Maximum capture model with a distance constraint between facilities: A case for the convenience store franchise in Korea

Keywords: maximum capture model, market share, franchise distribution model, competitive location modeling, convenient store
Abstract Type: Paper Abstract

Abstract

competitive outlets. A typical competitive location model is the market share model maximizing the capture of customers. The location decision on the new entry is more complicated in the franchise system because the franchisor wishes to maximize total franchise revenue by expanding as many franchisees as possible, while individual franchisees have to compete with existing outlets of the same franchise as well as competitors. In Korea, additional stores from the same franchise are enforced to be located outside a specified distance to the existing stores. In this application context, this research shows the optimization of the franchise distribution locations based on the maximum capture model with a distance constraint between franchisees. As an empirical example, the developed franchise distribution model is applied to the market of the convenient store at the central business sector of Seoul. Our approach would be a methodological basis and show practical solutions for the franchise system to make locational decisions on the new entry avoiding the cannibalization of existing outlets.