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Journal of the Academy of Marketing Science
Published in: Journal of the Academy of Marketing Science 4/2013

01-07-2013 | Original Empirical Research

An introspective examination of single-unit versus multi-unit franchisees

Authors: Rajiv P. Dant, Scott K. Weaven, Brent L. Baker, Hyo Jin (Jean) Jeon

Published in: Journal of the Academy of Marketing Science | Issue 4/2013

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Abstract

Multi-unit franchisees (MUFees; i.e., franchisees that operate more than one outlet within a franchise system) represent a pervasive and even dominant form of franchise ownership in many sectors. However, much of the franchising literature has been developed with a focus on single-unit franchisees (SUFees). The goals of this article are to introspectively compare MUFees and SUFees in terms of (1) the factors franchisees consider important when initially buying a franchise, (2) how these considerations change when SUFees become MUFees, and (3) how SUFees and MUFees characterize their relationships with their franchisors in terms of relational constructs. Our data reveal significant differences between these two groups in terms of purchase motivations as well as relational sentiments. Importantly, franchisor preferences for multi-unit franchising notwithstanding, it is the SUFees that characterize their dyadic relationships with their franchisors as more relational as compared to their MUFees counterparts.
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Appendix
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Footnotes
1
The notion of IPLC describes an internationalization process wherein a local manufacturer in an advanced country (e.g., USA) commences with selling a new, technologically advanced product in its market, but over time, ends up becoming a net importer of the product as this product is produced at a lower cost either by competitors in lesser developed countries or, if the innovator has developed into a multinational manufacturer, by its foreign-based production facilities.
Since franchising revenues are based on contractually vested royalty remittals, there is no danger of franchise systems becoming victims of IPLC.
 
2
We use the acronyms SUF and MUF to represent the business organizational forms of single unit franchising and multi-unit franchising, respectively. When referring to the actual franchisees, we use the analogous acronyms of SUFees and MUFees.
 
3
The most commonplace basis for the existence of MUFees is the incremental growth amongst existing franchisees. The successful SUFees typically seek additional units in order to grow their businesses, and permission for such expansion is usually based on the performance of existing units. This form of MUF is sometimes also referred to as incremental or sequential expansion, and it is distinct from master franchising in which a franchisee is granted the rights to multiple units from the outset (Kaufmann and Dant 1996). One familiar form of master franchising, the area development agreement, entitles (and even obligates) the master franchisee to open and operate multiple outlets under a pre specified schedule. The incidence of master franchisees or area developers, however, is relatively rare and is most often utilized by franchisors embarking on international expansion of their systems. In our sample, we had only two master franchisees and one area developer.
 
4
In fact, under the premise that theories typically underdetermine the phenomenon (Kuhn 1962), there is an increasing trend toward using multi-theoretic derivation of hypotheses in mainstream business articles as well (e.g., Cropanzano et al. 2002; Greenberg and Scott 1996; Griffith et al. 2006; Heide and John 1988; Husted and Folger 2004; Lusch and Brown 1996; Palmatier et al. 2007; Ramaswami and Singh 2003).
 
5
The most frequently occurring effects documented by Palmatier et al. (2006) involved the construct of trust (105 effects), followed by commitment (60 effects) and relationship satisfaction (29 effects) (cf., Palmatier et al. 2006, Table 4, p. 146). We decided to drop their fourth relational mediator, relationship quality (with 21 effects) because it has itself been “conceptualized as a multi-dimensional construct” (Palmatier et al. 2006, p. 139). In terms of their impact on relationship outcomes, the sample weighted reliability adjusted average effect size for trust was r = 0.564, followed by commitment (r = 0.532) and relationship satisfaction (r = 0.502). The average impact of relationship quality was r = 0.448. These summary statistics have been generated by manipulating the numbers presented in their Table 4.
 
6
The premise is that as the dependence of the weaker party on its partner increases, the stronger partner faces strong temptations to act opportunistically (Kumar et al. 1998) and utilize coercive power sources to glean disproportionate share of benefits from the exchange relationships, which in turn would lead to dissatisfaction perceptions. However, most scholars (e.g., Brown and Frazier 1978; Frazier and Rody 1991; Frazier and Summers 1986) predict that with increased dependence of the weaker party, the stronger party will have less need to rely on coercive strategies and will instead employ non coercive strategies to gain compliance, thereby generating relationship satisfaction perceptions. This is especially true in a franchising context where a franchisor’s potential coercive actions are likely to have systemic reactions from the rest of its chain through adverse publicity.
 
7
However, to ascertain this empirically, we subdivided our sample into those who had been with the system for two years or less and those with more than two years of association with their franchise systems, and we carried out a MANOVA analysis to see if there were significant differences across these two groups. The results were insignificant (p = 0.554) suggesting that whatever erosion of memory (if any) occurred, it affected both groups equally. However, to reiterate, we believe that salient events like decisions to purchase franchise business units qualify as financially significant and memorable events.
 
8
The notion of statistical power, operationally (1-β), where β refers to Type II errors can be loosely translated as the probability of making the correct inference about the hypotheses under test since β already accounts for α or Type I error. Cohen (1977, page 14) has proposed the widely accepted benchmark of 1-β = 0.80 for behavioral sciences as the desirable level of power for statistical tests.
 
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Metadata
Title
An introspective examination of single-unit versus multi-unit franchisees
Authors
Rajiv P. Dant
Scott K. Weaven
Brent L. Baker
Hyo Jin (Jean) Jeon
Publication date
01-07-2013
Publisher
Springer US
Published in
Journal of the Academy of Marketing Science / Issue 4/2013
Print ISSN: 0092-0703
Electronic ISSN: 1552-7824
DOI
https://doi.org/10.1007/s11747-011-0265-2

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