The Impact of Satisfaction and Environmental Uncertainty on

Commitments Mediated by the Franchisee’s Trust

Makartiningrum, D. Adriel, A. K. Ilyas and Lim Sanny

Business Management Program, Management Department,

BINUS Business School Master Program Bina Nusantara University, Jakarta, 11480, Indonesia

Keywords: Satisfaction, Environmental Uncertainty, Commitment, Trust, Franchise.

Abstract: This study aims to analyze the effect of environmental satisfaction and uncertainty on commitment and its

indirect effects through trust mediator variables. The research sample is franchisee, especially in the field of

food and beverages. Data analysis using SPSS and Sobel Test. The results showed that there was a positive

and significant effect of Franchisee Satisfaction on Franchisee Trust, positive and significant influence

between Environmental Uncertainty on Franchisee Trust, positive influence of Franchisee Trust on

Commitment, further Franchisee Satisfaction had a positive and significant effect on Commitment with

Franchisee’s Trust as a mediating variable, and Environmental Uncertainty has a positive and significant

effect on Commitment with Franchisee’s Trust as a mediating variable.

1 INTRODUCTION

In today’s highly developed digital era, there are

many businesses, both large and small, in society,

especially in Indonesia. One of the businesses that is

currently on the rise is about franchising or

franchising, especially in the field of food and

beverages where there are more competitors. From

year to year, the prospect of franchise business in

Indonesia is increasingly promising. General

Chairperson of the Indonesian Franchise and

Licensing Association (Wali), Levita Ginting Supit,

said the franchise business in the country continues to

experience positive growth. In 2018, the franchise

business in the country experienced a growth of 3%

with a turnover of IDR 150 trillion. In 2019, it is

projected that the franchise business can grow by 5%

(FLEI, 2019). In addition, this franchise is also

supported by the improvement of infrastructure and

investment in the trade sector. The concept of

franchising is just learning and running a system that

has been determined by a certain brand, so there is no

need to create a new brand.

This franchise business can be said to be a

strategic business because even though it was built

from a small business, it was formed in a mature

concept. In the franchise business, the risk of failure

can be minimized, because the franchisor has

provided everything to support the franchisee,

including surveys, marketing and promotion

methods, licensing, raw materials, management,

work standards (SOP), interior design, strategies and

so on (Latan et al., 2018). Several franchise

businesses are currently under increasing pressure by

having to always innovate, otherwise this will make

the business worse off. The challenge of this franchise

business is that business people must be innovative

and creative. The reason is, the emergence of various

franchises and many foreign franchises have entered

Indonesia. ”Like it or not, franchising has to be

creative,” said Levita (2019).

Meanwhile, in other conditions in 2020, around

the world began to talk about the Covid-19 virus. This

virus was first known to infect humans at the end of

December 2019 in the city of Wuhan - China. Then

in January 2020, the National Health Commission of

China informed that this virus can be transmitted

from human to human (Sheth et al., 2012). In this

case, the whole world is experiencing changes in all

their daily activities. Including in terms of the

economy, the economic turmoil caused by the Covid-

19 pandemic hit Indonesia like a perfect storm which

at least had three major impacts on the economy,

Suryo said the first impact was making household

consumption or purchasing power which is the

support for 60 percent of the economy to fall deep

enough. This is evidenced by data from the Central

Makartiningrum, ., Adriel, D., Ilyas, A. and Sanny, L.

The Impact of Satisfaction and Environmental Uncertainty on Commitments Mediated by the Franchisee’s Trust.

DOI: 10.5220/0011243800003376

In Proceedings of the 2nd International Conference on Recent Innovations (ICRI 2021), pages 221-227

ISBN: 978-989-758-602-6

221

Statistics Agency (BPS) which recorded that

household consumption fell from 5.02 percent in the

first quarter of 2019 to 2.84 percent in the first quarter

of 2020. The second impact, namely the pandemic,

caused prolonged uncertainty so that investment also

weakens and implies cessation of business. The third

impact is that the entire world is experiencing an

economic downturn, causing commodity prices to fall

and Indonesia’s exports to several countries have also

stopped (Morgan et al., 1994).

Based on data, especially in the food and beverage

franchise business sector in Indonesia, for example,

PT Fast Food Indonesia Tbk (FAST), the KFC

franchise rights holder acknowledged the cessation of

operations in some companies, due to the impact of

the corona virus or Covid-19. This termination made

FAST close 115 KFC outlets (Davies et al., 2011).

Then for the current beverage business from Taiwan,

Chatime, to change its operating hours, according to

the applicable mall operating hours to close several

stores in several cities during the pandemic period,

there are 39 outlets that have started to stop operating,

which are spread throughout the cities of Indonesia

(Minarikova et al., 2020). This creates a condition of

uncertainty in terms of denomination or environment

uncertainty. Unpredictable environmental uncertainty

(such as climate change or natural disasters) or the

level of change in the market (such as customer

desires, competitor challenges and technological

changes) that lead companies to respond either now

or in the future (Minarikova et al., 2020).

The relationship between the Franchisor and

Franchisee has an important role in the franchise

business. (Latan et al., 2018) state that the important

thing in building relationships in the franchisee field

is to develop a vertical marketing system, for example

franchising and exclusive distribution where

marketers can develop long-term relationships and

contracts between buyers and sellers. In this case,

forming relationships, trust and commitment are three

important factors. Commitment and trust are key

because it encourages marketers to (1) work in

maintaining investment relationships by working

with partners, (2) refuse to take short-term

alternatives in order to expect longterm benefits with

partners, (3) see potential high risk actions as wise

because they believe that partners will not act

opportunistically (Justitia et al., 2019).

The trust that is built between the franchisor and

the franchisee is in the form of control that is

dependent on the two. According to (Sanny et al.,

2017), franchisors generally rely on franchisees to

sell their brands but still with strict rules. So that the

franchisee depends on the franchisor for promotional

support and managerial support such as conducting

training. Therefore, the franchisor needs to maintain

the trust that has been given. When the control

between the two is missed until the franchisee doesn’t

trust the franchisor, the contract between the two of

them becomes out of sync, which causes the

franchisee to start not following the existing rules

because they have lost trust.

According to (Allen and Meyer, 1990),

franchisors have a perception that the income they

receive is generally higher than their franchisees. This

means that franchise royalties are usually based on

gross sales figures, while franchisee’s profits are

strongly influenced by operating costs. Then, the

revenue from the franchisor is a collection of a

predetermined percentage of the total income or

profits obtained from the franchisee, so if there is a

problem in terms of an economic downturn, the

franchisor will still get a profit according to that

percentage. So that if there are problems related to the

economy, there can be conflict friction between the

two because of the mismatch of perception. In this

case, trust and commitment must be built on both

parties, trust is a factor that underlies a relationship so

that with mutual trust the relationship between the

two parties is strong enough.

Based on previous researchers who have

conducted research on franchise and trust businesses,

such as research by (labrague et al, 2018) which

tested a model of trust and compliance in franchise

relationships, other researchers, (Chu, 2003) tested

the bright side and the dark side of trust: The

mediating effect of the franchisor owner’s trust in

performance. Research by (Siagian and Cahyono,

2014), regarding the influence of environmental

uncertainty on trust relationships, as well as research

conducted by (Morgan et al., 1994) regarding the

influence of environmental strategy, environmental

uncertainty and management commitment to

corporate environmental performance: The role of

environmental management accounting. Finally, the

research conducted by (Alzola, 2013), regarding the

effect of environmental uncertainty, organizational

commitment, and information asymmetry on the

relationship between budget participation in

manufacturing companies in Surabaya.

According to several previous studies that have

been mentioned above, research has not been found

that combines the variables of Satisfaction,

Environmental Uncertainty, Commitments and Trust.

Therefore, we will conduct a research entitled The

Impact of Satisfaction and Environmental

Uncertainty on Commitments Mediated by The

Franchisee’s trust. The results of this study are

ICRI 2021 - International Conference on Recent Innovations

222

expected to help franchisees, especially in the field of

food and beverage companies, to be more optimal in

running their business.

2 LITERATURE REVIEW

The development of the franchise at this time can be

said to be worldwide, even its development has been

very rapid in Indonesia, both international franchises

and local brands. This is driven by the entrepreneurial

spirit and creativity of the community to build their

economic independence. Franchise is a form of

business strategy that aims to expand the reach of its

business in increasing market segment and sales.

Satisfaction from the franchisee side is found when

someone’s expectations match the perceived

performance of a given product or service. Loyalty is

earned when a customer repurchases a service or

product or recommends it to a potential new

customer. Satisfaction has a direct positive

correlation with loyalty (Padin et al., 2017).

Commitment is defined as an attitude that has a

strong desire to remain in an organization, tries hard

according to the wishes of the organization, and

believes in the acceptance of organizational values

and goals (Hogevold et al., 2019). Organizational

commitment is defined as an emotional relationship

between employees and the organization which

consists of affective commitment, normative

commitment, and ongoing commitment.

Trust is a trust based on integrity and reliability as

well as dependence between consumers and providers

(Rusman and Karim., 2017). According to (Hogevold

et al., 2019) describes several indicators of trust such

as best service, consistent, complete, valuable, and

keeping promises. Then (Wasiati, 2019) add that trust

is the willingness of a company to depend on its

business partners. According to (Mowday et al, 1979)

trust is a belief from one party regarding the

intentions and behavior of the other party, thus trust

is defined as an expectation that service providers can

be trusted or relied on in fulfilling their promises.

Figure 1: Research model.

Satisfaction is a manifestation of the other’s

capacity to fulfil relational norms, and this can

generate trust. The perception of expectations

regarding the quality of the franchise exchange is of

course how to produce a relationship between the two

parties, namely the Franchisee and Franchisor.

Satisfaction in economic terms is based on

distributive equity and equity exchanges, and leads

directly to trust in the franchisor and his competencies

(Kasali, 2018). Meanwhile, trust can be defined as a

willingness to trust in another partner in a business

context where actions taken by one partner can make

another vulnerable (Etikan et al., 2016). Based on this

description, our first hypothesis is:

2.1 H1: Franchisee Satisfaction Has a

Positive Impact on Franchisee

Trust

Under environmental uncertainty, one expects the

level of trust in the organization to change because

the circumstances we interact with may change;

otherwise, the imminent interaction seems to be over.

Therefore, environmental uncertainty limits the

development of trust within the firm due to growing

behavioral uncertainty. The higher the environmental

uncertainty, the greater the need to incorporate risk

into decisions, and the greater the need for trust. As

Sako and Helper (1998) in (Etikan et al., 2016), the

greater the level of environmental uncertainty, the

greater the benefit of being able to trust a trading

partner, because trust facilitates decision making in

unforeseen circumstances or environmental

uncertainty.

2.2 H2: The Effect of Environmental

Uncertainty on Franchisee Trust

If in partnership both parties trust each other, they

will be confident in their reliability and integrity

which will then result in a commitment from each

party. As business partners who can repeatedly

interact with each other, the trust and commitment

that has been built will be able to grow (Labrague et

al, 2018) in (Chu, 2003). Based on the perspective of

the sales process, Svensson et al., (2010) argue that

trust is an antecedent to commitment.

2.3 H3: Franchisee Trust Has a

Positive Impact on Commitment

Franchisees get satisfaction based on how well the

relationship with the franchisors can meet their

expectations (Kotler, 2012) Based on research

The Impact of Satisfaction and Environmental Uncertainty on Commitments Mediated by the Franchisee’s Trust

223

conducted by (Justitia et al., 2019) regarding the role

of commitment and relationship satisfaction on

franchisee loyalty, found that in testing the

commitment between the franchisee and the

franchisor, the results showed that the effect of

commitment was lower than franchisee satisfaction.

In this study, the franchisee seems less satisfied with

the franchisor’s attitude. The franchisor’s attitude is

one of several dimensions that are asked of the

franchisee in addition to support from the franchisor,

payment time, payment method and time to receive

materials. In particular, it is said that although the

franchisor provides all facilities to the franchisee

based on the franchise agreement, the franchisor does

not consider the franchisee’s opinion, especially in an

effort to develop a marketing strategy to increase

sales of the products it sells.

2.4 H4: Indirect Influence of

Franchisee Satisfaction on

Commitment with Franchisee’s

Trust as a Mediating Variable

Based on previous research that tested the Effect of

Environmental Uncertainty on Commitment, it was

stated that testing for Environment uncertainty had a

positive effect on Organizational Commitment (Latan

et al., 2018). Organizational commitment in this study

is because organizational commitment shows strong

belief and support for the values and goals that the

organization wants to achieve (Minarikova et al.,

2020). A strong organizational commitment within

the individual will cause individuals to strive to

achieve organizational goals in accordance with the

interests that have been planned. In this era of

disruption, uncertainty is something that is of concern

to both employees and companies. Uncertainty

affects employee motivation at work (Davies et al.,

2011) Individual beliefs or commitments in taking

jobs, identify with workrelated roles, they will

become committed to doing work and behave in

accordance with the expectations of the job (Sheth et

al., 2012).

3 METHODOLOGY

The population in this study were food and beverages

franchisees in Jakarta areas. The technique used is

convenience sampling. Convenience sampling (also

known as Haphazard Sampling or Accidental

Sampling) is a type of non-probability or non-random

sampling in which members of a target population

meet certain practical criteria, such as easy

accessibility, geographic proximity, availability at

certain times, or willingness to participate .

Convenience Sampling is a sampling that is quite

affordable, easy and the subject is readily available.

Of the total population, it is possible that the number

of samples collected from this quota sample consists

of 50-100 respondents who have business food and

beverages franchisees.

4 RESULTS AND FINDINGS

Table 1: Demographic Characteristics of the Respondent.

Table 2: Reliability Consistency Test Results.

Through the results of the reliability test of the four

variables, it is known that the first variable, namely

Franchisee Satisfaction, has a Cronbach Alpha

coefficient value of 0.947 which means that the

internal consistency is very good (r

> 0.9). The second

variable, Environmental Uncertainty has a Cronbach

Alpha coefficient value of 0.514, meaning that the

internal consistency is categorized as less reliable (r

<0.6). The third variable, Franchisee Trust, has a

Cronbach Alpha coefficient of 0.919, meaning that

the internal consistency is very good (r

>0.9). And the

last variable, Franchisee Commitment, has a

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Cronbach Alpha coefficient value of 0.817 meaning

that the internal consistency is categorized as good

> 0.8).

Table 3: Result of Normality Test between Variables.

Construct

Kolmogorov-

Smirnov Z

Franchisee

Satisfaction &

Trust

0.095 0.200

Environmental

Uncertainty &

Trust

0.131 0.083

Franchisee

Trust &

commitment

0.069 0.200

Through the results of the correlation test using

the Kolmogorov-Smirnov 1-Samples Menu by

looking at the significance value (p), variables that

have a normal distribution will have a p value

(Asymp. Sig.)

> 0.05 and an abnormal distribution is

<0.05. From the first three tests, Franchisee

Satisfaction Trust has a normal distribution with a

KolmogorovSmirnov Z value = 0.095 and a

significance value p = 0.200 (p

> 0.05). Second,

Environmental Uncertainty Trust has a normal

distribution with a Kolmogorov-Smirnov Z value =

0.131 and a significance value p = 0.083 (p

> 0.05).

And finally, Franchisee Trust commitment has a

normal distribution with the Kolmogorov-Smirnov Z

value = 0.069 and a significance value p = 0.200 (p

0.05).

Table 4: Results of Hypothesis 1, 2 and 3 Regression Test.

Variable

Regression

Coefficient

thitung Sig.

Franchisee

Satisfaction &

Trust

14.463 4.605 0.000

1.87 8.053 0.000

Environmental

Uncertainty &

Trust

-2.212 -0.385 0.702

1.939 7.203 0.000

Franchisee Trust

& commitment

0.724 0.982 0.332

0.143 7.708 0.000

In the results of the above calculations, hypothesis

1 has a sig value. of the independent variable

Franchisee Satisfaction, which is equal to 0.000

<0.05 so that it has a significant influence on the

dependent variable, namely trust, and the same as the

trust variable on the dependent variable Franchisee

Satisfaction has a value of 0.000

<0.05, which means

that it has a significant influence between the two

variables. In this case, both variables have a

significant effect.

In the results of the above calculations, hypothesis

2 has a sig value. from the independent variable

Environmental uncertainty, which is 0.702> 0.05, so

it does not have a significant effect on the dependent

variable, namely trust, and the trust variable on the

dependent variable Environmental uncertainty has a

value of 0.000

<0.05 which means it has a significant

effect. In this case, when compared, the trust variable

has a significant influence compared to the

environmental uncertainty variable.

In the results of the above calculations, hypothesis

3 has a sig value. from the free variable trust which is

equal to 0.332> 0.05 so that it does not have a

significant effect on the dependent variable, namely

the commitment, and the trust variable on the

commitment bound variable has a value of 0.000

<0.05 which means that it has a significant effect. In

this case, when compared, the variable commitment

has a significant effect compared to the trust variable.

Table 5: Results of Hypothesis 1, 2 and 3 Regression Test.

Variable p-value

Franchisee Satisfaction,

Commitment & Trust

0.0047

0.0050

0.0044

Franchisee Trust,

Environmental

Uncertainty &

Commitment

0.0001

0.0000

From the results of the above calculations using

the Sobel test, in Hypothesis 4, the indirect effect of

Franchisee Satisfaction on Commitment with trust as

mediation, has a value of 2,824 with P value: 0.0047,

0.0050, and 0.0044 where the P value

<0.01 which

means that trust mediates the relationship Indirectly

variable Franchisee Satisfaction with Commitment.

From the results of the above calculations using the

The Impact of Satisfaction and Environmental Uncertainty on Commitments Mediated by the Franchisee’s Trust

225

Sobel test, in Hypothesis 5, the indirect effect of

Environmental Uncertainty on Commitment with

trust as mediation has a value of 2,824 with a P value:

0.0001, 0.0001, and 0.0000 where the P value

<0.01

which means that trust mediates the relationship

indirectly the Environmental Uncertainty variable on

Commitment.

5 CONCLUSION

on the results of data analysis described in chapter IV,

both hypothesis 1, hypothesis 2 and hypothesis 3 are

accepted and have an influence on this study. Where

hypothesis 1 shows that satisfaction has a positive

effect on trust, hypothesis 2 shows that environmental

uncertainty has a positive effect on trust, and

hypothesis 3 on trust has a positive effect on

commitment. On the results of data analysis described

in chapter IV, the hypothesis with the mediation

variable Trust tested using the sobel test is also

accepted and Trust as the mediating variable is

proven to have a direct effect. For hypothesis 4 with

P values: 0.0047, 0.0050, and 0.0044 where the P

value < 0.01, which means that trust mediates the

indirect relationship of the Franchisee Satisfaction

variable to Commitment. Then hypothesis 5 with the

value of P: 0.0001, 0.0001, and 0.0000 where the

value of P

< 0.01, which means that trust mediates the

indirect relationship of the variable Environmental

Uncertainty to Commitment.

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