title: Contrasting the Four Franchising Imperatives across Hybridised Governance Models
Creators: name: Bodey, Kelli Lee
Publisher: name: Griffith University
Year: 2009
Subjects: subject: franchising
subject: hybridised governance models
subject: multi-unit franchising
subject: franchsing imperatives
subject: multi-unit organisation

description: The economic importance of franchising in service provision, job creation and self employment opportunities is widely reported (Spinelli, Rosenberg &amp; 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 &amp; 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 &amp; 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 (for example, Bradach, 1995; Garg et al., 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 (that is 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, based on the seminal work of Bradach (1995), this study will empirically examine the impact of the four franchising imperatives (that is, (1) unit growth, (2) uniformity, (3) local responsiveness and, (4) system wide adaptation) upon franchise system operational performance across the four key governance structures (that is, (1) master franchising, (2) area development franchising, (3) area representative franchising and (4) incremental franchising). Thus, this research addresses gaps in the literature by investigating the research question: To what extent are there differences in the effect of the four imperatives (that is, unit growth, system uniformity, local responsiveness and system-wide adaptation) upon operational performance across different multiple unit franchising arrangements (master franchisee, area development, area representative, incremental). A two-stage methodological approach was utilised in this research. Stage One adopted a qualitative process of convergent interviewing which involved in-depth interviews with franchisors. The rationale for the interviews was to gain insight into the experiences of franchisors in regard to the four imperatives and their effect on operational performance. This process resulted in the emergence of a number of themes that were then used to generate the survey items of this study. Stage Two involved the development of a questionnaire, the construction of which included input via an expert panel and rigorous pilot testing. This resulted in a psychometrically sound survey instrument being used to collect the data for hypotheses testing. Administration of the survey was via email to a purposive sample of Australian franchisors and this resulted in the collection of 347 usable surveys. Preliminary analysis of the data was conducted via tests of normality, skew and kurtosis, Kaiser-Meyer Olkin and Bartlett’s Test of Sphericity, correlation analysis, exploratory factor analysis (EFA) and reliability analysis. Upon confirming the factors structures and reliability of the scales, composite variables were computed ready for analysis via structural equation modelling using Partial Least Square (PLS) regression analysis. Hypothesis testing resulted in all, but one, hypothesis being supported. The findings, therefore, indicate that there are significant differences in the way in which three of the four imperatives (that is, unit growth, system uniformity and system-wide adaptation) impact on performance across different governance structures, such as master franchising, area development franchising, area representative franchising and incremental franchising...