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This paper's aim is to examine the risk‐adjusted market performance of an overall franchise and three sub‐sector franchise common stock portfolios from 1990 through 2008.

Four sets of franchise sector portfolios are constructed, their returns are calculated, and their performances relative to three market benchmarks are evaluated using the Sharpe ratio and Jensen's α.

The all franchise portfolio significantly outperformed the three market benchmarks. Among the sector portfolios, the services and restaurant portfolios also outperformed the market benchmarks, but not the lodging portfolio. Results support the theoretical hypothesis that franchising may provide superior advantages to investors and point to a possible “franchising anomaly”. Investors consider franchise firms to be less risky than the average publicly traded firms and therefore require a lower rate of return.

The results of the study suggest that in the past, franchise managers may have paid a much higher cost of capital than warranted by their firms' risk characteristics. Study results also have positive implications for franchise firms' access to capital and for evaluating franchise managers' compensation arrangements. Investors should consider allocating a portion of their investible funds to franchise stocks. Many lodging firms may not have taken full advantage of the benefits of franchising to reduce their financial risks. Restaurant firms may further improve their financial performance by selling their riskier units.

This is the first comprehensive study of the risk‐adjusted market performance of franchise firms over an extended period of time covering a variety of economic conditions that also analyzes the risk‐adjusted performance of the main business subcategories in franchising.

The existing literature has focused heavily on investigating the effect of corporate social performance (CSP) on financial performance (FP) but has not paid sufficient attention to an inverse causation of the relationship. Moreover, while some of the literature argues that FP positively affects CSP, based on the slack resources theory, others have found negative effects of FP on CSP, supporting the managerial opportunism perspective. Thus, this paper aims to address the impact of FP on CSP. Further, this study examines the moderating role of franchising to better understand the relationship.

This study uses and expands the models derived from the CSP literature to confirm the effects of FP on CSP with the moderating role of franchising within the restaurant industry. Using two-way fixed effects models, it effectively addresses important problems embedded in the panel data.

The findings show a positive effect of FP on CSP, which is inconsistent with Park and Lee’s (2009) findings and supports the slack resources theory. Further, the interesting results show that the impact of FP on CSP diminishes as a firm franchises more, supporting the double-sided moral hazard framework of the agency theory.

This paper fills the lacuna in both the existing literature on the relationship between CSP and FP and the franchising. This study contributes to enhancing restaurant practitioners’ understanding of the double-sided moral hazard of agency theory unique to franchising context.

The paper's purpose is to evaluate the factors which influence a multinational hospitality organization's franchise decision‐making process.

A single embedded case study of an international hotel firm was the focus of the enquiry. Interviews and document analysis were used as data collection techniques.

Findings suggest that the two important contextual variables which have a bearing on the franchise decisions are the key stakeholders of the organization and different country markets. Decisions with regard to franchising are driven by capital market systems trying to meet the demands of shareholders and also by a strong desire to protect the core competences to meet the expectations of international customers. The growth through franchising mode however faces strong cultural challenges in different hotel markets in Europe.

Conducted on a single case study basis, with the hotel industry chosen as its focus the applicability of the research findings to other industries is therefore debatable. The findings are also limited to franchisors versus firms pursuing other growth strategies.

This paper illuminates the socio‐cultural challenges international service organizations face, and highlights the types of practices required to enable growth through franchising in different country markets.

This paper investigates a franchise decision‐making process and examines different factors that interact and exert influence on each other while a service organization decides to choose the most appropriate franchise project. The paper identifies the key stages and the variables to the process that could be verified in the future.

The purpose of this study is to explore the hospitality franchise purchase decision-making process undertaken by franchisees in Macau as an emerging tourism destination and the role of national culture on purchasing a franchise brand and selecting a potential franchisor.

Semi-structured in-depth interviews with 18 franchisees in Macau, who purchased international and domestic hospitality franchise brands, were conducted to understand the feelings, attitudes and motivation of franchisees toward purchasing a hospitality franchise.

The study reveals that national culture can play an important role in franchisees’ decision-making process. Personal networks of friends and family (guanxi) are very influential in introducing and steering aspiring entrepreneurs toward franchising as an option to realize their ambitions, although there may be some limitations to franchisees with this approach. Guanxi was also found to be particularly relevant during negotiations and franchisees’ post-purchase reviews.

International franchisors should understand the importance of guanxi at different stages of the franchisees’ decision-making process. Franchisees should realize how a reliance on guanxi might negatively affect their efforts to undertake sufficient research to thoroughly evaluate the franchisor offer before contract signature.

A comprehensive hospitality franchisee decision-making purchase framework is developed, which includes the cultural context and cultural values. Guanxi, in particular, affects the franchisee decision-making process.

The purpose of this study is to analyze the extent to which under- and over-investment problems affect hotel firms’ value around the time when acquisitions are announced.

Hotel firms are classified based on their financial constraints (under-investment), corporate governance mechanisms (over-investment) and organizational structures. Multivariate analyses are conducted utilizing the panel ordinary least squares regression to examine the effects of financial constraints, corporate governance mechanisms and organizational structures on acquisition returns.

The results show that financial constraints have a larger effect on the firm value compared to the effect of corporate governance. Also, acquisitions are viewed as over-investments in poorly governed, franchising and hotel-real estate investment trust (REIT) firms.

The analyses are limited to gains from acquisitions in the hotel industry. Therefore, future studies may examine the effects of capital expenditures and cash holdings on hotel firm value.

Acquisitions could help financially constrained firms reduce informational asymmetries. Firms could expand through franchising when they are financially constrained. However, franchising firms should take restrictive actions to control managers from making acquisitions. The hotel-REIT organizational form does not seem to cause under-investment problems, and it functions as an additional corporate governance mechanism.

In addition to the C-corporation organizational structure, hotel firms extensively adopt REIT and expand through franchising, which might affect under- and over-investment problems. Nonetheless, little is known about whether capital investments create or reduce value for hotel firms. This study helps to explain how financial constraints, corporate governance mechanisms and organizational structures affect hotel firms’ value.

The primary purpose of this research is to investigate franchisees' satisfaction based on franchisors' pre‐opening support, central purchasing, congeniality and ongoing business support.

The sample was drawn from ice cream franchising operations in Seoul, South Korea, and its vicinity. Personal interviews were conducted, followed by a self‐administered questionnaire.

The franchisees learned about their business opportunities through friends and relatives. The brand recognition by the consumer is the major motive for franchisees to engage in franchising. While franchisees are least satisfied with their franchisors' ongoing business support, they are most satisfied with central purchasing support from the franchisor.

The study offers valuable insights for strategic management as to recruitment, selection, and ongoing support provided by franchisors.

This research is particularly valuable to franchisors who are contemplating expanding their franchising business internationally.

Reviews articles published during 1996 in the International Journal of Contemporary Hospitality Management, International Journal of Hospitality Management, Tourism Management and Travel & Tourism Analyst. Compares the central themes arising with those identified by a sample of hotel managers working in the UK and in Portugal, with particular reference to aspects of organizational performance. Compares and contrasts themes identified by academics and practitioners with reference to environmental scanning as a supportive process for trends identification and for strategy and decision‐making purposes.

To investigate the role of prior knowledge in the international franchise partner recruitment process and to evaluate how cultural distance influences the role of prior knowledge in this process.

A single embedded case study of an international hotel firm was the focus of the enquiry. Interviews, observations and document analysis were used as the data collection techniques.

Findings reveal that prior knowledge of the franchisor enables the franchisor to coordinate more efficiently with prospective partners. However, the case study firm experienced a great deal of cultural distance in different country markets. The greater the cultural distance, the more challenges the firm has to face in terms of upgrading and adapting its prior knowledge to local needs.

The findings are based on a hotel franchise chain, and may not be generalisable to other firms or industry sectors, although the literature on international management does not indicate any substantial differences between hotel firms and other types of organisations. Despite this limitation, the findings shed light on the importance of critically evaluating a firm's prior knowledge in a complex, multinational context.

This paper illuminates the challenges international franchisors face, and highlights the need to adapt their prior knowledge base to the local needs. The findings also reinforce the message that selecting prospective franchisees that are familiar to the franchise business format and willing to adopt the franchise system is crucial to the long‐term success of the franchise system.

This paper cross‐fertilises literature of organisational learning and franchising and evaluates the interplay of prior knowledge, cultural distance and international franchise recruitment. The findings provide further evidence on the mixed influences of prior knowledge on international franchise partner recruitment, and caution firms to critically evaluate their prior knowledge in international expansion. The findings also contribute to the understanding of franchise partner selection and recruitment, and bring in new addition to the body of existing franchising literature which largely examines the operations of the franchise system.

To discuss the entrepreneurial role and importance of organisational members in implementing franchising decisions internationally.

A single embedded case study of an international hotel firm was the focus of the enquiry. Interviews, observations and document analysis were used as the data collection techniques.

Findings suggest that Development Directors, as the organisational members in host country markets, display many characteristics of entrepreneurial salespeople in the process of selling the franchise system. However, they face organisational obstacles which mean that they cannot fully exploit their entrepreneurial effort. The paper concludes by suggesting that it is Development Directors, as opposed to senior decision makers, who possess an international orientation and are therefore crucial to the internationalisation process of the firm. In addition, there is an indication that there is a relationship between entrepreneurial efforts within sales and the performance of a firm.

The hotel industry has been chosen as the focus of the study, and the comparability with other industries is therefore questionable. Although the research findings have not indicated any substantial differences in terms of the international management of the hotel firms and other types of organisations, the findings of this research cannot be generalised.

This paper both illuminates the challenges franchise organisations face internationally and highlights the options that companies may consider as part of their growth strategies.

This paper illustrates the role and importance of organisational entrepreneurs in the international expansion process and sheds new light on the implementation of franchising decisions internationally. It identifies an important factor in the operationalisation of international franchising – the need for entrepreneurial sales people in the franchise‐selling procedure.

The existing research finds a positive financial impact of franchising for relatively short time windows, usually less than ten years. As a result, these studies leave one critical research question unanswered: does franchising influence restaurant firms' financial performance consistently in the long term? The purpose of this paper is to address the research question and offer relevant managerial implications.

This study uses and expands the models derived from Ohlson, from Amir and Lev and from Lev and Zarowin to address the financial impacts of franchise in the restaurant industry from a long-term and consistent perspective.

Carrying out empirical tests over all ten-year testing windows that span 1980-2010 with quarterly data, this study finds that franchising is an effective mechanism to systematically and consistently outperform non-franchise firms in the long term and provides compelling empirical evidence to answer the research question. Further, limited-service restaurants also exhibit consistent and positive impacts on firm financial performance in the long term, suggesting limited-service operations are also effective to enhance firm value and outperform competitors.

First, this study expands the set of variables employed by many financial researchers to explain stock price in the restaurant industry. Second, this study tests and shows that franchising systematically leads to financial outperformance over the long term. Third, this study tests and shows that limited service restaurants consistently and systematically outperform their peers in the long run. Finally, the results of this study can be used to help investors and fund managers select restaurant company stocks and offer compelling evidence in support of franchising and limited service operations.