Contrasting the four franchising imperatives across hybridised governance models: the outcomes!

Abstract

The economic importance of franchising in service provision, job creation and self employment opportunities is widely reported (Spinelli, Rosenberg, & Birley, 2004). In Australia, franchising currently contributes approximately $130 billion to the Australian economy representing 10 percent of national Gross Domestic Product (GDP) (Frazer, Weaven & Wright, 2008). Current research suggests that much of the future growth in franchising in many world economies will be attributable to the growth in multi-unit franchising arrangements (Weaven & Frazer, 2007). Multi-unit franchising (MUF) refers to an organisational arrangement in which franchisees are allowed to own more than one unit within the same franchise system. However, the existence of multi-unit franchising remains a curious anomaly. In particular, from an agency theoretic perspective, multi-unit franchising appears to represent a suboptimal alternative to traditional dyadic revenue sharing arrangements as it contradicts incentives rationales for franchising choice. However, the ubiquity and popularity of this organisational form has generated consistent debate regarding the relative merits of this growth strategy. Over the last 15 years there has been a myriad of research explaining and examining the area multi-unit franchising. Areas of particular interest have focused upon expansionary strategies, motivations and incentives, and differences between single-unit and multi-unit operations. Further research has explored the challenges which chain organisations encounter when employing a MUF framework (e.g., Bradach, 1995; Garg, Rasheed & Priem, 2005). However, whilst it is evident that growth has occurred throughout the franchising literature in relation to MUF, significant gaps still exist. For example, with the notable exception of Bradach (1995) limited research has explored the key factors (imperatives) essential for multi-unit franchising to succeed (i.e., operational performance), hence, ensuring sustainability of franchise systems. Moreover, previous research has not empirically examined franchise system performance within the context of different organisational forms of MUF that are distinguished by their influence upon the extent of direct franchisor control, rate of system expansion and management of system operations. Therefore, in order to empirically examine the influence of the four franchising imperatives (i.e., (1) unit growth, (2) uniformity, (3) local responsiveness and, (4) system wide adaptation) upon operational performance from a multi-unit perspective (i.e., (1) master franchising, (2) area development franchising, (3) area representative franchising and (4) incremental franchising), further exploration of the four franchising imperatives is warranted. This represents an important gap in the literature. The literature presents only one previous study (Garg et al., 2005) which has examined the four franchising imperatives proposed by Bradach (1995), however this study was limited as (1) only three of the four franchising imperatives were examined and (2) the study (Bradach, 1995) did not provide a comparison between the four different multi-unit franchising forms. As such, this research provides a comprehensive insight into the outcomes which were found to influence the four franchising imperatives upon operational performance across the four multi-unit franchising governance models.