Power and control in the franchise network: an investigation of ex-franchisees and brand piracy

Abstract

This research considers the issue of franchisees who exit the franchise system in order to continue operating independently. The literature regarding incentives for entering franchising is reviewed in an attempt to reveal why franchisees become dissatisfied and leave. The use of power by the franchisor and its relationship to brand piracy by franchisees is explored. Franchisors and their current and former franchisees are interviewed to uncover insights into this phenomenon. Explanations concerning the effectiveness of contractual remedies, dissatisfaction with the franchise, level of dependence and expectations in the relationship, and franchisorfranchisee goal incongruence are proposed.

Making Franchising Work: A Framework Based on a Systematic Review

“…Although it is frequently argued that payments serve as an incentive for franchisees, in practice, higher levels of ongoing payments rarely have a positive effect at the franchisee level. On the contrary, predominantly negative relationships have been found with survival (Michael and Combs 2008), financial performance (Frew and Jud 1986) and satisfaction if the franchisees perceive the payments as too high (Abdullah et al 2008;Frazer et al 2007a;Hing 1996;Knight 1986;Tuunanen and Hyrsky 2001). Only Benjamin et al (2007) found that the effect on financial performance depends on the region.…”

“…Multiple studies revealed that the skills and attitudes of the franchisor and the franchisee are important for the success of franchising. Franchisees that are highly motivated and willing to work hard and make sacrifices are more likely to survive and succeed, as are their franchisors (Bates 1995a,b;Clarkin 2008;Frazer and Winzar 2005;Frazer et al 2007a;Jambulingam and Nevin 1999;Merrilees and Frazer 2006;Parsa et al 2005;Watson 2008). Franchisees experience better financial performance, a greater likelihood of success and more satisfaction if they have good management and marketing capabilities and if they are able to align their own strategies and management efforts with those of the franchisor (Clarkin 2008;Falbe and Welsh 1998;Frazer and Winzar 2005;Knight 1986;Merrilees and Frazer 2006;Parsa 1999;Parsa et al 2005;Withane 1991).…”

“…Franchisees' prior skills and experience appear to be less important than current capabilities. Experience, whether in selfemployment, management, business or industry, rarely has a positive effect (Bates 1995a,b;Fenwick and Strombom 1998;Frazer et al 2007a;Gassenheimer et al 1996;Hing 1995Hing , 1999Hunt 1973;Jambulingam and Nevin 1999;Knight 1986;Knott 2003). Two studies even found a negative effect on returns (Knott 2003) and on franchisee satisfaction (Tuunanen and Hyrsky 2001).…”

Franchising - a key to success in times of financial and economic crises?!

“…The entry into a franchising system is just one way to employ oneself in addition to an acquisition or a business start-up [KfW Bankengruppe, (2009), p.18 ff.]. The fundamental advantage of a franchising system is the fact that a lot of problems possibly appearing in the context of an acquisition or a business start-up can be avoided [Frazer et al, (2007), p.1038]. These problems can be the finding of a successful business idea [KfW Bankengruppe, (2009), p.8], the adequate evaluation of the performance of the own business, the lack of relevant market knowledge, scarce business and economic skills of the new business founders as well as the composition of a convincing business and financing plan to secure the financing of the start-up [BMWi, Starthilfe, (2009), pp.12, 34;Waschbusch et al, (2009), p.353].…”

Conceptualizing Franchisee-based Brand Equity - A Framework of the Sources and Outcomes of the Brand’s Added Value for Franchisees

“…Research on franchising traditionally builds on two major theoriesresource scarcity and agency theory -where the brand is present but does not constitute a major topic (Combs & Ketchen, 1999;Combs et al, 2004). More recently, a new stream of research has focused on the brand as a core topic of study in franchising, with research on franchise brand management practices (Pitt, Napoli & van der Merwe, 2003), franchisee perceptual equity (Leslie & McNeill, 2010), franchisee-brand relationships (Nyadzayo, Matanda & Ewing, 2011), franchisee brand piracy (Frazer, Merrilees & Wright, 2007) and franchise branding from an organizational identity perspective (Zachary, McKenny, Short, Davis & Wu, 2011).…”