franchise system to survive!
6. Conclusions and Future Research
5. Multi-Language Entity-Relationship Diagrams in Two major contributions can be identified in this paper:
(1) Showing that international franchising is an effective
International Franchising
The Entity-Relationship (ER) Model, proposed by Peter global e-business growth strategy and a good way to
Chen in 1976 [8], has been proven to be one of the most narrow the e-business knowledge gap between
popular and powerful tools to do enterprise data
developed and developing nations; and (2) the
modeling. The ER diagram, serving as the blueprint of Multi-language ER diagrams provide a powerful tool to
the database, shows graphically the business model of solve the issues associated with international franchising.
the enterprise. Most recently, Peter Chen devoted his
research focus on the multi-language ER Diagrams,
Future research may include:

Setting up a standard ER diagram in franchising
and enhancing it with the specific needs in
various industries in franchising, so that
franchising companies can build their own
e-business databases for daily operations and
asset leveraging.

Developing multi-language ER diagrams to
help franchise companies manage their
businesses abroad.
including:

The correspondence between English sentence
structure and the ER diagrams, with eleven
rules for translation [9];

The correspondence between Chinese character
construction and the ER diagrams, with six
principles for translation [10]; and

The correspondence between ancient Egyptian
hieroglyph construction and the ER diagrams,
also with six similar principles for translation
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2.
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
Improving natural language understanding and
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9