An organisation theory perspective on choice of franchising form (2001)
AuthorsFloyd, Callumshow all
This research addresses the issue of diversity of organisational forms in franchising, which despite its prevalence, is poorly understood. The research focuses on the choice between three categories, consisting of five common types, of franchising: single-unit franchising, direct multi-unit (sequential franchising and area development) and indirect multi-unit (area representation and subfranchising) franchising forms.
The thesis presents and tests a contingency model that explores the influence of environmental (munificence, complexity and dynamism) and task (task complexity) uncertainties on choice of franchising form. Six factors were operationalised to represent environmental and task uncertainties. These factors included demand size and growth (environmental munificence), demand dispersion and heterogeneity (environmental complexity), intensity of rivalry (environmental dynamism) and task complexity (task uncertainty).
A multi-case study research strategy was conducted to test the contingency model. The strategy involved interviews with founders, other franchisor executives and franchisees, and also considered documentation and direct observations. The sample comprised a heterogeneous selection of seven New Zealand founded franchise systems. Companies were theoretically selected to ensure all five types of franchising were represented.
The findings illustrated general support for the thesis that environmental and task uncertainties do influence choices made between alternative franchising forms. Most companies adopted types of franchising that were consistent with expectations derived from the model. Importantly, however, the overall fit was not neat and conclusive. The explanatory power of individual factors varied and in some situations form choices occurred contrary to expectations.
This research produced further important findings. The qualitative methodology employed helped uncover five further drivers of franchising form choice. These additional factors related to individual choice and the firm, and included incentives, growth aspirations, need for control, resource constraints and franchisee aspirations. The findings also confirmed that no one factor or theory was sufficient to explain form choice, and the factors important in one company's decision might have little relevance to another's. Consequently, multiple perspectives were necessary to understand the decisions made by franchisors.