Performance in Franchise Systems : The Franchisee Perspective

Abstract: During the last decades, franchising as an organizational form has received a lot of attention from researchers and practitioners alike. While many studies have examined various aspects of franchising from the franchisor's perspective, little research has taken the franchisee’s perspective. Therefore, given the importance of franchisees in a franchise system, the lack of research about consequences from the franchisee's perspective, and that many of the previous studies have taken a top-bottom view, this research concentrated on the franchisee's performance. This study focused on business format franchising in the restaurant industry in two countries, Iran and Sweden.In this study, the three perspectives of entrepreneurship, strategic management, and marketing were used to study the franchisee’s performance. Moreover, the resourcebased view, relational view, and relational exchange theory have been used to find the influential factors in a franchisee’s performance. Therefore, by considering franchising as a mutual relationship and examining the influential factors in a franchisee's performance, the related factors of both the franchisor and franchisee, as well as the relationship between them, were examined.According to the franchisee’s related factors, the franchisor's related factors, and the relationship and environmental factors, 12 main hypotheses and 9 sub-hypotheses were developed. In total, 191 usable questionnaires from Sweden and Iran, comprising a response rate of 22 percent, were returned from the franchisees. In this study, confirmatory factor analysis was used to test the construct measurement; to test the hypothesis, hierarchical multiple regression analysis was performed. Moreover, the Chow test was conducted to integrate the data from these two countries.A primary contribution of this study is taking a bottom-top view in franchising research. This study also provided a detailed and holistic view about the consequences of franchising for franchisees. Moreover, this study, offers important contributions toward understanding entrepreneurial activities, as a controversial issue, in franchising outlets.The results provide interesting insights into the franchisee’s performance. While the franchisees’ related factors of absorptive capacity, Kirznerian entrepreneurial orientation, and social capital positively affected their performance, Schumpeterian entrepreneurial orientation and human capital did not affect their performance. Moreover, the franchisor’s related factors of system profitability, brand reputation, advertisement and providing raw material had a positive influence on the performance. However, training did not cause a difference in the franchisee’s performance. All relationship factors also positively affected the performance, and conflict and satisfaction mediated the relationship between trust and performance. Finally, the implications of this study and suggestions for further contributions in this stream of research are discussed.