The use of franchising as a growth strategy by US restaurant franchisors

Abstract

The paper summarizes predictions about the use of franchising as an expansion strategy and examines them through an empirical investigation of a sample of restaurant franchisors. The restaurant industry is an appropriate field for such an investigation as franchising is extensively used in this sector. The subject of growth is also important from the consumer’s perspective because of the increased desire for convenience and uniformity. The results suggest that franchising is an effective strategy for store expansion. However, larger chains have a lower need to use franchising as a growth strategy, apparently because they have their own resources. The paper also shows that the chain’s mix of company owned and franchised outlets is likely to be influenced by its past growth pattern. The results indicate that a significant increase in the proportion of franchised outlets is unlikely for chains that already have a relatively high percentage of franchised outlets. This is ostensibly because synergistic benefits are achieved through having both company owned and franchised stores.

Franchise branding: an organizational identity perspective

“…The Franchise 500 provides an attractive sampling frame for this study because it includes a large cross-section of franchisors from diverse industries, of varying sizes, and contains both public and private firms. The Franchise 500 is also a common sampling frame for research in franchising (c.f., Combs and Castrogiovanni 1994;Sen 1998). The majority of franchises in the Franchise 500 were retail establishments, including food services (e.g., Subway, McDonald's), consumer goods (e.g., Ace Hardware, Play It Again Sports), hotel/motel services (e.g., Country Inn & Suites, Hilton Garden Inn, Howard Johnson), automotive services (e.g., Midas International, AAMCO Transmissions), and household services (e.g., Mr. Rooter, Lawn Doctor).…”

Effects of restaurant franchising: Does an optimal franchise proportion exist?

“…As mentioned earlier, resource scarcity and agency theories are often used to explain why a firm decides to use franchising (e.g., Brickley and Dark, 1987;Carney and Gedajlovic, 1991;Combs and Ketchen, 1999;Lafontaine and Kaufmann, 1994;Norton, 1988;Sen, 1998;Oxenfeldt and Kelly, 1969). Resource scarcity theory suggests that firms initiate franchising because they lack the capital (i.e., financial, human, and/or information resources) for expansion and that franchisees are a necessary evil but hard to control Kaufmann and Dant, 1996;Oxenfeldt and Kelly, 1969).…”

Influence of Franchisors' Competitive Strategies on Network Size: The Impact of Entry Timing Decision

“…Franchising has been considered a strategy for fast growth and for achieving greater territorial coverage (Sen, 1998;Shane, 1996a). Opening new outlets is a strategy commonly used by small businesses to grow (Barringer & Greening, 1998).…”