An Illustrative Application of Multi-Unit Franchise Expansion in a Local Retail Market

Abstract

Retail expansion in a local market offers many challenges, and given the sensitivity of survival to location mistakes, it is imperative to develop site models that incorporate realistic impediments to that expansion. Small independent businesses or local area franchisees facing limits on all forms of capital rarely can open additional units without delays. In this paper, we test the benefit of using Kaufmann, Donthu and Brooks' (2000) multi-unit site selection model that incorporates the reality of delays in the opening of new stores as well as the recognition that local retail chains can face competition from many hard to identify sources. We use data from the actual introduction of a small set of stores in a major United States metropolitan market to estimate the potential for improvement over a pure sequential expansion strategy. When compared to the sequential strategy actually used by the retailer, we estimate that performance could have been improved by 15.5% if a model that anticipated the delays in opening the stores and competition from secondary sources would have been used.     

Franchising and real estate brokerage

This paper examines the value of franchise affiliation to real estate brokerage firms. It uses a national sample to estimate models of brokerage firm sales and revenues. The results suggest that franchisees sell more properties than nonaffiliates, but that the average franchise sale results in less revenue. The net benefit of franchise affiliation is a 9.0 percent increase in net revenue to the average firm. We compare the initial cost of affiliation with the benefits and find that the up-front fees charged by franchisors are substantially lower than the present value of the stream of incremental profits generated by franchise affiliation.     

Towards a framework for the study of franchising as an operating mode for international retail companies

In recent years franchising has become a popular operating strategy for companies competing in the global marketplace. In particular, international retailing companies have increasingly been adopting franchising as a marketentry mechanism. While this growth in the popularity of franchising has led to increased research interest in the topic, there has only recently been a recognition of the need to consider franchising within the wider context of retailer internationalization activity. This paper attempts to provide a framework for the study of franchising as a strategy for retailers expanding into international markets. The discussion examines key findings to date from the established literature on international franchising concerning the motivations underlying internationalization, the internationalization process itself and the operating problems encountered. It is argued that a careful examination of findings from the international franchising literature can provide further development of retail internationalization conceptualization.     

Valuing Exclusivity from Encroachment in Franchising

Conflict is created when business format franchisors penetrate existing markets with new outlets that increase system-wide sales, but negatively affect the sales and profits of existing franchisees. Territorial exclusivity contracts are used to manage channel conflict in such situations. We present a model to value territorial exclusivity from the perspective of both the franchisor and the franchisee. We show that under certain circumstances there is positive value to the franchisor by including the exclusivity clause in the contract and to the franchisee by purchasing this exclusivity. When this happens, the likelihood of franchisor-franchisee encroachment-related conflict is reduced.     

解析特许经营的成功之道与风险因素

特许经营模式在我国商业经营中成长迅速,效益明显.品牌、诚信、法律、信息化、标准化是特许经营成功的重要因素.特许经营企业的过快发展,人员素质的低下,法律法规的不健全等是特许经营的风险因素.     

Family Ties that B(l)ind: Do Family-Owned Franchisees Have Lower Financial Performance than Nonfamily-Owned Franchisees?

Over the past three decades, franchisee performance has attracted the attention of scholars in both retailing and entrepreneurship. However, to date, research has not investigated whether the type of franchisee ownership influences franchisee financial performance. Family ownership, the most dominant form of firm organization worldwide, ingrains greater focus on noneconomic goals that could, in turn, reduce the financial performance of a family-owned franchisee. Drawing on the tenets of agency theory undergirding the franchising and family business literature, we examine whether family-owned franchisees have lower financial performance than nonfamily-owned franchisees. Using data from the 2007 Small Business Owner survey and propensity score matching, we observed that family franchisees generated at least 6.7% lower sales per employee than nonfamily franchisees. The inferences are consistent across two additional samples and robust to additional performance outcomes and specifications. Overall, this research provides a novel empirical examination of the influence of family ownership on franchisee financial performance and has managerial implications for both franchisors and franchisees.     

Gender’s moderating role in the relationship between organisational form and performance in the Spanish supermarket industry

This research seeks to discover how the organisational form (franchising vs. vertical integration) of 305 supermarkets belonging to a Spanish franchise chain influences unit-level performance measured through three key performance indicators commonly used in the retail literature: sales per square metre, sales per employee, and service quality scores. Additionally, we assess the moderating role of the manager's gender in each individual supermarket. We have analysed the research questions using multivariate analyses, with a panel dataset that includes quarterly establishment-level data covering the period from January 2017 to December 2019. We have found that franchised supermarkets record higher sales both per square metre and per employee than vertically integrated ones. This positive effect of franchising is lower in establishments run by females than in those run by males. The findings also reveal that franchised supermarkets record lower service quality scores than their company-owned counterparts, and this negative effect is again lower in establishments managed by females than in those managed by males.     

Corporate Social Responsibility in franchise chains: Specificities,insights from French franchise chains’ CSD,and avenues for future research

Although franchise chains are increasingly committed to environmental, social, and societal transitions, only a few researchers have focused on Corporate Social Responsibility (CSR) in the specific case of franchising. The aim of our paper is to discuss the specificities and challenges of CSR in franchising, explore how franchisors report on their sustainable practices, and emphasize subsequent directions for future research. In order to do so, we focus on the Corporate Social Disclosure (CSD) practices of twenty-two retail and service franchisors operating in the French market where regulations of non-financial information disclosures exist for large companies. Our findings show that these franchisors disclose rich and diversified information about their CSR activities. However, franchisors’ disclosures can vary significantly, especially depending on their chain size and whether they are subject to reporting regulations. Our research contributes to the literature on CSR in franchise chains, as well as the practice.