Franchising vs. company ownership as a decision variable of the firm

This paper investigates the mix of franchised and company-owned outlets among franchise chains. Hypotheses are formulated about the proportion of franchised outlets and are tested using firm-level data from a national survey of franchisors. Empirical results support the hypothesis that company-owned outlets serve as a way for the franchisor to give itself an incentive to maintain system quality.     

Asset specificity and vertical integration in franchising

This study empirically tests transaction cost hypotheses with the use of data on publicly-owned franchised firms. We employ measures of the proportion of company-owned outlets for the degree of integration and brand name capital for the degree of asset specificity. The results suggest that for the sampled firms the degree of asset specificity is positively related to the degree of vertical integration. Additionly, increases in the real interest rate and firm growth rates are found to be positively related with vertical integration, while increases in unanticipated growth and firm experience are negatively related with vertical integration.     

Leveraging brand equity in business-to-business mergers and acquisitions

Every acquisition provokes a branding decision—should the acquirer absorb the acquired business by renaming it under its own name to convey to the market that ownership and the way of doing business has changed, or should it allow the acquired company to continue trading under its old name so as to avoid damage to its existing customer franchise? This is a complex management decision but one which apparently receives little attention. This paper draws on the B2B branding and M&A literatures to create a model of brand equity transfer. The model assumes that rebranding of an acquired company under the name of the new parent can yield positive benefits if the new parent has higher brand equity than the acquired company. A case study of an acquisition of a national construction materials company by a larger international group provides an illustration of the transfer process.     

Who should own it? An agency‐based explanation for multi‐outlet ownership and co‐location in plural form franchising

Plural forms exist when managers use two owners to perform one activity. Franchising is a plural form explained by agency theory, however, the theory is unable to explain two franchisor actions: 1) allowing franchisees to own multiple outlets and 2) co‐locating company‐owned and franchised outlets. We use research that describes a symbiosis between company‐owned and franchised outlets to extend agency theory and explain these actions. Our investigation of ownership patterns among 4,339 outlets of 16 plural form franchisors is consistent with our theory that multi‐outlet franchising is cost efficient and that co‐location occurs when franchisors fill market gaps left by franchisees. Copyright © 2011 John Wiley & Sons, Ltd.     

Price control and advertising in franchising chains

This study investigates how franchising chains use advertising to enhance coordination and improve their control over prices set at franchised outlets. We argue that chains use price advertising to inform customers about their desired prices, thereby influencing franchisees to adopt the advertised prices although they are not contractually required to do so. We test our hypotheses using rich outlet‐level price data collected before and after a U.S. nationwide advertising campaign by McDonald's. Our findings indicate that advertising is an effective mechanism that franchising chains use to improve their control over franchisees, enhance uniformity, and reduce franchisee free‐riding. Copyright © 2013 John Wiley & Sons, Ltd.     

Brand Extension Effects and Core Attributes of Experience Product Franchises: A Bayesian Approach

An experience product's quality is difficult to assess prior to purchase, largely due to the limited availability of information before consumption. In the absence of perfect information, firms routinely use certain market signals to provide product quality information to consumers. Accordingly, drawing from signaling theory, this research aims to identify a collection of product core attributes in the form of signals and brand extension features to successfully manage experience product franchises. In doing so, we make use of Bayesian models with both deterministic effects via the use of predictor variables and probabilistic effects via the use of brand extension properties. Such models allow us to explore specifically the relative performance effects of the parent product of a franchise and of its extensions given the same level of product core attributes. The results of this study, based on the motion picture franchise data, indicate that there are critical product core attributes such as continuity, timing, and prior perception that collectively lead to successful successive generations. Furthermore, our study shows that brand features measured by the relationships between the parent product and its subsequent extensions at the infancy of the franchise are essential for the continuation of experience products. Similarly, our results indicate that the parent product's success on later extensions' performance starts to diminish, implying that the established “brand name” is what carries the franchise forward.     

Residential Real Estate Brokerage Efficiency and the Implications of Franchising: A Bayesian Approach

This paper provides substantial evidence that real estate brokerage firms choosing to franchise are more cost-efficient than firms that remain independent. It uses 1995 cost data obtained from a nationwide survey of real estate brokerages to analyze the differences in firm efficiency across firm type—franchised and independent. We estimate a single stochastic cost frontier using Bayesian statistics and measure firm efficiency relative to that frontier conditional on firm type. The results indicate that real estate brokerages are relatively efficient, implying a competitive market, but franchised brokerages are substantially more efficient than their independent counterparts.     

Brand relationships and brand equity in franchising

Previous research suggests that building brand equity enhances the competitive advantage of retailers in B2B markets. However, limited attention has been paid to the concept of brand equity in B2B retailing contexts, particularly in franchise channels. This study seeks to understand how brand relationships can be leveraged to enhance brand citizenship behavior and ultimately brand equity in franchise channels. Accordingly, this study explores franchisees’ perceptions of their franchise brands, leading to a new conceptualisation of ‘franchisee-based brand equity’. An interpretive research design is employed, comprising of semi-structured interviews with key informants. Findings suggest that franchisors play an important role in promoting brand citizenship behaviour of franchisees, which in turn enhances brand equity. The study provides insight on how to effectively manage brand relationships to enhance franchisees’ brand citizenship behaviour and brand equity. The concept of brand relationships has been discussed widely in consumer markets, but has received limited attention in B2B contexts. In response, this study provides new insight in B2B branding and specifically, in how brand relationships may enhance brand citizenship behaviour and brand equity in B2B markets.     

Franchising brand benefits: An integrative perspective

Despite significant advances in the study of B2B branding, including several contributions and special issues in this journal, the specificities of franchising, a subfield of B2B relationships, dictate further investigation. In effect, the franchise branding literature remains largely fragmented and dependent on data from a single stakeholder source. This paper attempts an integrative view of franchise branding by examining brand benefits from three theoretical perspectives (brand as a resource, brand as knowledge, and brand as a relationship fulcrum) and data from two stakeholders. Specifically, the objective of this paper is threefold: to offer a comprehensive view of brand benefits for franchisees, as perceived by both franchisees and franchisors, and considering their evolution throughout the franchise relationship lifecycle. 37 interviews with franchisees (n = 22) and franchisors (n = 15) reveal diverse brand benefits, including new insights related, for instance, to experiential benefits which have received very limited attention in B2B branding. The study also unveils significant perceptual gaps, with franchisors having a much narrower view of brand benefits than franchisees, which could potentially be detrimental for this subtype of B2B brands. Based on the findings, we also develop a tool that helps franchisors manage their brand benefits (i.e. deploy, emphasize or downplay individual benefits) over the lifecycle of their relationship with each franchisee.     

Innovation in business networks: The role of leveraging resources

This study investigates how companies innovate in their business networks. We examine the role of leveraging resources in the context of retail brand paints within the do-it-yourself (DIY) paint industry, where the role of innovation is pertinent to achieve differentiation and create value. The study investigates innovation as a process of leveraging resources within business relationships. Research findings demonstrate that manufacturers and retailers jointly leverage resources to develop and launch innovative retail brands. Companies need to carefully address these resource-leveraging processes and assess their options in developing innovations that enable sustainable growth.     

优势品牌基因的特点

任何一个品牌,都是由三重因素构成的。第一重因素就是产品的品质、产品外观、产品价值等产品属性;第二重因素是销售价格、广告宣传与市场推广、经营管理理念、企业文化等品牌属性;第三重因素是企业环境、竞争环境、消费环境等环境属性。所有的品牌都有这三重因素,但是,只有极少数的品牌升级为优势品牌。这是因为优势的品牌是一件无价的艺术品,而优势品牌基因是成就其无价的因子。这篇文章通过对优势品牌基因的分析,为企业提供寻找优势品牌基因的线索,希望能对推进中国品牌的优势进化有所帮助。     

Centralized and Decentralized Contracts in a Moral Hazard Environment

We study the optimal allocation of the contracting capacity in a moral hazard environment. Centralizing is superior when the principal is able to establish all the contracts with the agents simultaneously and she is able to monitor side contracting between the agents. Otherwise, decentralizing can be a superior strategy. We apply our results to a firm's decision on which outlets to franchise. They suggest that franchising is more likely to occur the further the store is from headquarters, the more isolated it is and in those activities where the risk is low. This conclusion is consistent with empirical studies.     

SURVIVAL AND GROWTH IN RETAIL AND SERVICE INDUSTRIES: EVIDENCE FROM FRANCHISED CHAINS*

Using data on franchised chains, which are the type of single‐product entities emphasized in industry dynamics models, we show that age and size affect growth and survival even after controlling for chain characteristics and unobserved chain‐specific efficiency. This implies that age and size affect firm growth and survival for reasons other than those emphasized in learning‐type models. We also find that several chain characteristics affect growth and survival directly, and thus controlling for firm characteristics is important. Finally, we find that chain size increases rather than decreases exit among young chains, and chains converge in size over time.     

Knowledge management and franchise systems

Knowledge management is generally recognized as a resource for sustainable competitive advantage. Many organizations have approached knowledge management through the use of information technology. However, results are mixed, primarily because (1) information is merely one aspect of knowledge management, (2) some types of knowledge are difficult to transfer effectively and (3) the structure and culture of organizations may inhibit knowledge transfer. In this study, we examine knowledge management in a franchising context because franchisors and franchisees are independent entities linked together in a contractual (some even use the word hybrid) relationship. In addition, the ’product or service’ offered by a franchise organization is an outcome of knowledge resources and the success of a franchise system depends on how well the parties involved in a franchise system leverage their knowledge resource. Specifically, we explicate types of knowledge, discuss the differences between traditional and network franchise organizations and develop a framework for knowledge management in franchise systems.     

Successful branding of a commodity product: The case of RAEX LASER steel

In today's competitive business environment, industrial marketers must work harder than ever before to achieve some degree of differentiation for their products to avoid being viewed as a commodity. Many firms have sought to achieve this differentiation by branding their products. Branding, however, is more than simply putting the company's name on a product and broadcasting that name to its target audiences. For industrial products, branding is a multidimensional construct that includes not only how the customers view the physical product, but also the logistics, customer support, and corporate image and policy that accompany this product. This paper discusses how the Finnish steel company Rautaruukki was able to successfully incorporate these four components into their RAEX LASER steel, a brand specifically targeted for job shops who do laser cutting. The paper concludes with managerial implications and suggestions for how industrial marketers might implement their own branding strategy.     

Creating value in retail buyer–vendor relationships: A service-centered model

We present a “service-centered” model of retail buyer–vendor relationships, in which retail buyers' perceptions of a vendor's economic and social resources affect their assessments of relationship value and relationship outcomes. Economic resources offered at the organizational level of the vendor include brand equity and customer support activities (e.g., merchandising support and margin maintenance). Social resources offered at the individual level of the salesperson include special treatment and customer advocacy. Relationship outcomes include the buyer's intention to grow the business, and in the event of business termination, maintain the interpersonal relationship with the sales representative. Survey data from 532 retail buyers were collected and analyzed using structural equation modeling. The results show that relationship value mediates the effects of economic and social resources on relationship outcomes. However, the process by which this occurs varies.     

Creating Brand Names That Work

When it comes to brands, what's in a name is everything—a product is not a brand until you name it. What you call your product makes a difference. In addition to making the product yours and no one else's, a good brand name can create a competitive edge by being memorable, by communicating the special qualities of the product, and by setting the stage for a line of future products. Lorna Opatow brings practical experience to this article in which she identifies the problems and the promises in choosing brand names, and then provides guidelines for creating, developing, and evaluating them prior to testing for market acceptance.     

Determinants of Monitoring Capabilities in International Franchising: Foodservice Firms within East Asia

This paper undertakes an exploratory study on determining capabilities of international franchising within East Asia. There is a need to develop a deeper understanding in franchising within East Asia as much of the franchising literature is based on the U.S. experience. Findings from this paper indicate that international franchisors use a combination of mechanisms to prevent franchisee opportunism in East Asia. They include ex-ante bonds, performance schedules and formal controls in brand management. However, the effectiveness of these mechanisms depend on the capabilities of the franchisor to negotiate a high initial franchise fee, select the right franchisee and make adaptation but still maintain brand integrity.     

Acts of hidden franchisee innovation and innovation adoption within franchise systems

Franchising, as an imitative business model, provides a challenging context to create and manage innovation, as franchisors may wish to limit their franchisees' innovative activities to ensure network consistency. Drawing on data from two related empirical studies of franchisees operating in the UK, we seek to understand how franchisees contribute to innovation within their systems. Our first quantitative study reveals that although many franchisees develop innovations, these innovations are not always adopted by the franchise system, suggesting acts of hidden innovation. These findings motivated our second, qualitative study. Through a case analysis of 29 franchisees from 7 different franchise systems, we identify a number of organizational and relational factors that influence both franchisee engagement in innovation, and the extent to which their innovations are disclosed to the network. From these, we develop a theoretical framework of franchisee-led innovation processes, which contributes to the role of social exchange theory in innovation practices within business-to-business contexts. Our findings extend emerging research on innovation in franchise systems, and also provide practical insights on how franchisees can be best supported in creating and disclosing innovations to benefit the franchise system.     

制造商线索与零售商自有品牌感知质量

零售商通常把自有品牌产品委托给其他企业进行代工。在国外,在自有品牌上只标注零售商的信息,而无须显示代工制造商的任何信息;然而在我国,根据相关法规,必须标注代工制造商的名称和所在地,这是中国特有的现象。本文研究这一特殊现象,并把与制造商有关的线索称为“制造商线索”,包括制造商名称、所在地和包装模仿。研究发现制造商所在地和制造商包装模仿对自有品牌感知质量有重要的影响,而制造商名称的影响并不显著,消费者的产品知识对上述影响关系具有调节作用。