Exploring the Origins of Organizational Paths: Empirical Evidence From Newly Founded Firms:

The purpose of this article is to examine the present state of international franchising research. We consider the origins and evolution of franchising as an enterprise form and summarize relevant research in this area. We advance and substantiate the premise that franchising research in the global arena has largely followed the geographic expansion trajectory of the franchise industry. And, based on these themes, we conclude by identifying a series of significant research topics in the international franchising domain.

International Franchising Research: Some Thoughts on the What, Where, When, and How

Prior research has examined why franchisors expand abroad, but no paper has empirically examined the role of franchising in the macroeconomy of developing nations. In this paper, the pattern of franchising development is statistically analyzed within the context of the general economic development of Latin America. It is found that franchising leads, rather than follows, economic development. Implications for theory and policy are considered.

Can franchising be an economic development strategy? An empirical investigation

How do firms’ partnering strategies impact the size of their partner-based retail networks? We draw on agency theory to address this question in the context of franchising. Our econometric analyses...

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How Firm Strategies Impact Size of Partner-Based Retail Networks: Evidence From Franchising

This paper attempts to identify the effects of several variables on the international expansion pursued by Spanish service franchise chains. These include: management and franchising experience, brand awareness, the international franchise ratio, and a franchisor's size. Specifically, the study looks at 125 franchisors doing business in 44 foreign countries in late 2009. Findings allow us to conclude that management and franchising experience, together with brand awareness, the international franchise ratio and company size are significantly associated with (i) the number of countries where the chain has a presence; (ii) the number of operational outlets the franchisor has abroad, and (iii) the number of years the chain has been operating overseas.

International franchise expansion of service chains: insights from the Spanish market

* Prior research has examined why franchisors expand abroad, but no paper has explained why individuals of different nations buy franchises. Using an economic model of why individuals choose to purchase franchises, the paper models the rate of franchising in the work force across nations as a function of economic, strategic, and cultural variables. Key Results * Individuals across nations choose franchising when wages in their home nation are low, when unemployment is high, when the target nation is culturally distant from the US, and when opportunity for product differentiation through national media exists. The choice of entry mode and organizational form by a multinational corporation entering different nations and markets is a central question in international business. One organizational form that has been relatively under-explored in international business is franchising. Franchising is an organizational form chosen by both franchisors and franchisees in order to compete successfully in an industry, typically in retail trade and services. The franchisor, the owner of a trademark and a production technology, grants to the franchisee, typically a local entrepreneur, the right to use the trademark and the technology in a site of the franchisee's choosing, for which the franchisor receives compensation in the form of a lump sum franchise fee and a royalty on sales. As a practical matter, franchising is a large and growing force in the world economy. Although international franchising has occurred since the 1960's, it is now experiencing high growth; Arthur Andersen (1996) recently documented the existence of over 700,000 franchisees across at least 30 nations. Existing literature, reviewed more fully below, has generally examined the choice of the franchise organizational form using the same theory and constructs as a unitary firm choosing to go abroad (as reviewed in Hoy et al. 2000). But franchising is different. Franchisors are selling a business opportunity, entrepreneurship, and individuals in the target nation must respond. This study seeks to explain why the rate of franchising differs across nations. The paper examines the economic alternatives a franchisee faces, the strategic advantage that franchising gives franchisees, and cultural factors affecting the transfer of the organizational form. The article is organized as follows. The first section reviews relevant literature, and the second presents theory and hypotheses. Measurement and methodology are then discussed, followed by empirical results. A discussion follows. Previous Research Franchising is an organizational form chosen by entrepreneurs in service industries where a decentralized network of units, a "chain," is desirable to achieve competitive advantage. Operating multiple units under a common trademark and a common production system allows for a common consumption experience at different times and places. The reduction in uncertainty through a common consumption experience has value to customers (Caves/Murphy 1976). Local entrepreneurs, termed franchisees, are granted the right to operate one or multiple units of the chain, at a location of their choice while investing their own funds. In return for this right, the franchisee pays the owner of the trademark and production system, the franchisor, a royalty based on gross sales. Profits after expenses (including the royalty) are received by the franchisee as compensation. The literature on franchising, such as Caves and Murphy (1976), Lafontaine (1992), Michael (1996), and Rubin (1978), is dominated by the question of the franchisor's choice: why would a firm choose to organize as a franchise chain and engage franchisees? Research on why individuals choose to become franchisees is much less common. Peterson and Dant (1990) found that individuals who bought a franchise most value the training received, the greater independence, and the established name of the franchise chain relative to the risk and reward of opening an independent business. …

Determinants of the Rate of Franchising among Nations (1)

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Determinants of the Rate of Franchising among Nations (1)