Toward a relational perspective of franchising chains

In many professional and services industries, firms try to scale up their operations by reproducing practices in new locations through franchising arrangements, especially business format franchising. The classic but still prevailing explanations for franchising related phenomena, especially the initiative of franchising, the propensity to franchise, and the franchise performance, are mostly based on two orders of reasons (or a combination of them): franchising is either explained as a means to deal with resource scarcity or (and) as a mechanism for franchisor and franchisee to align incentives between themselves. However, empirical studies have shown limited support for both such claims, especially in face of the so called plural form, where proprietary and franchised units of the same franchisor co-exist. It may also be argued that the traditional literature on franchising has assumed a high level of homogeneity within and between franchising “networks,” possibly due to the perception that they tend to be “dominated” by a high level of standardization and replication of practices, both operative and relational. However, learning processes in such “networks” have recently been brought in as an attempt to capture other mechanisms that may underlie their operation and sustainability. This article seeks to explore a third perspective to look at franchising “networks,” by drawing from the literatures on capabilities and industrial networks. Seen from this perspective, business format franchising may involve more than the mere replication or exploitation of a recipe, especially if we take into consideration the partly idiosyncratic nature of both the relationships between actors and their capabilities and intentions. Within this perspective, variety preservation, and not only uniformity, may be recognized by participants as relevant for the performance of the franchise chain. In other words, variety may reflect the need for the refinement of the “package” throughout time, in more than one ways, together with the gradual development of the network and the learning experiences that take place in that context.