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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.

This paper aims to explore the effect of hiring outside chief executive officers (CEOs) on restaurant performance. As outside CEOs have a mandate to bring changes but lack internal knowledge, this study expected that outside CEOs impose a significant influence on restaurant performance. It was further expected that the relationship is substantially moderated by franchising and recession.

The CEO data was manually collected from firms’ annual filings and the EXECOMP database. The COMPUSTAT database was used for company financial data. A two-way panel regression was used to examine the proposed relationships.

The results revealed that outside CEOs have a positive effect on growth but a negative effect on restaurant profitability. It was further turned out that franchising significantly moderates the outside CEO-performance relationship. However, the moderating effect of recession turned out to be insignificant.

The results suggested that outside CEOs play a critical role in determining restaurant performance. The results further imply that franchising helps to maximize the positive effect of outside CEOs while mitigating the adverse effects of outside CEOs.

This study is one of the first to examine the effect of outside CEOs in the hospitality context. Moreover, this study extended the literature by revealing the relationship in the restaurant industry and highlighting the importance of long-term organizational context.

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 aim of this study is to analyze the importance of knowledge in reaching organizational objectives (long-term organizational goals) and in constructing competitive advantage (value-added) and identifying the impact of this knowledge on organizational performance of franchised restaurants in an emerging market.

Likert-scale surveys were applied to 50 managers representing 80% of the franchised restaurant business in Bogotá, Colombia. Data processing was performed through descriptive statistics, multiple correspondences analysis (MCA) and logit regression (LR).

Results indicate that 1) of the set of factors that contribute to the achievement of franchise objectives, personnel motivation and continuous environmental scanning are the most important; 2) the primary sources of knowledge for construction of competitive advantage are clients and providers; and 3) the most significant impact of knowledge occurs in human resource and organizational development and in increased earnings.

The study provides evidence of the role and the impact of knowledge in the performance of franchised restaurants and thereby contributes to academic analysis and managerial decision-making.

This study provides aggregated and disaggregated analysis of empirical data on the role of knowledge in franchised restaurants, a sector with limited extant research in the context of emerging markets.

The purpose of this paper is twofold: to investigate the impact of franchisor support on quick service restaurant (QSR) users’ intranet acceptance; and to examine the technology acceptance model (TAM) to explain QSR users’ attitude toward the franchise intranet usage. Franchisors are building intranet systems as a communication tool to assist their franchisees in performing their jobs better. However, there is a little available literature that discusses in detail the use of the intranet by franchise systems.

This study adopted the TAM to investigate the acceptance of the intranet in the context of QSR franchise systems. The original TAM was modified to include an external variable, franchise support. A total of 161 returned and completed responses were examined. Descriptive analysis, validity, principal component factor analysis and regression analysis were used to estimate the relationships between constructs.

The key finding of this study is that franchise support is a key in the decision for users to use intranet systems in the QSR franchise systems. This study also confirmed that there are positive and significant relationships among key variables: franchise support, perceived usefulness of intranet, perceived ease of use of intranet, attitude toward using intranet and behavioral intentions to use intranet. Regression analysis revealed that TAM is a valid model in predicting intranet adoption in restaurant franchise systems.

This study pursued franchise support, which was not included in the original TAM, to see how it affects perceived ease of use, perceived usefulness and intention to use. In addition, a list of recommendations for improving the situation in that franchise organization is provided.

The purpose of this paper is to examine whether operating countries influence restaurant franchising system performance and what would be an optimal international franchise proportion.

The authors observed ten publicly traded franchise firms that operated between 1995 and 2015. Data analysis is conducted through a generalized linear model (GLM) of panel data.

The model confirms a curvilinear U-shaped relationship between international franchise expansion and firm performance, similar to domestic franchising. The authors found that international franchisors have a higher optimal franchise proportion than domestic franchisors. The authors did not find that operating countries influence firm performance.

This study contributes to franchising literature by expanding limited empirical studies on international franchising. It provides practitioners with a new optimal franchise proportion at the international level.

A substantial body of research employs agency theory and transaction costs analysis to explain ownership decisions in distribution channels. Agency theory identifies factors that prompt firms to favor behavior‐based contracting over outcome‐based agreements. Transaction cost economics is a complementary framework which maintains that the organizational form in a location should be the one that economizes on production and transaction costs. Prior research illustrates that independent variables (e.g. proximity to highways, dedicated assets) outlined in these theories provide a partial explanation for ownership decisions. Nevertheless, scant research has analyzed whether factors outlined in agency theory and transaction cost analysis are employed by executives when making ownership decisions. The purpose of this study is to investigate managerial rationales underlying plural contractual networks.

Service fairness has been conceptualized as a major part of the foodservice industry due to the intangibility of foodservice, which is difficult to be evaluated by customers. Considering this challenge, this study investigates the impacts of perceived service fairness dimensions in encouraging brand citizenship behaviors (i.e. brand enthusiasm and brand endorsement) along with the mediating roles of brand trust and brand experience in the foodservice industry.

Based on an established framework of perceived service fairness, brand trust, brand experience and brand citizenship behavior, an exploratory conceptual model was formulated and empirically assessed. Survey data were collected from customers of casual dining franchise restaurants in Korea. Data analysis consisted of frequency analysis, reliability analysis, confirmatory factor analysis, correlation analysis and structural equation modeling.

The empirical results indicated that brand trust was significantly influenced by price, procedural, outcome and interactional fairness, while brand experience was significantly affected by price, outcome and interactional fairness. Additionally, brand trust and brand experience had positive influences on brand enthusiasm and brand endorsement, respectively.

A foodservice enterprise’s violation of customers’ fundamental need for fairness leads to negative outcomes, such as customers voicing the undesirable situation and/or leaving the restaurant. Thus, this study provides a strategy for maintaining service fairness to better develop brand relationships with customers in the restaurant industry.

There is a paucity of research on the effect of perceived service fairness on brand development in the restaurant industry. The findings provide greater insights into the impacts of perceived service fairness, brand trust and brand experience on customers’ brand citizenship behaviors.

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.

Literature on the services industry's front‐line employees has largely focused on the relationships between service providers and customers. However, there is increasing approbation that managers influence the front‐line employees' motivation, ultimately impacting service quality. This study investigates the relationship between front‐line employees' perceived managerial sincerity, need for feedback, and role motivation.

The data were collected at 26 restaurants (from a global fast‐food franchised chain) located in a large US city, using a self‐administered questionnaire, from their front‐line employees. The final sample size was 185 (47.4 percent response).

The results suggest a positive association between front‐line employees’ feedback‐seeking orientation and their perceived managerial sincerity. A positive association also exists between front‐line employees' motivation levels and their job satisfaction.

The focus on a subset of restaurants (from a single franchise system) and the limited scope of states‐of‐mind and behaviors measured are two main limitations. A multitude of other front‐line employee characteristics and factors should be investigated in future studies.

Results suggest that managers' interpersonal communication techniques enhance front‐line employees' perceptions of managerial sincerity, and increase their motivation and job satisfaction. However, managers need to balance a portfolio of diverse employee traits with relevant managerial styles to achieve desired outcomes.

The association between perceived managerial sincerity and feedback‐seeking orientation is intuitively appealing and comforting. However, some employees are happy being told what to do without any concern for involvement. Employees with low perceived managerial sincerity are also low on feedback need.