Restaurant Franchisees’ View of the Relationships Among the Determinants of Franchisors’ Entrepreneurial Strategy Processes

Abstract

The determinants of entrepreneurial strategy processes in franchising were identified as external environment, entrepreneurial strategy, mechanistic-organic structure, and financial performance. The primary purpose of this study was to explore a model that examines the relationships among the external environment, entrepreneurial strategy, mechanistic-organic structure, and financial performance of restaurant franchisors from the perspective of the franchisees. Structural equation modeling (SEM) was employed to develop this exploratory model. The final structural model indicated that franchisors’ external environment forces such as competition, politics, technology, and price wars are perceived as having a negative effect on franchisor’s financial performances. Restaurant franchisees perceive that franchisors’ entrepreneurial strategies such as aggressive expansion of franchise units, innovative system development, and menu development to meet local needs make a highly positive contribution to franchisors’ financial performance. Franchisees also perceived that franchisors’ entrepreneurial strategies and mechanistic-organic structure could have a significantly and mutually positive effect on each other.

Entrepreneurial orientation and the franchise system

“…While in franchising there is some evidence to suggest that franchisees may lack EO (Maritz and Nieman, 2006) a number of authors have suggested that EO is important for system performance (Falbe et al, 1998;Lindsay and McStay, 2004;Maritz and Nieman, 2008). But there is only limited empirical evidence to support this (Sul and Khan, 2006). Thus, it is important to consider the potential link between EO and performance.…”

“…Moreover, issues relating to performance have generally received minimal attention in the franchising context (Barthélemy, 2008); (2) we address key limitations of the few existing studies on EO and the franchise system such as the reliance on a small number of case studies, the focus on a single industry and on the franchisee perspective (see e.g. Nelson and Coulthard (2005) and Sul and Khan (2006)); and (3) by presenting an empirical study of EO, drawing on a sample of franchise systems from the UK, the present paper broadens the scope of prior franchising studies. In a recent paper, Dant (2008) called for researchers to look beyond the North American contexts for data as most franchising research has focused virtually exclusively on the US.…”

Performance in Franchise Systems : The Franchisee Perspective

“…In the franchising context, the external environment also has a crucial role in entrepreneurial strategy from the perspective of the franchisees (Sul and Khan, 2006). For those franchisees that are in different local markets, environment competitiveness increases the need for entrepreneurial activities Watson, 2013, Falbe andWelsh, 1998).…”

“…In a competitive environment, intensity of competition exerts 160 more pressure on franchisees, and entrepreneurial franchisees can take advantage of the more entrepreneurial activities (Casillas et al, 2010). In the franchising context, the external environment also has a crucial role in entrepreneurial strategy from the perspective of the franchisees (Sul and Khan, 2006). For those franchisees that are in different local markets, environmental competitiveness increases the need for entrepreneurial activities.…”

Franchising in Russia: does an optimal franchise proportion exist?

“…Its wide use started in 1940s and 1950s and nowadays franchising is one of the fastest developing types of business all over the world (Mendelsohn, 2005;Antonowicz, 2011;Ramirez-Hurtado, 2011). Franchising accounts for 40% of retail sales in the U.S., and, in some industries (e.g., restaurants, photocopying services, tax documentation preparation services), this percentage is even higher (Combs, Ketchen 2003;Michael, Combs, 2008;Sul, Khan, 2006;Gerhardt, Dudley, Hazen, 2012).…”