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Chapter IV
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter represents the analysis and interpretation of the data gathered

from the questionnaire administered to the respondents.

1. Profile of Selected Food Cart Franchising Business.

The group of respondents was composed of 43 selected food cart

franchising business operating in Lipa City. The factors considered in the profile of

the business are capitalization, type of franchising business, form of business

organization, number of years in operation, number of employees and average

daily sales. These are all presented in the Tables 4.1.1. to 4.1.6

1.1 Capitalization

The table shows the frequency distribution of food cart franchising business

in terms of capitalization.

Table 4.1.1
Distribution of food cart franchising business in terms of capitalization
Capitalization Frequency Percentage
30,000 and below 2 5
30,001 – 50, 000 2 5
50, 001 - 70, 000 3 7
70, 001 – 90, 000 6 14
90, 001 – 100, 000 7 16
100,001 and above 23 53

Total 43 100

As shown in the table 4.1.1 with a total of 43 food cart franchising business,

there are two (2) food carts which have a capitalization of 30,000 and below which

is equivalent to 5 percent. Similarly, there are also two (2) food carts which have a

capitalization of 30,001 to 50,000 that is also 5 percent while there are three (3)

food carts which have a capitalization of 50,001 to 70,000 which is equivalent to 7

 63

percent. Furthermore, there are six (6) food carts which have a capitalization of

70,001 to 90,000 which has a percentage of 14 percent and seven (7) out of 43

food carts have a capitalization of 90,001 o 100,000 that has 16 percent. Thus,

there are 23 food cart franchising business which have a capitalization of 100,001

and above which is equivalent to 53 percent.

This implies that most of the food carts have a capital of above Php100,001.

This also shows that there are benefits to profitability of food cart franchising

business when capital is high. Higher capital would mean higher source funds

which is needed for the day-to-day transaction of the business. In case of loss,

food carts with a higher capital can absorb more loss and withstand stress periods

than food cart with low level of capitalization. This also recommends that the higher

the amount of capital, the higher the cash inflow in investing activities.

According to Von and Chan (2009), capital is an important tool for

evaluating safety and soundness of firms. They further stated that when a firm has

high level of capitalization it shows that the firm is safer and is an advantage to get

higher profitability. In their study, the authors also proved that capital will positively

affect profitability.

1.2 Type of Franchising Business

The table 1.2 reveals the percentage and frequency distribution of the food

cart franchising business according to the type of franchising business.

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Table 4.1.2
Distribution of food cart franchising business in terms of type of
franchising business
Type of franchising Frequency Percentage
business
Product Franchising 13 30
Business Format 30 70
Franchising
Total 43 100

As shown in table 4.1.2, majority of the food cart franchising business are

business format franchising which have a frequency of 30 that is equivalent of 70

percent. On the other hand, 13 out of 43 food cart franchising business are product

franchising that yielded to 30 percent.

The result implies that most of the owners of food cart franchising

businesses prefer business format franchising than product franchising it is

because the latter is more advantageous. It offers a complete plan for managing

and operating the business. According to PFA, with the means of distributing

goods and services perfected, rapid expansion of a successful business concept

occur more quickly. Modern day franchising is primarily in the business format

mode, accounting for around 90% of franchise businesses worldwide.

1.3 Form of Business Organization

The table shows the percentage and frequency distribution of the food cart

franchising business according to the form of business organization.

 65

Table 4.1.3
Distribution of food cart franchising business in terms of form of business
organization
Form of business Frequency Percentage
organization
Sole Proprietorship 38 88
Partnership 3 7
Corporation 2 5
Total 43 100

The result implied that food cart franchising business operating in Lipa, City

are mostly sole proprietorship with a frequency of 38 out of 43 which make a total

of 88 percent. On the other hand, there are three (3) food cart franchising business

which are engage in partnership having a percentage of 7 percent while only two

(2) food carts were involved in corporation which is equivalent to 5 percent.

This implies that most of the food carts are operated by one person. It

means that the owner faced complete responsibility of managing the business

which means making daily decisions on the operation in its functional segment. On

the other hand, franchising food carts can be easily managed by one person

because it is just a small business.

The result was proven by Fajardo (2002), he stated that sole proprietorship

is only owned by one person therefor the decision and management will only come

from the one who manage the food cart. There is a definite advantage in terms of

share of profit because all profit will be gained by the owner since he/she has no

one to share it with. This the greatest incentive or reward to the entrepreneur. This

is the reason why many entrepreneurs prefer the sole proprietorship rather than

partnership and corporation in ownership of business in terms of franchising food

carts.
 66

1.4 Number of Years in Operation

The frequency distribution of the respondents in terms of number of years

in the operation is shown in table 4.1.4.

Table 4.1.4
Distribution of food cart franchising business in terms of years of
operation
Years of operation Frequency Percentage
5 years and below 39 91
6- 10 years 4 9
Total 43 100

The table shows that the food cart franchise business in Lipa City operates

in 5 years and below with a percentage of 91 percent which is the highest among

the length operation given that have a frequency of 39 out of 43. However, there

are only four (4) food carts that were operating are within 6-10 years which is

equivalent to 9 percent.

The results show that there is a rising trend in food cart franchising business

industry in Lipa, City. The business is continuously growing from the time of its

introduction. Many may have given up their food carts but still, much number are

being establish since franchising is an easy way to a business.

This was proven by Johnson (2010), he stated franchised business has a 90%

success rate within 5 years of opening. They open a franchise business because

within 5 years, you could have something to sell. The minimum time period for

franchise agreement is 5 years.

1.5 Number of Employees

Table 4.1.5 shows the percentage and frequency distribution of food cart

franchising business according to number of employees.

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Table 4.1.5
Distribution of food cart franchising business in terms of number of
employees
Number of employees Frequency Percentage
1 43 100
Total 43 100

With reference to the table, all of the food cart franchising business in Lipa

City were operated by 1 to 3 employees.

The benefit having employees the number of 1-3 is that the food cart would

incur lower salaries expenses that contributes to earning higher profits. The food

cart business also does not need many employees since the operation can be

managed by few employees because food cart is a small business.

Based on the study of Lacsamana (2008) the problem that most

encountered by franchised business is finding and hiring a number of a competent

employees. It is not important for the business to hire a large number of employees

but a competent employee.

The result of the study is supported by (Peavler 2011), business that has

no more than 1-10 employees has the advantage of simplicity of record keeping

and organizational cost and the management of ease in decision making.

1.6 Average Daily Sales

The frequency distribution of the respondents in terms of number of

years in the operation is shown in table 4.1.6.

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Table 4.1.6
Distribution of food cart franchising business in terms of average daily
sales
Average daily sales Frequency Percentage
5,000 and below 22 51
5001 – 6,000 10 23
6,001 – 7,000 7 17
7001 - 8000 0 0
8,001 – 9,000 3 7
9,001 – 10,000 0 0
10,001 and above 1 2
Total 43 100

The result in the table was interpreted that the average daily sales which

ranges from 5000 and below has the highest percentage of 51 percent with a

frequency of 22. Second, are those that ranges from 5001 to 6000 with a

percentage of 23 percent. It was followed by a range of 6001 to 7000 with a

frequency of seven (7) which is equivalent to 17 percent. Next to that are those

that ranges from 8001 to 9000 with a percentage of 7 percent and lastly, with a

percentage of 2 percent were food carts who have average daily sales of 10,001

and above with a frequency of one. Yet those that ranges from 7001 to 8000 and

from 9001 to 10,000 got no frequency.

The result implies that food carts with higher capitalization would not always

mean higher daily sales. It also suggests that food cart with lower capitalization

can have same level of average sales with food cart with higher capitalization.

2. The effects of internal and external determinants to the Profitability of

Food Cart Franchising Business.

This part presents the effects of determinants to the profitability of food cart

franchising business as for the owners to be aware in terms of internal

 69

determinants (capital, expenses management and liquidity management) and

external determinants (competition and inflation).

2.1 Internal Determinants

The tables below present the mean score and interpretation of the

responses on the effects of internal determinants on the profitability of food cart

franchising business in Lipa City in terms of capital, expenses management and

liquidity management.

Table 4.2.1.1
Effects of internal determinants on the profitability of food cart franchising
business (capital)
Capital Weighted Verbal
The food cart… Mean Interpretation
1. Used capital to pay franchise fee which 3.60 Strongly
enables the business to start its operation Agree
and make profits.
2. Purchased raw materials needed in the 3.44 Agree
operation provided by higher capital which
impacts positively the firm’s profitability.
3. Pays its liabilities through capital which 3.30 Agree
allows the firm to have a higher income.
4. Absorbs loss through its capital and still 2.95 Agree
earn profits.
5. Has expanded their operations in other 2.74 Agree
areas through the use of capital which gives
them higher earnings.
6. Used capital to purchase a service car for 2.56 Agree
deliveries that helps in continuous operation
of the business leading to higher profits.
COMPOSITE MEAN 3.12 Agree

The table presents the mean score of the effects of internal determinants

on the profitability of food cart franchising business in terms of capital. It can be

noticed from the table that respondents agreed that their food cart business meets

the the different criteria that were involved in capital with a composite mean of
 70

3.12. All the items yield high to very high means ranging from 2.56 to 3.60 and

interpreted as “agree” and “strongly agree”.

As indicated from the results, in the top 3 that was involved in capital, one

of which was strongly agreed by the respondents which includes that food cart

uses capital to pay franchise fee with a weighted mean of 3.60. Following to that

are those criteria which were agreed by the respondents which are also belonged

to the top 3 which includes the food cart purchased raw materials needed in the

operation of the business by higher capital which impacts positively the firm’s

profitability (3.44) and pays its liabilities through capital which allows the firm to

have a higher income (3.30). However, among the criteria the least 3 and was

agreed by the respondents are absorption of loss through its capital and still earn

profits (2.95), has expanded their operation in other areas through the use of

capital which gives them higher earnings (2.74) and the food cart uses capital to

purchase a service car for deliveries that helps in continuous operation of the

business leading to higher profits (2.56).

The results implies that capital is a significant determinant of profitability of

food cart franchising businesses. It also shows that capital plays an important role

in how the food cart pays its franchise fee, purchase its raw materials needed in

the business and how it pays its liabilities when they fall due. It also indicates that

it is crucial for the food cart to manage its capital effectively for the continuous

operation of the business. The food cart used capital to pay franchise fee which

enables the business to start its operation and make profits. It is mandatory for a
 71

franchise business to pays franchise fee so this statement marked the highest

percentage with the interpretation of strongly agree.

The food cart has widened the business because according to Hisrich

(2000), the most obvious advantage of franchising for an entrepreneur is that you

can expand a venture quickly, with a little capital. This is significant when he

reflects on the problems and issues that the franchisee faces on trying to manage

and grow the franchising business.

Table 4.2.1.2
Effects of internal determinants on the profitability of food cart franchising
business (expenses management)
Expenses Management Weighted Verbal
The food cart… Mean Interpretation
1. Maintain sufficient amount of cash for 3.54 Strongly Agree
current operations and paying obligations
as they come due.
2. Has enough fund to renew business 3.53 Strongly Agree
permit which allows the firm to operate
continually and make profits.
3. Has enough cash holdings to pay taxes 3.52 Strongly Agree
and prevents the incurrence of penalty
resulting to higher net income.
4. Prevents to incur expenses resulting from 3.33 Agree
spoilage which leads to increased
profitability.
5. Pays interest expense on due date and 3.09 Agree
prevents the incurrence of penalty giving
the business higher net income.
6. Meets the irregular cash flows as well as 3.0 Agree
the planned acquisition of additional
machineries which would contribute to
wider business operations resulting to
higher returns on investment.
COMPOSITE MEAN 3.35 Agree

Table 4.2.1.2 shows the mean score of the expenses management as

internal determinants of profitability. It can be noticed form the table that

 72

respondents agreed that their food cart business meets the different criteria that

was involved in expenses management with a composite mean of 3.35. All the

items yield high to very high to very high ranging from 3.0 to 3.54 and interpreted

as “strongly agree” and “agree”.

As indicated from the results, the top three (3) criteria that was involved in

expenses management and were strongly agreed by the respondents includes the

food cart maintain sufficient amount of cash for current operations and paying

obligations as they come due (3.54), the food cart has enough fund to renew

business permit which allows the firm to operate continually and make profits

(3.53) and the food cart has enough cash holdings to pay taxes and prevents the

incurrence of penalty resulting to higher net income (3.52) . However, all the least

three (3) criteria were agreed by the respondents and those are the food cart

prevents to incur expenses resulting from spoilage which leads to increased

profitability (3.33), the food cart pays interest expense on due date and prevents

the incurrence of penalty giving the business higher net income (3.09) and lastly,

the food cart meets the irregular cash flows as well as the planned acquisition of

additional machineries which would contribute to wider business operations

resulting to higher returns on investment (3.0).

The results conclude that expenses management is significant factor of the

profitability of food cart franchising businesses. It also implies that the food cart

must maintain sufficient fund for current operations and for payment of obligations

as they come due because the raw materials needed in the business is on a daily

basis whether it be on cash payment or in payables. Another implication of the

 73

result is that food carts must have enough funds to renew business permit. It allows

them to operate continually and earn profits. It is also mandatory for the business

failure to do so would mean penalty hence incurring higher expenses. The result

also indicates that food carts must have enough cash holdings for payment of

taxes. It has always been mandatory for the business to pay its taxes. The owner

deals with the government when they pay business licenses, permits and taxes.

(Fajardo 2009).

According to Sufian and Habibullah (2010) and Ramadan, Kilani and

Kaddumi (2011) studies the higher the firm’s expenses, the less efficient is the

business. It indicates when a firm spends too much of its expense; it could reduce

the profitability of the firm. Most of the researchers such as Molyneux and Thornton

(1992) and Haron (2004) suggested that higher expenditures could bring to higher

profitability.
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Table 4.2.1.3
Effects of internal determinants on the profitability of food cart franchising
business (liquidity management)
Liquidity Management Weighted Verbal
The food cart… Mean Interpretation
1. Makes prompt payment of interest on short- 3.19 Agree
term obligations resulting to lower business
expense and higher business income.
2. Is able to collect receivables in a timely 3.09 Agree
manner which has direct positive impact of
the business profitability.
3. Makes timely payment to suppliers giving 3.44 Agree
them the advantage of the discount hence
increasing the business profits.

4. Sells its product and generate enough 3.33 Agree

cash on a daily basis which positively
impacts their business earnings.

5. Sales become higher when suppliers 3.07 Agree

advance their credit limits which results to
higher gross profit.

6. Has sufficient cash requirements to meet 3.33 Agree

the day to day operations for creating
reasonable amount of earnings.

7. Inventories are consumed/disposed over 3.37 Agree

an acceptable period which gives rise to
high amount of cash holdings.

COMPOSITE MEAN 3.29 Agree

The table 4.2.1.3 shows that the respondents agree in the effects of internal

determinants in terms on the profitability of food cart franchising business in terms

of liquidity management with a composite mean of 3.29. The food cart makes

timely payment to suppliers giving them the advantage of the discount hence

increasing the business profits got a weighted mean of 3.44. Then, the food cart

inventories are consumed/disposed over an acceptable period which gives rise to

high amount of cash holdings with 3.37 weighted mean. Likewise, the food cart
 75

sells its product and generate enough cash on a daily basis which positively

impacts their business earnings and has sufficient cash requirements to meet the

day to day operations for creating reasonable amount of earnings both having a

weighted mean of 3.33. Following that is that the food cart makes prompt payment

of interest on short-term obligations resulting to lower business expense and

higher business income got a weighted mean of 3.19. Then, the food cart is able

to collect receivables in a timely manner which has direct positive impact of the

business profitability with 3.09 weighted mean. And lastly, the food cart sales

become higher when suppliers advance their credit limits which results to higher

gross profit with 3.07 weighted mean. All those criteria stated have a verbal

interpretation of “agrees”.

The result indicates that liquidity management is significant factor of the

profitability of food cart franchising businesses. It also shows that the food cart

must pay its suppliers on time. This could be beneficial to the business when

paying in advance or on time would avail those discounts hence availing the

materials at a lower price. It also implies that the food cart must consume their

inventories over an acceptable period of time. This would mean a rise to the

amount of cash holdings of the business. It also reduces the risk of incurring loss

in case of spoilage. Another implication of the result is that food carts must sell its

product and generate enough cash on a daily basis and must sufficient cash

requirements to meet the day to day operations. The quick conversion of its

product into cash would allow the food cart to maintain its cash holdings needed

for the day-to-day operation.

 76

The crucial part in managing working capital is required maintaining its

liquidity in day-to-day operation to ensure its smooth running and meets its

obligation (Eljelly, 2004). Liquidity plays a significant role in the successful

functioning of a business firm. A firm should ensure that it does not suffer from

lack-of or excess liquidity to meet its short-term compulsions. A study of liquidity is

of major importance to both the internal and the external analysts because of its

close relationship with day-to-day operations of a business (Bhunia, 2010).

2.2 External Determinants

The tables below present the mean score and interpretation of the

responses on the effects of external determinants on the profitability of food cart

franchising business in Lipa City in terms of competition and inflation.

Table 4.2.2.1
Effects of external determinants on the profitability of food cart
franchising business (competition)
Competition Weighted Verbal
The food cart… Mean Interpretation
1. Employees provide good customer service 3.53 Strongly
compared to other business. Agree
2. Presentation of product has no difference 3.26 Agree
as compared to competitors which gives no
advantage on its sales.
3. Is located in an area with several numbers 3.23 Agree
of similar business which affects its income
significantly.
4. Has minimal advertisements compared to 3.0 Agree
competitors which substantially affects their
sales hence affecting their overall profit.
5. Has a small size of selling area and could 2.88 Agree
not offer a portion of space to customers
affecting negatively its daily sales.
6. Product is availed by the customers for 2.60 Agree
higher price with that of competitor which
has material effect on its earnings.
COMPOSITE MEAN 3.10 Agree
 77

As seen in the table above regarding the effects of external determinants

on the profitability of food cart franchising business in terms of competition

business got a composite mean of 3.10 with a verbal interpretation of agree. The

food cart employees provide good customer service compared to other business

has the highest weighted mean of 3.53 giving a verbal interpretation of strongly

agree. Next, the food cart presentation of product has no difference as compared

to competitors which gives no advantage on its sales and the food cart is located

in an area with several numbers of similar business which affects its income

significantly having a weighted mean of 3.26 and 3.23 respectively which is

equivalent to a verbal interpretation of agree. From the top 3 criteria, the table also

presents the bottom three. First, the food cart has minimal advertisements

compared to competitors which substantially affects their sales hence affecting

their overall profit with a 3.0 weighted mean. Then, the food cart has a small size

of selling area and could not offer a portion of space to customers affecting

negatively its daily sales have a weighted mean of 2.88. And lastly, the food cart

product is availed by the customers for higher price with that of competitor which

has material effect on its earnings and got a weighted mean of 2.60. The least

three criteria have a verbal interpretation of “agree”.

The result implies that competition is a significant factor of the profitability

of food cart franchising businesses. It also indicates that the food cart must provide

good customer service. Industry has discovered the value of loyal customers: they

buy more, buy more often, are cheaper to serve, have higher retention rates, and

are more profitable than newly acquired customers. Further, it was agreed by the
 78

respondents that offering no variation in the food cart products would mean no

advantage for its sales. It also indicates that the profitability of the food cart

business is affected by locating it in an area with several numbers of similar

business.

According to Michael Porter there are certain competitive forces that impact

on profitability in every industry. These forces are said to be the drivers of

competition and profitability in every industry which as well include banking

industries around the world. He further stressed that it is difficult for firms which

operates in highly competitive industries to earn favorable returns on investment.

On the basis of this statement it obvious that commercial banks profitability is

highly influence by certain competitive forces and even some studies have argue

that intensive competition within commercial banking industry tends to decrease

profits (Smith, 1984).6 Among these forces is what Michael E. Porter termed as

“Rivalry among Existing Competitors”. He documented that higher rivalry among

existing competitors which takes many forms including the fight for higher market

share erodes profitability of an industry. Especially in slow growth markets with

numerous competitors who are equal in size and power (Harvard Business Review

2008).
 79

Table 4.2.2.2
Effects of external determinants on the profitability of food cart franchising
business (inflation)
Inflation Weighted Verbal
The food cart… Mean Interpretation
1. Changes the price of the products when input 2.72 Agree
costs rises resulting to lower sales and lower
profits.
2. Pays higher rental payments when 2.79 Agree
experiencing inflation lowering the net
income from operations.
3. Prices of the product are not kept pace with 2.67 Agree
the changes in prices which leads to lower
earnings.
4. Is maintaining the mark-up over the 2.79 Agree
increased costs that is paying to suppliers
which impacts negatively on business
profitability.
5. Operating cost is increased due to increased 2.93 Agree
labor costs leading to lower net income.
6. Minimizes its costs through limiting 2.70 Agree
operations to when experiencing inflation
which has immediate impact on its gross
sales.
7. Has no alternative materials of lower costs on 3.02 Agree
by which makes it difficult to earn valuable
returns of investment.
COMPOSITE MEAN 2.80 Agree

Table 4.2.2.2 presents that inflation as an external determinant affects the

profitability of food cart franchising business with a composite mean of 2.80. the

food cart has no alternative materials of lower costs on by which makes it difficult

to earn valuable returns of investment got the highest weighted mean of 3.02. Next

is, the food cart operating cost is increased due to increased labor costs leading

to lower net income with a weighted mean of 2.93. Then, the food cart pays higher

rental payments when experiencing inflation lowering the net income from

operations and the food cart is maintaining the mark-up over the increased costs
 80

that is paying to suppliers which impacts negatively on business profitability are

both having a weighted mean of 2.79. Moreover, the food cart changes the price

of the products when input costs rises resulting to lower sales and lower profits

and the food cart minimizes its costs through limiting operations to when

experiencing inflation which has immediate impact on its gross sales got a

weighted mean of 2.72 and 2.70 respectively. And lastly, the food cart prices of the

product are not kept pace with the changes in prices which leads to lower earnings

giving a weighted mean of 2.67. All criteria under inflation were agreed by the

respondents.

As can be averred in the result, the respondents agreed that inflation really

have an effect on the profitability of food cart franchising business. Because of

inflation the money worth of business might increase and can cause a great impact

in the operation of the business.

According to Revell (1980), he believed that inflation could be a factor that

influences firm’s profitability. DevinaRasiah (2010) further stated that inflation

relationship negatively on firm’s profitability by decreasing the real value of firm’s

assets as compared to their liabilities.

Based on the article of McMahon (2013), entitled “How does Inflation affect

the business” he mentioned that constantly increasing prices leads to menu costs,

where companies will have to spend money changing and reprinting their prices.
 81

3. Significant difference on the assessment of effects of determinants of

profitability of food cart franchising business when grouped according to

profile variables.

The tables present the difference on the respondent’s responses when

group according profile variables.

Table 4.3.1
Difference on the assessment of effect of internal and external
determinants to profitability of food cart franchise business in terms of
capitalization
Variables p-values Computed f- Decision on Ho Verbal
values Interpretation
Internal
Capital .94 .25 Failed to Reject Not Significant
Expenses .72 5.47* Failed to Reject Not Significant
management
Liquidity .41 1.04 Failed to Reject Not Significant
External
Competition .94 .25 Failed to Reject Not Significant
Inflation .29 1.29 Failed to Reject Not Significant

Table 4.3.1 shows the differences on the assessment of effect of internal

and external determinants to profitability franchise in terms of capitalization. There

are no differences between the respondents’ profile which is capitalization and the

determinants of profitability of food cart franchising business.

In contrast to the study of Berger (1995) that lower level of capital put the

firm into risky position and impact negatively the firm’s profitability, food cart

franchising capitalization do not affect the business’ profitability. It can be

concluded that the respondents experience the same effect that the variables used

in this study has no differences in the profitability of food cart franchising business

when grouped according to their capitalization. According to Woo (1981),

 82

capitalization does not always translate to profitability. Based on the study of Byrd

et. al, (2000), it cannot be stresses enough that the shortage of capital is the

greatest problem facing small business owners as in the case of food cart

franchising businesses.

Table 4.3.2
Difference on the assessment of effect of internal and external
determinants to profitability franchise in terms of its type
Variables p-values Computed f- Decision on Ho Verbal
values Interpretation
Internal
Capital .81 -.24 Failed to Reject Not Significant
Expenses .67 .42 Failed to Reject Not Significant
management
Liquidity .88 -.159 Failed to Reject Not Significant
External
Competition .90 -.13 Failed to Reject Not Significant
Inflation .99 -.016 Failed to Reject Not Significant

Table 4.3.2 shows differences between the assessment of effect of internal

and external determinants to profitability franchise in terms of its type. As indicated

from the results, there are no difference in the effect of both internal and external

determinants to the profitability of franchising business when grouped according

to its type.

According to Phan et al, (1996) while some franchisees will be happy to

conform to the franchisor’s stipulations, others view their ownership of a franchise

unit “as giving them the right to exercise entrepreneurial initiative” (Baucus et al,

1996). Deviation may also occur as a result of franchisee opportunism to pursue

different goals to those of the franchisor. For example, if the franchise fee paid by

the franchisee to the franchisor is based on sales then the franchisor will want
 83

franchisees to pursue revenue maximization. However, it may not depress their

profits (Phan et al, 1996).

Table 4.3.3
Difference on the assessment of effect of internal and external
determinants to profitability franchise in terms of form of business
Variables p-values Computed f- Decision on Ho Verbal
values Interpretation
Internal
Capital .09 2.61 Failed to Reject Not Significant
Expenses .19 1.76 Failed to Reject Not Significant
management
Liquidity .01 14.38* Reject Significant
External
Competition .09 2.55 Failed to Reject Not Significant
Inflation .57 .57 Failed to Reject Not Significant

Table 4.3.3 shows the differences between the assessment of effect of

internal and external determinants to profitability franchise in terms of form of

business. As indicated in the results, there are differences in the liquidity (p=.01,

f=14.38) when grouped according to the form of business.

The results implied that in terms of liquidity, the form of business

organization whether it be sole proprietorship, partnership or corporation, the food

cart business should convert their non-cash asset into cash on short notice and

pay its liabilities in a timely manner as they come due because if not it would have

a negative impact on the profitability of food cart franchising business. Whether it

is sole proprietorship, partnership or corporation, liquidity is significant since the

success of the business depends on how it is managed.

As stated by Eljelly (2004), the firm is required to maintain its liquidity in day-

to-day operation to ensure its smooth running and meets its obligation. According
 84

to Rahemanet (2007), liquidity requirement of a firm depends on the peculiar

nature of the firm and how they maintain it in order to ensure positive impact on its

profitability.

Table 4.3.4
Difference on the assessment of effect of internal and external
determinants to profitability franchise in terms of years of operation
Variables p-values Computed f- Decision on Ho Verbal
values Interpretation
Internal
Capital .87 .03 Failed to Reject Not Significant
Expenses .29 1.16 Failed to Reject Not Significant
management
Liquidity .000 21.02 Reject Significant
External
Competition .18 1.88 Failed to Reject Not Significant
Inflation .94 .006 Failed to Reject Not Significant

Table 4.3.4 shows the differences between the assessment of effect of

internal and external determinants to profitability franchise in terms of years of

operation. As indicated in the results, there are differences in the liquidity (p=.000,

f=21.02) when grouped according to the years of operation.

Since the result of p=.000 is lower than the .05 level of significance, then

the result was found significant respectively for liquidity. The findings indicated a

not significant difference in terms of liquidity. This means that whether the food

cart franchising is new or it is operating in longer years they are affected by how

quick their assets is converted into cash and how timely they make payment of

their liabilities as they come due.

According to Chandra (2001, p.72), normally a high liquidity is considered

to be a sign of financial strength, however according to some authors as Assaf

Neto (2003, p.22), a high liquidity can be as undesirable as a low. This would be a
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consequence of the fact that current assets are usually the less profitable then the

fixed assets. It means that the money invested in current assets generates less

returns then fixed assets, representing thus an opportunity cost. Besides that, the

amounts employed in current assets generate additional costs for maintenance,

reducing thus the profitability of the company.

Table 4.3.5
Difference on the assessment of effect of internal and external
determinants to profitability franchise in terms of average daily gross sales
Variables p-values Computed f- Decision on Ho Verbal
values Interpretation
Internal
Capital .99 .02 Failed to Reject Not Significant
Expenses .95 .18 Failed to Reject Not Significant
management Failed to Reject Not Significant
Liquidity .67 .59
External
Competition .57 .74 Failed to Reject Not Significant
Inflation .29 1.30 Failed to Reject Not Significant

Table 4.3.5 shows differences between the assessment of effect of internal

and external determinants to profitability franchise in terms of its daily gross sales.

As indicated from the results, there are no difference in the effect of both internal

and external determinants to the profitability of franchising business when grouped

according to its daily gross sales.

According to Slastnikoy (2009), franchises often are required to contribute

a percentage of their income to some hidden and unexpected costs but not all food

carts do it because of the reason of low rate of sales.

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4. Based on the findings the recommended courses of actions that may be

proposed on the implications of the study.

Based on the interpretation and analysis of the data gathered by the

researchers in terms of internal (capital, expenses management and liquidity

management) and external determinants (competition and inflation), its implication

to the stakeholders such as owner, employee, customer, franchisor and investor.