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Article
Publication date: 20 April 2020

Andrea Lanfranchi, Pedro Lucas de Resende Melo, Felipe Mendes Borini and Renato Telles

In this study, the authors identify how formal institutional environments in destination countries matter to franchise chains as they internationalize. The institutional…

Abstract

Purpose

In this study, the authors identify how formal institutional environments in destination countries matter to franchise chains as they internationalize. The institutional environment of the destination countries of franchise chains is characterized according to three institutional dimensions necessary to attract international investment – public governance, ease of doing business and legal processes – and analyzed in the context of regional and global franchise expansion.

Design/methodology/approach

The descriptive quantitative study involved 625 franchise chains from Australia, Brazil, Germany, India, Russia, South Africa and the United States, with a total of 2,939 observations.

Findings

Results suggest that franchise chains from emerging markets are guided by the institutional conditions of ease of doing business and the quality of legal processes in global expansion and guided by ease of doing business, quality of legal processes and governance in regional expansion. On the other hand, franchise chains from developed markets are guided by the ease of doing business, quality of legal processes and governance in global expansion and governance and ease of doing business in regional expansion.

Research limitations/implications

The sample included only franchise chains associated with organizations that represent franchises in their countries of origin, and the study does not analyze the effect of institutional distance between countries of origin and destination.

Originality/value

This study identifies the formal institutional characteristics that explain selection and commitment in international markets by franchise chains from different countries. The contribution is in analyzing the phenomenon through the lens of institutional theory and showing, through a global sample, that institutions matter to franchise chains from different types of countries (developed and emerging) and with different strategies for internationalization (global and regional).

Details

International Journal of Emerging Markets, vol. 16 no. 4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 11 September 2020

Andrea Giovani Lanfranchi, Suzane Strehlau, Felipe Mendes Borini and Pedro Lucas de Resende Melo

The purpose of this research is to identify the impacts of the country of origin of a franchise chain on its commitment in the destination countries, verifying the…

Abstract

Purpose

The purpose of this research is to identify the impacts of the country of origin of a franchise chain on its commitment in the destination countries, verifying the institutional particularities between the chains from emerging and developed countries.

Design/methodology/approach

The research is descriptive and quantitative and involved 724 franchise chains from 10 countries of origin (Brazil, Russia, India, South Africa, Argentina, USA, Germany, Australia, Spain and Portugal), spread over 174 destination countries, totaling 3,513 cases.

Findings

The results indicate that institutional preferences do not vary according to the country of origin of the franchise chain but rather vary according to the destination country.

Research limitations/implications

This paper contributes to institutional theory by identifying a set of characteristics that explains the selection of international markets and the commitment of franchise chains.

Practical implications

The results obtained in the study can help managers of franchise chains to make decisions related to the selection of destination countries for international expansion based on the institutional characteristics of the markets and their compatibility with the objectives of the franchise chains.

Originality/value

Companies in emerging countries internationalize according to different management logics from those of companies from developed countries. Thus, it is possible that the process of selecting countries for internationalization is also based on different criteria that reflect different institutional preferences. The thesis defended in the paper is that market potential is more important to franchisees from emerging markets, whereas contract enforcement is more important to franchisees from developed markets.

Details

Multinational Business Review, vol. 29 no. 1
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 12 August 2021

Pedro Lucas de Resende Melo, Julio Araújo Carneiro-da-Cunha and Renato Telles

The purpose of this paper is to understand the relationship between franchisee support and brand value in micro-franchise chains. This study aims to understand the…

Abstract

Purpose

The purpose of this paper is to understand the relationship between franchisee support and brand value in micro-franchise chains. This study aims to understand the importance of value delivery in support to the micro-franchisee aiming at increasing brand value.

Design/methodology/approach

The sample was composed of 148 micro-franchisees belonging to 70 chains located in Brazil. The questionnaire aimed to verify the franchisee’s degree of concordance with the support and brand value provided by the franchisor through a Likert scale. The questionnaire structure comprised of ten metrics associated with franchisee support, four metrics associated with the brand value perception and four potentially intervenient metrics. A regression analysis was carried out to confirm the results for the factor analysis, assuming that the three factors associated with support as independent variables and the brand factor as a dependent variable.

Findings

The three factors related to franchisee support were found to be significant predictors of brand value. Based on the values of the coefficients, it is possible to infer the positive nature of the association. An increase in franchisee support leads to an increase in the franchisee perception about brand value. The positive effect of training and franchisor’s support in prospection and installation improvement on the brand value evaluation by franchisees was supported by the statistical analyses conducted.

Research limitations/implications

This research complements the studies on brand citizenship behavior and franchisee brand commitment; the greater the support provided to the micro-franchisee, the greater its commitment to the brand values of the chain. This contribution is critical because we deal with micro-enterprises in a business environment with an intense resource scarcity. These aspects place restrictions on the delivery of support and brand value in these franchise chains.

Practical implications

Structured support plans and greater approximation with franchisees seem to be alternatives for this perception of value to be increased in micro-franchise chains. The attractiveness of a micro-franchise chain can be enhanced if the franchisor is able to show to its potential micro-franchisees that it offers adequate support for its business; and also for the capture of new micro-franchisees.

Social implications

The social implications aimed at entrepreneurs with low financial expenditure. The sustainability of these businesses is highly relevant in the case of emerging markets given the high rates of unemployment and informality. Hence, micro-franchises become one of the means for micro-entrepreneurs to enter the job market.

Originality/value

When dealing with micro-franchises, there is an intensification of this scarcity of resources due to the smaller amount captured by the franchisor, as well as the lower technical level found in the franchisees. The relationship between brand value and the perceived level of support and the consequent franchise satisfaction with the chain in franchises, symbolized by brand citizenship behavior, is still little studied, and there are promising new studies, especially on the different types of franchises.

Details

Journal of Entrepreneurship in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2053-4604

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Article
Publication date: 25 August 2021

Rozenn Perrigot, Anna Watson and Olufunmilola (Lola) Dada

This paper aims to explore how the power of salient stakeholders involved in the green waste management of franchise chains can impact the ability of the chains to change…

Abstract

Purpose

This paper aims to explore how the power of salient stakeholders involved in the green waste management of franchise chains can impact the ability of the chains to change their green practices.

Design/methodology/approach

This qualitative study is based on interview data from 19 franchisors and their head office staff operating in the fast-food sector in France where franchise chains have been ‘named and shamed’ as continuing to ignore waste management regulation.

Findings

The findings suggest that both the form and bases of power of different stakeholder groups have important implications for the implementation of green practices, even those required by law. The authors find that the franchisees’ central network position alters the ability of franchisors to directly engage in dialog, consult with, and educate key stakeholders, creating additional challenges for franchisors in the implementation process.

Research limitations/implications

The qualitative nature of the study limits the extent to which the findings can be generalized. Future studies could develop an instrument to assess franchisor perceptions of stakeholder power.

Practical implications

The findings suggest that franchisors should consider carefully how they communicate changes to green practices to their franchisees to ensure not only their compliance but also their motivation to engage with those stakeholders with whom they have regular interactions. The findings can also help governments to better understand how to involve other stakeholders to ensure effective environmental legislation.

Originality/value

The study is the first, to the authors’ knowledge, to consider the role of stakeholders in the implementation of green practices in franchise chains. By examining franchise chains, this paper provides new insights into the role of an additional stakeholder, the franchisee, and enriches the literature on green practices in the hospitality sector.

Details

International Journal of Contemporary Hospitality Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0959-6119

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Article
Publication date: 1 May 2002

Gérard Cliquet and Jean‐Philippe Croizean

The cosmetics retail industry in France is changing for at least two reasons: first, more and more services are available within cosmetics stores and, second, large groups…

Abstract

The cosmetics retail industry in France is changing for at least two reasons: first, more and more services are available within cosmetics stores and, second, large groups like LVMH or Marionnaud are themselves looking for retail chains in order to exert greater control over their distribution systems. The findings from an exploratory study of several cosmetics retail companies operating in the French market seem to indicate that developing services is the best way of retaining business independence and resisting predators. Moreover, the development of new services leads these companies to implement plural form organisations. Many managerial and strategic advantages can be drawn from this type of organisation compared to pure franchise or company‐owned arrangements. A model is proposed to explain the evolution of organisational forms in cosmetics chains.

Details

International Journal of Retail & Distribution Management, vol. 30 no. 5
Type: Research Article
ISSN: 0959-0552

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Article
Publication date: 13 February 2009

Victoria Bordonaba Juste, Laura Lucia‐Palacios and Yolanda Polo‐Redondo

This paper aims to examine whether there is evidence of pioneering advantage in long‐term survival terms in the particular context of franchising.

Abstract

Purpose

This paper aims to examine whether there is evidence of pioneering advantage in long‐term survival terms in the particular context of franchising.

Design/methodology/approach

Data covering 188 franchise chains for an eight‐year period (from 1995 to 2003), operating in restoration and fashion retailing sector are used. The Cox proportional hazard model is used to examine survival. The existence of pioneering advantage is tested in the Spanish context because its franchising sector is one of the most developed in Europe, along with those of France, the UK and Germany.

Findings

Empirical evidence of pioneering advantage was found. Early entry strategy leads to lower failure risk. Different strategies are highlighted according to different entry time moments, suggesting a moderating role of the entry timing decision. Additional variables influence survival such as previous experience or dual distribution.

Research limitations/implications

The paper has some limitations. The focus is just on one country. Therefore, a multi‐country study could help to generalize the results. Furthermore, the research could be improved by adding variables of the specific franchise context such as the franchise fee or the royalty rates.

Practical implications

The results may help franchisors to improve their survival, adapting their strategies to be more competitive in the market. Depending on their entry timing decisions, they can have different strategies to continue in the market. Pioneers differ from late entrants in terms of ownership structure and system size – two main aspects for survival. Moreover, the paper can help the prospective franchisee in making a better selection of franchise chain in which to invest. Findings support the idea that entering at the early stages of the franchise industry brings some advantages.

Originality/value

The paper highlights the importance of the entry‐timing decision in the franchising context using survival as performance. This objective has not been underlined in previous research.

Details

International Journal of Retail & Distribution Management, vol. 37 no. 2
Type: Research Article
ISSN: 0959-0552

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Book part
Publication date: 22 September 2009

Steven C. Michael and Janet E.L. Bercovitz

An agency relationship exists whenever one party (the principal) delegates authority to another (the agent). Because agents are assumed to be self-interested and to…

Abstract

An agency relationship exists whenever one party (the principal) delegates authority to another (the agent). Because agents are assumed to be self-interested and to possess goals that diverge from the principal's goals, the principal must expend resources (called agency costs) to insure that agents act in her interest (Jensen & Meckling, 1976). In chains, the firm can choose as outlet managers either employees who are paid a salary (and perhaps a bonus) or franchisees who are granted the right to their outlet's profits after royalties and other expenses. In both cases, an agency problem is created because the firm delegates local decision-making to outlet managers whose interests are not perfectly aligned with that of the franchisor's (Rubin, 1978).

Details

Economic Institutions of Strategy
Type: Book
ISBN: 978-1-84855-487-0

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Article
Publication date: 30 March 2020

Rozenn Perrigot, Begoña López-Fernández, Guy Basset and Olivier Herrbach

As franchisees are independent entrepreneurs, one important part of the business format that franchisors are not allowed to impose on their franchisees is resale prices…

Abstract

Purpose

As franchisees are independent entrepreneurs, one important part of the business format that franchisors are not allowed to impose on their franchisees is resale prices. They are only allowed to indicate a recommended or a maximum price. This study aims to look further into the capabilities underlying the calculation of resale prices and suggests that price-setting is part of both the “business know-how” transferred to franchisees and the “organizational know-how,” that is, capabilities developed and kept at the franchisor level.

Design/methodology/approach

This study adopted a qualitative methodology with a total of 65 interviews, 19 with franchisors and 46 with franchisees, all operating in the French market.

Findings

The findings show that resale pricing is a process that involves know-how. The complexity of pricing leads to develop specialized and broad capabilities. The first type of know-how, i.e., business know-how transferred to franchisees, deals with operational implementation of recommended resale prices in the stores. The second type, i.e., organizational know-how, not transferred as a safeguard against opportunism, connects across other functions of the franchise chain such as R&D and communication.

Originality/value

This study confirms the existence and relevance of another kind of know-how apart from the business know-how that is transferred to the franchisees. Organizational know-how at the chain level, though often neglected, is a necessary determinant of sustaining a competitive advantage. This know-how is not transferred to the franchisees but contributes to the success and sustainability of the franchisor/franchisee relationship. Franchisors should thus work on improving their capabilities to better support their franchisees. Moreover, this study highlight the complexity and extreme importance of setting the right resale price.

Details

Journal of Business & Industrial Marketing, vol. 35 no. 4
Type: Research Article
ISSN: 0885-8624

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Article
Publication date: 3 April 2007

Scott Weaven and Lorelle Frazer

This paper aims to extend current understanding of organisational choice theory through examining to what extent firm‐level factors influence the growth of…

Abstract

Purpose

This paper aims to extend current understanding of organisational choice theory through examining to what extent firm‐level factors influence the growth of franchisee‐owned mini‐chains within Australian franchise systems. In particular, this study examines how the age of the system, corporatisation of management processes, plurality of distribution, levels of intra‐firm conflict and franchise system complexity influence multiple unit franchising adoption.

Design/methodology/approach

A qualitative methodology was adopted to gain a clearer picture of the salient issues influencing multiple unit franchising adoption from the franchisor's perspective.

Findings

The research reveals that mature franchise systems in Australia use sequential methods of multiple unit franchising expansion in order to minimise adverse selection costs and leverage learning economies derived from previous experiences in managing intra‐firm channel relationships.

Research limitations/implications

Industry‐specific influences and differences in managerial orientations may limit the predictive application of this study to all franchise systems. However, on balance the reflections offered by the participants provide a rich and valuable source of information about the factors influencing their willingness to encourage this growth strategy.

Practical implications

Franchisors need to consider upfront whether they are ready and able to encourage multiple unit ownership within their systems. Less experienced franchisors may need to corporatise operations, minimise channel conflict and introduce administrative support procedures to ensure the recruitment of suitable franchisee candidates who will assist in realising the franchisor's goals, thus promoting a harmonious franchising relationship.

Originality/value

Whereas, previous research has investigated motivations for encouraging multiple unit franchising, this paper supplements that literature by examining multiple unit franchising within Australia.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 19 no. 2
Type: Research Article
ISSN: 1355-5855

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Article
Publication date: 6 May 2014

Laura Lucia-Palacios, Victoria Bordonaba-Juste, Melih Madanoglu and Ilan Alon

The purpose of this paper is to demonstrate how signaling support services and contractual arrangements that create value for incumbent franchisees can help to create…

Abstract

Purpose

The purpose of this paper is to demonstrate how signaling support services and contractual arrangements that create value for incumbent franchisees can help to create value for the whole network by attracting prospective franchisees.

Design/methodology/approach

Using data from Bond's Franchising Report the study analyses franchisors operating between 1994 and 2008 via a Generalized Method of Moments (GMM) model for an unbalanced panel of 2,474 franchisors.

Findings

Training, financial assistance, sub-franchising and restrictions against passive ownership, and the use of area development agreements are found to be valuable for prospective franchisees. Experience and the number of company-owned and franchised units also attract prospective franchisees.

Research limitations/implications

Our findings imply that not all value-creating services and contractual arrangements are interpreted in the same way by prospective franchisees. Franchisors should offer training and financial assistance to new franchisees in the early stages of a franchise. They should also allow sub-franchising but restrict passive ownership and offer the possibility for area development agreements as contractual arrangements to appeal to new franchisees. Franchisors should focus not only on expansion, but should view the chain in a holistic manner by sustaining and growing both franchised and company-owned units.

Originality/value

The findings contribute to the franchising literature by providing new evidence on how offering and signaling some contractual arrangements and support services can help franchisors create value for incumbent franchisees and can attract new franchisees. Our research shows that value in franchising is created differently depending on whether the franchisees are incumbent or prospective.

Details

Journal of Services Marketing, vol. 28 no. 2
Type: Research Article
ISSN: 0887-6045

Keywords

1 – 10 of over 2000