Servicing customers directly: Mobile franchising arrangements in Australia

Abstract

This paper analyses operational differences between mobile franchising arrangements and fixed-site franchises from an agency-theoretic perspective. Almost 40 per cent of all franchised units in Australia operate as mobile or home-based businesses, predominantly in service industries where products or services are provided directly to consumers. A two-stage methodology is reported in this paper, incorporating quantitative and qualitative research methods. In stage one, data obtained from a survey of the population of Australian franchisors in 1998 are analysed to compare operational variables of mobile and fixed-site franchise units. The second stage of the research employs in-depth interviews with a sample of mobile franchisors and franchisees to further explore relevant issues. The results confirm the agency theory perspective that start-up investment risk is lower in mobile units and mobile operations exhibit a higher level of repeat customers than fixed-site franchises. No significant differences between the two arrangements are revealed in relation to the levels of franchisee monitoring, initial training or essential franchisee experience. This study indicates that agency theory contributes to our understanding of mobile franchising arrangements, yet also suggests the findings are not completely explained by agency theory. The results imply that both monitoring and alignment of incentives have complimentary effects and that both forms of contract are necessary in a franchisor's control system.