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Article
Publication date: 26 November 2010

Tae‐Woo(Mike) Kwon and Kanghwa Choi

The purpose of this paper is to assess the conceptual relationship between the running royalty programs and the performance of a franchisee or franchisor. Thus, this paper will…

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Abstract

Purpose

The purpose of this paper is to assess the conceptual relationship between the running royalty programs and the performance of a franchisee or franchisor. Thus, this paper will analyze the correlation of financial stability when the franchisor strengthens the running royalty policy at aspect of franchisor.

Design/methodology/approach

A model is presented and designed. The paper will analyze the causality which is affected by strengthening the profit structure with the running royalty program and also find out how the strengthened profit structure will affect and improve the franchisors' sustainable supports for the franchisees, service quality and service satisfactions.

Findings

Although the franchise industry is growing in Korea, the stability of business is still in doubt because the business cycle of the franchisor is shortened. This paper found the reasons why franchisors have unstable status in Korea. The main reason was the instability of profit structures for franchisors which are a burden to the franchisees which then worsen the franchisors' financial status. The biggest different from the US franchise industry was the running royalty program. So, this paper will apply the running royalty program politically to the franchise business in Korea and find out how it will affect the overall business cycle.

Originality/value

This study was limited to the Korean franchise industry and found out the factors which influence the franchisors' performance in various aspects. By analyzing with casual loop diagram, this paper found how each of the factors interact and bring out the positive feedback process. Also, it suggests a way of adopting the running royalty program into the Korean market.

Details

Asian Journal on Quality, vol. 11 no. 3
Type: Research Article
ISSN: 1598-2688

Keywords

Abstract

Details

Australian Franchising Code of Conduct
Type: Book
ISBN: 978-1-83909-168-1

Abstract

Details

Australian Franchising Code of Conduct
Type: Book
ISBN: 978-1-83909-168-1

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 possess goals…

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

Book part
Publication date: 23 November 2015

Guy Basset and Rozenn Perrigot

The subject of resale pricing is a hot topic in franchising, due to its links with chain homogeneity and franchisee autonomy. The franchisee is bound by current legislation and…

Abstract

Purpose

The subject of resale pricing is a hot topic in franchising, due to its links with chain homogeneity and franchisee autonomy. The franchisee is bound by current legislation and regulations, in addition to respecting the franchise contract clauses, to the extent that they are lawful, and potentially opposing contentious professional practices. Focusing on resale prices, we cover these three perspectives, that is, legal, contractual, and professional constraints, using a dual approach based on managerial and legal perspectives and illustrating our arguments using examples from European and French cases.

Methodology/approach

We illustrate our arguments using examples from European and French cases.

Findings

We pointed out that the ban on the practice of imposed resale prices presents several advantages (e.g., integrity of franchise chains, chain’s commercial dynamism).

Research limitations/implications

Our paper contributes to the stream of franchising literature dealing with resale prices.

Practical implications

Our paper can be viewed by franchisors, franchise experts, franchisees, and franchisee candidates as a synthesis of the impact of European and French regulations on resale price-based practices to be adopted in franchise chains. It also highlights practices to be avoided in order to prevent potential conflicts.

Originality/value

We use a dual approach based on managerial and legal perspectives to explore resale prices in the context of franchising.

Details

Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children
Type: Book
ISBN: 978-1-78560-562-8

Keywords

Abstract

Details

Australian Franchising Code of Conduct
Type: Book
ISBN: 978-1-83909-168-1

Book part
Publication date: 29 August 2018

Guy Basset, Rozenn Perrigot and Gerard Cliquet

In this chapter, using a dual approach based on managerial and legal perspectives, we examine franchisee attitudes regarding online sales in franchise networks to better…

Abstract

In this chapter, using a dual approach based on managerial and legal perspectives, we examine franchisee attitudes regarding online sales in franchise networks to better understand their views of the costs and benefits of e-commerce in a franchise network. We thus explore the following research questions from a franchisee perspective: What are franchisees’ attitudes regarding online sales?; Are online sales viewed as complementary or competing sales for physical stores?; What about the opening of a franchisor’s website?; and What about the opening of a franchisee’s website? We also analyze how several different e-commerce options available to franchisors impact franchisee incentives and how they would be treated under European Union competition law.

The empirical research is based on the conduction and analysis of 46 in-depth interviews with franchisees in the retail and service industries in the French market.

We find that online sales in franchise networks raise important questions for the franchisees, and for the franchisors as well. E-commerce has to be integrated into the development strategies of franchise networks. Franchisors should facilitate the online sales practices of their franchisees in order to avoid potential conflicts with them or among the franchisees themselves, thereby maintaining the control necessary to ensure healthy network growth. Moreover, franchisors should pay attention to the sharing of Internet sales with its franchisees.

Our chapter contributes to the stream of franchising literature dealing with the use of Internet in franchise networks. Moreover, it can be viewed by franchisors, franchise experts, franchisees, and franchisee candidates as an overview of issues linked to online sales in franchise networks. It also highlights best practices when having a multichannel strategy.

Details

Healthcare Antitrust, Settlements, and the Federal Trade Commission
Type: Book
ISBN: 978-1-78756-599-9

Keywords

Article
Publication date: 19 August 2022

Gowsia Shah and Natasha Saqib

This study aims to develop an instrument that examines the franchisor as an entrepreneurial form. Although examining the entrepreneurial tendencies of the franchisors has been a…

Abstract

Purpose

This study aims to develop an instrument that examines the franchisor as an entrepreneurial form. Although examining the entrepreneurial tendencies of the franchisors has been a central goal of the present research, the study also uncovers the factors that lead firms to offer franchises and promote franchisor growth.

Design/methodology/approach

Data was collected from the population of franchisor organizations in India by following a survey approach. Statistical techniques including descriptive and inferential statistics like correlation and structural equation modeling were used to analyze the data.

Findings

The study results show that franchisors possess entrepreneurship traits and reveal entrepreneurial behavior. The study also provides empirical evidence toward various dimensions that contribute to franchisor growth.

Research limitations/implications

The results of the present study propose research implications toward clarification of the entrepreneurial position of the franchisors in the extensively unclear research area.

Originality/value

Considerable ambiguity surrounds franchisors’ activities running and managing their business as entrepreneurial firms. By indicating franchisors’ entrepreneurial traits, the study expatiates on major franchising and entrepreneurship literature arguments.

Details

International Journal of Innovation Science, vol. 15 no. 3
Type: Research Article
ISSN: 1757-2223

Keywords

Article
Publication date: 2 December 2022

Stephen K. Kim and Pushpinder Gill

This study aims to study research on franchise chain performance that has focused on franchisors’ efforts to align their interests with those of franchisees to address partner…

Abstract

Purpose

This study aims to study research on franchise chain performance that has focused on franchisors’ efforts to align their interests with those of franchisees to address partner uncertainty. In contrast, the question of what a franchisor should do to address another type of uncertainty and task uncertainty remains understudied. The authors suggest a franchisor’s coordination as a key means of alleviating task uncertainty and ongoing support and plural form as two mechanisms of coordination. The authors also posit that aligned interests between the franchisor and the franchisee improve, whereas one-sided interest impedes, chain performance. Furthermore, providing greater ongoing support or deploying plural form amplifies the positive effect of aligned interests on chain performance.

Design/methodology/approach

The authors relied on secondary data to test the hypotheses. The authors collected data for analysis from Bond’s franchisee guide and Nation’s Restaurant News restaurant database. They also tested the framework by analyzing 17-year, panel data of 71 restaurant chains operating in the USA and Canada using system generalized method of moments.

Findings

Results show that aligning interests does improve chain performance, but that the positive effect is amplified when aligned interests are matched with a chain’s provision of ongoing support or use of plural form.

Originality/value

The authors explicate why it is not enough to address the misaligned interests or lack of coordination alone; a chain manager needs to address both of these problems together. In addition, the authors explicate how two franchisee coordination mechanisms – ongoing support and plural form – help a chain augment the beneficial effect of aligning interests on chain performance. Without solving the twin problems of misaligned interests and coordination simultaneously, a chain is unlikely to achieve its full performance potential.

Details

Journal of Business & Industrial Marketing, vol. 38 no. 10
Type: Research Article
ISSN: 0885-8624

Keywords

Article
Publication date: 8 May 2018

Ateeque Shaikh, Dheeraj Sharma, Akshaya Vijayalakshmi and Rama Shankar Yadav

This paper aims to elucidate and extend the concept of power and fairness in the context of franchisor–franchisee relationship.

Abstract

Purpose

This paper aims to elucidate and extend the concept of power and fairness in the context of franchisor–franchisee relationship.

Design/methodology/approach

On the basis of Dul and Hak’s (2007) recommendations, the conceptual model is developed from closely related domains (e.g. channel relationship) using pertinent theories. On the basis of this comprehensive analysis, new propositions about fairness in a franchisee–franchisor context are drawn. The primary purpose of this research is to conceptually and theoretically further the understanding of antecedents and consequences of fairness in a franchisor–franchisee relationship context by proffering a framework. Finally, this study examines the concept of fairness of its antecedents and moderators that have received scant attention in the context of franchising research.

Findings

This study contends that non-coercive power is perceived fairly. Also, coercive power that is legitimate is perceived fairly. However, coercive power that is illegitimate can be detrimental to relationships between franchisee and franchisor. Furthermore, a franchisee who perceives the relationship to be fair is likely to place more trust in relationship, is more satisfied with relationship and is less likely to be opportunistic. Finally, the study contends that these relationship outcomes are dependent on the franchisee’s personality traits.

Research limitations/implications

One major limitation of this study is that the propositions have not been empirically tested. However, this paper cites several business cases that have been used to support the propositions proffered in the study. Our conceptual model supported by previous theoretical findings and industry cases suggests that it is important to focus on social dimensions along with economic costs of a franchisor–franchisee relationship. Future researchers may empirically examine the relationships posited in this study by using the primary industry data.

Originality/value

This paper takes a comprehensive view of various social constructs affecting a franchisor–franchisee relationship. It also highlights the role of individual personality factors in a franchisor–franchisee relationship, extends prior work on relational dimensions from channels to the franchising context and provides managerial conclusions.

Details

Journal of Business & Industrial Marketing, vol. 33 no. 4
Type: Research Article
ISSN: 0885-8624

Keywords

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