title: AN ACTION RESEARCH APPROACH TO EXAMINE THE GERMANENESS OF FRANCHISE FEES, ADVERTISING FEES, AND INNATE CONSTRUCTS INVOLVED IN THE FRANCHISE SALES PROCESS
Creators: name: Lott Valenti, Laura
Publisher: name: University of Liverpool Repository
Year: 2023

description: Businesses depend on franchising to increase their product portfolio by incorporating a larger number of smaller entities representing the franchised organization. Although business experts and scholars agree about the role of franchising in market penetration and brand recognition, it is unclear how the franchising model influences the price set for the initial investment to become a part of the franchised organization. The purpose of this study was to examine the influence of the following five themes on overall franchise performance: (1) franchise license fee, (2) advertising fee, (3) market orientation, (4) entrepreneurial orientation, and (5) charismatic leadership orientation. It is through this exploration that the originality of this study is enhanced, as it is generally assumed that franchise fees are useful for franchisors in acquiring additional franchisees. This mixed methods action research (MMAR) study used integrated quantitative and qualitative methods to explore concepts and test hypotheses. Action research (AR) was used to execute the study because of its participatory nature. In AR cycle 1, a purposeful sampling method was adopted to identify the most appropriate companies for investigation from the list of Franchise 500 companies between 2016 and 2019. The purposeful sampling yielded n=776 franchise brands from the United States and Canada. Filtering the sample based on consistent rankings within four years yielded n=259 franchise brands for inclusion in the analysis. A website scraping technique served as the method of data collection adopted to generate data on two hypotheses. The theoretical framework of the study focused on the performance of the franchise brand with respect to initial franchise fee and advertising fees as impacting the sales process and leading to the acquisition of additional customers. In applying this theoretical framework, the first AR cycle allowed for the identification of the initial franchise fees and advertising fees, while the second AR cycle focused on the identification of the impact of these fees on the sales process with respect to acquiring additional customers (franchisees). The second AR cycle consisted of semi-structured interviews conducted on the initial findings and additional constructs surrounding market orientation, entrepreneurial orientation, and charismatic leadership orientation to generate primary and qualitative data. The relationships were analyzed using Pearson’s correlation to test the hypotheses, while thematic analysis was used to identify commonalities in participants’ views. Analysis of the data obtained by website scraping revealed the presence of both a franchise fee (99%) and an advertising fee (88%) positively affected firm performance. A conceptual model was tested, and empirical findings revealed, inconsistent with the hypotheses, price-related liabilities are not correlated with franchise performance. The findings showed no correlation between initial franchise license fees and franchise brand performance across the firms. Similarly, no significant correlation was observed between the advertising fee and franchise performance in the US and Canada. However, executives’ responses with respect to the impact of the franchise fee and the advertising fee were expressed in contrasting views. Some executives denied that the initial fee influences franchise performance, while others confirmed the propositions. The respondents also confirmed the perceived influence of advertising fees, with some affirming that the presence of these fees affected firm performance, while others disagreed. Varied themes were noted in the perceived market orientation. The findings showed confirmation between the level of perceived market orientation and franchise performance. The study found evidence between the perception of entrepreneurial orientation and performance and revealed a perceived relationship between the level of charismatic leadership orientation and franchise performance. The findings show that high-performing franchise brands have indeterminate pricing factors, which may be a barrier to franchise sales. Other factors can propel franchise performance, as perceived by the brand’s franchise development executives, including market orientation, entrepreneurial orientation, and charismatic leadership orientation by a brand leader. Results revealed the absence of a universal model to improve franchise performance, leaving franchise executives with the mandate to implement an effective marketing strategy. The findings show the concepts tested influenced franchise brand performance differently, hence the need for sales and marketing executives to ascertain the most actionable parameters to improve performance. The value of these findings lies in both the clearer understanding of the relationship to franchise fees and advertising fees with respect to the franchise sales process while highlighting the underlying problem associated with their use, namely the absence of a universal model within the franchise sales process, which means if a franchise is to work to improve its overarching performance, additional research is necessary to identify other potentially influencing factors.