Criteria used in the selection of franchisees: an application in the service industry

Guerrero-Casas, Flor M.; Cataluña, Francisco Javier Rondán

doi:10.1007/s11628-011-0101-2

Cited by 8 publications

(4 citation statements)

References 30 publications

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“…Furthermore, franchisors may develop selection criteria and learn to recruit appropriate franchisees over time (Castrogiovanni et al 1993;Forward and Fulop 1993), but this offers very limited knowledge about the partner. Such learning helps weed out unsuitable candidates and prevent opportunism (Stanworth 1991;Ramírez-Hurtado et al 2011), but does not generate the familiarity and trust that prior interactions create. Consequently, the franchisor prefers to include clauses in the contract to prevent opportunism and to ensure that his instructions are followed.…”

Section: A Specific Type Of Alliance: Franchisingmentioning

confidence: 99%

Prior interactions and contractual completeness in Spanish franchising

Solís-Rodríguez

González-Dı́az

2018

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Acknowledgments:This paper has benefited from the support of the Spanish Ministry of Economy and Competitiveness (MINECO-13-ECO2013-40407R). Prior Interactions and Contractual Completeness in Spanish FranchisingPrior interactions between partners had led authors to emphasize the importance of relational contracting in interfirm relationships. We discern two learning effects from prior interactions (about the partner and about the transaction) to show that formal contracting is ubiquitous in franchising. Using a sample of 74 contracts from SME Spanish franchises, our results indicate that experienced franchisors complete their contracts more, always introducing more contingencies, even those relating to their own obligations. Furthermore, franchisor's reputation does not only not reduce the degree of completeness regarding the franchisor's obligations, but increases the franchisees' obligations. These findings suggest, first, that franchisors prefer formal contracting because it is feasible and affordable for them and signals their commitment to the chain in a more credible way and, second, that formal and relational contracting do not seem to work as substitutes. We conclude that formalization is always necessary to enforce franchise agreements, regardless relational contracting.efficiently structure their agreements (Reuer and Ariño 2007;Ryall and Sampson 2009; Vanneste and Puraman 2010). Parties learn from each other and therefore develop a mutual understanding, shared values and normative conventions that define how they will work together (Poppo, Zheng and Li 2016, p. 726). They mainly generate knowledge about the partner's behavior, familiarity and interorganizational trust. This is what some authors call knowledge-based trust (Yamagishi and Yamagishi 1994), and others relational trust (Ring 1996;Poppo et al. 2016). All these create an "expectation that alleviates the fear that one's exchange partner will act opportunistically" (Bradach and Eccles 1989, p.104), facilitating the use of relational governance mechanisms (Gulati 1995;Zollo, Reuer, and Singh 2002;Gulati and Nickerson 2008).However, this relevance of relational contracting does not seem to hold in all kinds of interorganizational agreements, among which franchising is an example. Franchising is a type of interfirm relationship in which a firm, the franchisor, grants the right to use its brand and a proven business concept to legally independent firms, the franchisees, under certain conditions and in exchange for financial compensation (entry fee and royalties). Some empirical evidence suggests that, in franchising, formal contracting is the main instrument for enforcing the relationship between franchisor and franchisees (Brickley and Dark 1987; Solís and González 2012), even when they have already renewed their contract several times. Why is relational contracting not the basis for franchising? More generally, there is another type of prior interaction to which the literature on interfirm relationships has paid hardly any attention. This is whe...

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Section: A Specific Type Of Alliance: Franchisingmentioning

confidence: 99%

Prior interactions and contractual completeness in Spanish franchising

Solís-Rodríguez

González-Dı́az

2018

Small Bus Econ

View full text Add to dashboard Cite

show abstract

“…I would like to express my gratitude to all of them. In the last few decades, franchising has turned into one of the most popular means to be involved in a business in a variety of activities (Ramírez-Hurtado et al, 2011). It also has been considered to be an important strategy for those firms that would like to expand their business (Rajagopal, 2007).…”

Section: Acknowledgmentmentioning

confidence: 99%

“…As mentioned earlier, the service industry is one of the great driving forces behind the growth of franchising in many countries (Ramírez-Hurtado et al, 2011). Among the different types of franchising , business format franchising is prevalent in the restaurant industry (Hoffman and Preble, 2003).…”

Section: List Of Tablesmentioning

confidence: 99%