Inter‐organizational trust in franchise relationships and the performance outcomes

Abstract

Purpose -The purpose of this paper is to examine performance outcomes of inter-organizational trust in franchisor and franchisee relationships in the fast-food industry in Turkey. Design/methodology/approach -The survey was conducted in two major cities in Turkey: Ankara (the capital and second largest city in Turkey) and Eskisehir (a major city 200 kilometers to the West of Ankara). A total of 103 questionnaires were administered to franchisees located at shopping malls in both cities. A total of 87 usable questionnaires were received, yielding a response rate of 84 percent. Findings -Trust is found to be positively related to cooperation and satisfaction, and negatively related to transaction costs. The duration of relationship is negatively related to transaction costs. Levels of trust, cooperation, satisfaction and transaction costs have not differed significantly on the basis of franchisor's origin or respondent's position. Research limitations/implications -This empirical study investigates only the perspective of franchisees in the dyadic relationship of franchisor-franchisee in one industry (fast-food) in two major cities of a country. Originality/value -The study contributes significantly to an overall understanding of the function of trust for successful franchise channel relationships, and is the first study to address performance outcomes and trust issues in the fast-food industry in Turkey.

Performance in Franchise Systems : The Franchisee Perspective

“…Since the 1950s, other companies such as McDonald's, Burger King, Coca-Cola, Pizza Hut and Holiday, have used this strategy to expand their operations (Eser, 2012). Today, although many businesses in different industries are utilizing franchising, restaurants, miscellaneous services, and non-food retailing in particular are the major industries that apply this strategy (Hoffman and Preble, 2003).…”

“…Entering into a franchise system and activity under a well-established brand does not guarantee the franchisee's success (Eser, 2012). Therefore, understanding the factors that affect the firm's survival and growth is one of the most important things for franchisees who commit their resources in a venture (Cooper et al, 1994).…”

“…In a franchise system as an interfirm relationship, mutual trust between the franchisor and franchisee is important for them in performing their own tasks (Victoria Bordonaba-Juste and Polo-Redondo, 2008). Trust is an important factor in the franchising relationship Frazer, 2006, Watson andJohnson, 2010), and encourages both parties to maintain and develop the relationship (Victoria Bordonaba-Juste and PoloRedondo, 2008), work successfully (Eser, 2012) and achieve mutual profitability (Davies et al, 2011 , Altinay andBrookes, 2012).…”

“…The issue of trust in an interfirm relationship has been widely studied in academic research in recent years (Eser, 2012, Croonen, 2010, Pinto et al, 2009). Trust in a relationship not only affects the interaction and coordination between parties; it also works as a precondition for superior performance and competitive success (Eser, 2012).…”

“…Trust in a relationship not only affects the interaction and coordination between parties; it also works as a precondition for superior performance and competitive success (Eser, 2012). It leads to cooperative behaviors, reduces uncertainty (Merrilees and Frazer, 2006), and helps the partners to enhance cooperation in a relationship (Ireland et al, 2002) and achieve competitive advantage (Barney and Hansen, 1994).…”