Does franchising pay? Evidence from the restaurant industry

Franchising has taken a prominent position in service industries for several decades, but little is known about how franchising affects financial performance. Thus, we addressed the question of whether chains that franchise to some extent outperform those that are wholly owned. Then, among chains that franchise, we also addressed the question of whether more franchising is better – that is, whether the proportion of a chain's units that are franchised is associated with superior financial performance. To answer these questions, our study first compares the risk-adjusted performance of franchising vs. non-franchising restaurant firms. Second, it investigates the relationship between franchising propensity and firm financial performance. We considered five different measures of firm financial performance: the Sharpe ratio, the Treynor ratio, the Jensen index, the Sortino ratio, and the upside potential ratio. On comparison of franchising and wholly owned firms, all five measures indicated that franchising firms outperformed their non-franchising counterparts. When we focussed on just the franchising firms, however, the results were less clear. Among firms that franchise, the franchising–performance relationship was positive and significant only with respect to the Jensen index. Thus, we provide very robust evidence that franchising pays – that is, that some franchising is good – but among firms that franchise, it is unclear whether more franchising is better.     

社会资本理论视角的企业慈善捐赠行为研究

企业慈善捐赠行为是企业履行企业社会责任的重要方式。本文站在社会网络的视角,基于社会资本理论分析了企业履行社会责任的慈善捐赠行为。结果表明:企业慈善捐赠行为能够提高企业所处网络其它主体对它的信任度和义务认同度,可以提高企业的社会资本丰度;企业慈善捐赠行为对社会资本的纵向关系资本、横向关系资本和社会关系资本三个维度都具有积极的影响,各分维度社会网络主体往往更倾向与慈善企业建立连结关系。     

Social Investment through Community Enterprise: The Case of Multinational Corporations Involvement in the Development of Nigerian Water Resources

This paper examines the different mechanisms used by multinational corporations (MNCs) in Nigeria seeking to make long-term social investments by meeting the critical challenge of improving water provision. Community enterprise – an increasingly common form of social enterprise, which pursues charitable objectives through business activities – may be the most effective mechanism for building local capacity in a sustainable and accountable way. Traditionally, social investments by MNCs have involved either donations to a charity, which then assumes responsibility for delivering social outcomes, or direct management of social investment in-house. These approaches have been criticized, however, for their limited contribution to local capacity building, their focus on short-term outcomes, and the restricted role that they afford to communities. Partnering with community enterprise, provided there is sufficient local capacity to support it, is the most effective mode of governance through which MNCs can manage social investments in developing countries. Dr. Emeka Nwankwo is the Chairman and Chief Executive Officer of Aquada Development Corporation, an infrastructure and technology development firm based in Nigeria. Nelson Phillips is the Professor of Strategy and Organizational Behavior at the Tanaka Business School, Imperial College London. Paul Tracey is a Lecturer in Enterprise at the Centre for Small and Medium Sized Enterprises, Warwick Business School, University of Warwick.     

A study on the key factors influencing international franchisors�� choice of entry modes into China

This paper examines factors associated with international franchising firms’ entry modes when they enter the Chinese market. To this end, a survey was conducted to investigate the linkage between entry modes and characteristics of franchising firms. The logit model and regression analysis were used to test the hypotheses. Findings reveal four factors that significantly influence international franchisors’ entry mode choices including cultural and geographic distance, international market experience, risk spreading, and maturity of the franchising system.     

Benefits of Inner Strength for Franchise System Expansion

For every franchise system, making the leap from the unknown to the common place requires a strategic plan for growth. The exogenous market perspective holds that evaluating market conditions is central to defining promising outlet locations as there are direct economic effects on performance. The endogenous firm perspective and the social network approach together provide an inner strength perspective on interconnected firms; this perspective holds that access to resources offered at a certain spot determines site attractiveness, rather than location-specific market factors. Using a sample of 201 German franchisees, this study tests hypotheses that explore which perspective dominates location decisions in practice and clarify the relevance of the decisive criteria for outlet performance. Results show that location decisions rely on both perspectives, yet franchisee performance depends more on inner strength factors. We also find that expansion is better served by following a geographically dispersed cluster approach than by growing steadily from a baseline site.     

Franchise,innovation and entrepreneurship

Since franchise business can be an alternative to independent business, it seems interesting to look at those factors that encourage individuals to choose franchise rather than independent business. It is also relevant to consider the role of innovation because it is generally accepted that independent business facilitates innovations to a greater degree than does franchise. The main goal of this paper is to determine the factors that encourage individuals to choose franchise activity and what role plays innovation in their decision.     

乡镇企业发展中社会资本的重构

乡镇企业在发展初期虽然缺乏物质资本、人力资本,但拥有丰富的社会关系,具有大量社会资本,这构成其高速增长的重要基础。然而,伴随着我国经济社会结构深刻变化,乡镇企业的社会资本开始下降、贬值,既有社会关系的负功能也日益凸现．其发展速度快速回落。社会资本在传递信息、构建信任等方面不可替代,乡镇企业要实现新的发展,必须适应新的经济社会环境,重建社会关系,再造社会资本。     

The choice of master international franchising – A modified transaction cost model

This study develops and tests a novel transaction cost model of master international franchising. Based on data from international franchise firms headquartered in six countries, we show that master international franchising is the franchisor’s preferred governance mode under the following conditions: large bilateral franchisor’s and franchisees’ transaction-specific investments, high institutional uncertainty and high behavioral uncertainty. Our model extends the literature by presenting a modified transaction cost model of master international franchising that investigates the bonding effect of bilateral transaction-specific investments and environmental uncertainty as determinants of the franchisor’s choice of international governance mode. In addition, by using primary data from international franchise companies, our study contributes to the transaction cost literature in international business and international franchising that is mainly based on secondary data.     

How Can Social Enterprise Address Disadvantage? Evidence from an Inner City Community

This article examines the potential impact of social enterprise on disadvantage. The case study research involved participant observation over a 2-year period. Selection of cases was based on a preliminary typology for social enterprise and disadvantage was conceptualized using the European concept of social exclusion. This sees exclusion as multidimensional and relative to the standards of the society in which a person lives. The existing research literature suggests that the aggregate economic impact of social enterprise upon exclusion is marginal. This is a consequence of a mismatch between policy expectations and what is happening in the field. This study found that different forms of social enterprise impacted on exclusion in different ways. This article outlines these different impacts in order to open up a more balanced perspective on the potential and limitation of social enterprise in combating disadvantage.     

基于商业生态系统视角的我国企业社会责任的思考

本文认为,任何一个企业都是商业生态系统中的生命体,系统的合理性、环境的动态变化直接影响到企业的经营活动和战略发展。企业的可持续发展能力与其所处的环境、社会、商业系统不是分离的,而是相互协调的关系。企业承担必要的社会责任,既有利于自身的可持续发展,又有利于和谐社会的建立。企业应有意识地加强同所处社会环境相结合的紧密程度,自觉增强企业的社会公德和责任意识。文章提出,从企业方面来讲,强化企业社会责任就是要通过企业社会责任自我意识的转变,关注与保障员工权益,保护消费者利益,采取有效措施保护环境等来增强企业的社会责任感;从商业生态系统方面考虑,就是要通过核心企业的带头示范作用、消费者的口碑及货币投票、社会监督和公众形象、政府行为和法律监管等来影响和强化企业的社会责任。     

Performance in franchising: the effects of different management styles

Various theoretical approaches uphold the relevance of the relationship between the form of management and performance. Different management styles influence the relationships of agencies [Jensen, M.C. (1998). Foundations of organizational strategy. Cambridge, MA: Harvard University Press], the cost of governing transactions [Williamson, O.E. (1985). The economics institutions of capitalism: Firms, markets, relational contracting. New York, NY: Free Press], and the allocation of resources between the exploitation and exploration of activities [March, J.G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71–87], and this is manifested in firm performance. In light of these assumptions, this article presents an empirical verification of the relationship between the management of franchises and their performance, examining how different styles of management on the part of franchisers over their franchisees have significant effects on the growth and profits of franchiser firms.     

Do Nonprofit Hospitals Exercise Market Power?

Several theories of nonprofit hospitals behavior predict that nonprofit hospitals behave in the consumer interest and thus do not exercise market power. If these theories are correct, then antitrust enforcement of hospital mergers should be restricted only to those markets in which a nonprofit hospital cannot offset anticompetitive behavior by for-profit hospitals. In this paper, we examine the relationship between price and market concentration among nonprofit hospitals in California in 1993. We find that nonprofit hospitals set higher prices in more concentrated markets. This result suggests that antitrust enforcement should challenge those mergers of nonprofit hospitals that create market power without creating offsetting efficiencies.     

Survival of new firms in the Brazilian franchising segment: an empirical study

This paper investigates the survival patterns of Brazilian franchising firms for the period 1994–1999. First, we considered the (percentage) survival of newly created franchisors in the following years. Survival functions were obtained by means of the Kaplan–Meier estimator for the selected sectors and they indicated sharp declines in the survival rates over time but with differential patterns across sectors. Finally, an econometric analysis based on the Cox proportional hazard model considered the explanatory variables pertaining to size, age and support regarding the legal aspects, location choice and training. The evidence indicates that the supports provided by the franchisor have a positive impact on the probability of survival of new firms, whereas there is partial evidence favoring a positive effect of firm size on survival.     

US-Based Franchise Systems

Abstract

This study assesses both firm and relationship characteristics that may differentiate US-based franchisors that have internationalized operations from those that do not. Multiple discriminant analysis is used and shows that both firm and relationship characteristics are important discriminators. Not surprisingly, international franchise systems are larger and exhibit lower levels of solidarity. A surprising finding, however, is that international systems exhibit lower levels of opportunism, in spite of greater geographic and cultural proximity. Interestingly, a number of firm characteristics (number of domestic units, number of franchised versus company-owned units, firm age, and experience with franchising) and relationship characteristics (flexibility, trust, behavioral transparency, and effectiveness) were not significant discriminators between domestic and international franchisors. Implications of the findings and directions for future research are provided.