Edited by Frank Hoy, Rozenn Perrigot and Andrew Terry
Chapter 6: Exploring the growth of multi-unit franchising
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.
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