The debate is still raging among leadership and organizational behaviour researchers: which leadership style leads to better job satisfaction and work performance among team members? From autocratic to participative management, various models coexist in organizations and have evolved over time to reflect societal changes and expectations. Similarly governance issues in business-format franchising should also be scrutinized. Traditionally, business-format franchising has been based on a directive leadership model where franchisors develop the rules while franchisees execute the strategy. Deviating from the traditional model of concept uniformity, certain franchisors have implemented new forms of leadership throughout their franchise network and have fostered innovation, creative and entrepreneurial spirit in their franchisees. These new models take different forms and shapes and are called ‘freedom franchise’, ‘quasi-franchise’ or ‘entrepreneurial franchise’. The purpose of the chapter is to investigate the various forms of autonomy in business-format franchising and to research the viability and the justification of autonomy in business-format franchising. A parallel could be made with the research in the field of leadership. Autocratic versus democratic leadership styles lead to different results in terms of productivity, and employee satisfaction in particular. And, more recently, transformational leadership has been linked to innovativeness and creativity in corporations. This chapter is a conceptual chapter that lays the foundations for future research opportunities based on existing leadership models that may predict future directions in governance models for business-format franchising.
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Odile Streed and Gérard Cliquet
Maria Jell-Ojobor and Ilan Alon
International franchise firms can be governed by equity and non-equity governance modes. This chapter provides an analysis of the major determinants of master international franchising (as non-equity mode) from international strategy, resource-based and organizational capabilities, and transaction cost and agency perspectives respectively. The conceptual model summarizes the impact of strategic, asset-specific, environmental as well as behavioural factors on the franchisor’s choice of master international franchising. Albeit focusing on master international franchising, the chapter’s propositions may also be applied to franchise expansion with other low control modes. The chapter shows that the right franchise mode choice is a critical task based on multiple determinants which influence the success of the international franchise chains. It may assist franchisors, franchise network partners and policy makers in analysing the conditions of master international franchising in the target country and applying efficient governance modes for successful expansion of the franchise brand into host countries.
Rozenn Perrigot, Guy Basset and Gérard Cliquet
The continued creation of websites in the franchise sector is inevitable, no matter whether they are informational or transactional websites. However, with the presence of these websites, there may be a risk that activities in the franchisees’ stores will decrease. Franchisors need to be attentive to the survival of their chains, to the consistency and uniformity of their chains and to potential conflicts with their franchisees or among their franchisees. This chapter deals with the development of websites within franchise chains in Europe. After briefly defining the legal regulations set by the European Union, the chapter considers the use of the Internet as a new marketing channel by studying the reasons why franchise chains need to be present on the Internet and under what conditions. Then the chapter discusses potential issues related to transactional websites opened by franchisors, e.g., encroachment problems and transactional websites opened by franchisees. It examines some solutions adopted by various French franchise chains.
Audhesh Paswan, María de los Dolores Santarriaga Pineda and Francisco Carlos Soto Ramirez
Although the notion of a franchisor being an entrepreneur is generally accepted in the franchising field, little research has been done to investigate how and why entrepreneurs become franchisors, especially in emerging markets. Using a qualitative approach (subjective personal introspection) this chapter investigates the evolution of a homegrown entrepreneur-franchisor in Mexico. Specifically, this chapter tries to understand the challenges faced by local entrepreneur-franchisor on their journey towards becoming a significant player in this market. The resultant emerging themes corroborate resource constraint theory, agency theory, and the institutional learning perspective. Finally, this chapter traces an evolutionary path of a local entrepreneur-franchisor and some of the unique factors that influence this evolution in Mexico.
With promising projected growth in terms of economic indicators and population, African countries have become attractive to both non-African and African franchisors. This chapter’s objective is to initiate research on franchising in Africa by looking at concrete examples of international and African franchise businesses in various African countries with a special focus on South Africa and Egypt. This chapter adds to the literature on franchising in emerging countries and, more specifically, to the limited stream dealing with franchising in Africa. It also contributes to the practice by providing an overview of the franchise business in South Africa and Egypt and by highlighting the opportunities and challenges for both international and African franchisors.
Benjamin Lawrence, Cyril Pietrafesa and Patrick J. Kaufmann
This chapter explores, from the practitioner’s perspective, factors that have led to the growth of multi-unit franchising in the US market. Informants point to both operational and financial factors driving multi-unit growth. Semi-structured interviews with multi-unit franchisees informed three main themes related to financial benefits including Law of Averages, Margin Pressure and Capital Raising Potential. Financial benefits include the ability to absorb the financial stress of low-performing units, addressing decreasing industry margins via unit consolidation and the availability of capital to fund growth. In relation to operational benefits, informants highlighted the superior Economies of Scale, Operational Expertise and Incentive Structures in driving the growth of multi-unit operations. Operational benefits include the development of a corporate infrastructure providing scale advantages, higher operating performance resulting from higher reinvestment in assets and incentive structures that mimic the franchise relationships that can incentivize unit managers. Based on the findings the authors propose fruitful avenues for future work.
Edited by Frank Hoy, Rozenn Perrigot and Andrew Terry
Robert W. Emerson
This chapter examines a myriad of meanings for the terms, ‘hard law’ and ‘soft law’. It applies the terms while analysing franchise relationships and laws. The franchise parties’ understanding of these legal concepts can facilitate their business planning. In tandem, soft law and hard law can work to foster stronger franchise relationships and more effective franchise regulation. The chapter considers the jurisprudence of hard law and soft law: positivism, rationalism, constructivism, and functionalism. It deals with franchise contract terms and termination. In its second section, the chapter proceeds to an in-depth treatment of soft law, including franchise parties’ expectations as well as important franchise elements such as goodwill and know-how. Franchisor disclosure obligations, franchise regulation, and franchising dispute resolution are analysed in the third section along a continuum of legal hardness or softness. After considering franchise business stability and franchise law standards through the lens of hard and soft law in the fourth section, the chapter concludes with an account of hard law’s and soft law’s advantages and disadvantages for both franchisors and franchisees.
Muriel Fadairo and Cintya Lanchimba
Based on a survey of the internationally diffused works, the chapter presents in the first place the state of research on franchising in Latin America. It then highlights the main current features and trends of franchising in Latin America, the aim being to provide an overview of the state of development of franchising in this subcontinent. The chapter underlines international differences, and discusses the role of macroeconomic determinants and of the institutional environment. Finally, some implications and avenues for further research are highlighted.
Andrew Terry and Marko Grünhagen
Franchising is an international phenomenon which has long developed beyond its relatively humble origins in the US. It has expanded as a significant business activity into all regions of the world and is a key driver of internationalization in an increasingly integrated global economy. Franchising is not only an effective channel and key growth driver for enterprises looking to venture into international markets, but it also offers significant advantages to the host country providing an important means of economic, social and commercial development. The expansion of international franchise systems has also been the catalyst for the development of increasingly robust domestic franchise sectors. Franchising is a particularly important strategy in developing markets, many of which are in Asia – the region poised to dominate the global economy and which is home to a number of diverse, energetic and growing domestic franchise sectors. Asia has enthusiastically embraced franchising which is growing exponentially but is far from reaching its full potential. While some of the Asian economies were early adaptors to franchising – in particular South Korea and Japan where franchising is very firmly entrenched – the development of franchising in Southeast Asia, the focus of this chapter is, with the exception of Singapore, a much later development and is very much a work in progress. The growth and development of franchising in this region of the globe is, nevertheless, progressing strongly and every indicator points to significant growth of franchising as a means of economic and social development in the future.