Franchising: a signaling perspective

Abstract

Purpose This paper aims to outline different signals that franchisors can use to communicate their value proposition to prospective franchisees. It also tests whether these signals can enable franchisors to charge a premium from their franchisees. Design/methodology/approach This paper uses a mixed-methods approach to arrive at the findings. It uses a combination of open-ended survey and archival data to arrive at the findings. Findings Franchisees consider franchisor’s characteristics such as its “capability,” “support offered” and “franchisee membership criteria” significant while buying into their franchises. The results suggest that franchisors can leverage some of their capability signals to obtain a higher franchise fee if they use the right signals as desired by franchisees. Research limitations/implications Signals identified in this study are specific to this study. The relationship between the signals and franchise fee is applicable for high-performing franchises operating in the American context only. Future research can address this limitation by collecting more data, testing additional signals and using alternative methods to verify the findings. Practical implications Franchisors can take cues from the evaluative criteria used by franchisees to design their signaling strategies. Franchisors can leverage some of their capabilities to extract higher fees from their franchisees. Prospective franchisees should engage in due diligence before purchasing a franchise unit and avoid franchises with higher support fees and loose franchisee recruitment criteria. Originality/value This study contributes to research on the evaluative criteria used by franchisees. It contributes to the signaling theory by offering insights into the performance outcomes of signals in the franchising context. It also contributes to our understanding of franchising by adopting a mixed-methods approach that includes information about franchisors and franchisees.

The role of ICTs for knowledge sharing in franchising networks

“…Our research findings reflect those of Iddy and Alon (2019, p. 776), who concluded: “Further research is still needed to analyze the contribution of information technology in knowledge transfer mechanisms, customer involvement in knowledge creation and absorptive capabilities of partners to transfer knowledge.” Taken together, by examining the impact of the VLE, our empirical evidence confirms the potential benefits of adopting ICT resources to facilitate the interactions and competitiveness in the franchisee’s networks. Furthermore, our findings suggest that VLEs can be considered an alternative to assist franchisors in communicating and sharing their value proposition to prospective franchisees (Panda et al , 2022).…”

“…Taken together, by examining the impact of the VLE, our empirical evidence confirms the potential benefits of adopting ICT resources to facilitate the interactions and competitiveness in the franchisee's networks. Furthermore, our findings suggest that VLEs can be considered an alternative to assist franchisors in communicating and sharing their value proposition to prospective franchisees (Panda et al, 2022).…”

Aligning restaurants and artificial intelligence computing of food delivery service with product development

“…Joint decision-making is a cooperative governance model agreed upon by cooperative enterprises to pursue common interests (Panda et al , 2023). In a collaborative decision-making environment, multiple stakeholders’ views are considered (Angulo et al , 2023); this collective approach often accelerates decision-making by considering different perspectives, thereby reducing deliberation time (Woolley and Lim, 2023) and building restaurant competitiveness.…”

Opening the black box of capabilities to renew the organizational and business know-how of franchises

“…Know-how is the cornerstone of the franchise network Franchising is an interdependent organizational relationship in which both franchisors and franchisees rely on one another to address their asset specificity (Panda et al, 2019(Panda et al, , 2023. It allows the franchisee to sell the franchisor's products or services while nonetheless respecting the franchisor's standards (Cox and Mason, 2009).…”