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Franchisor strategy and firm performance: Making the most of strategic resource investments

Author

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  • Gillis, William E.
  • Combs, James G.

Abstract

A key decision for entrepreneurs in many retail and service firms is whether, and how much, to use franchising. If the decision is made to franchise, the actor may assume one of two "identities" or tactics: (1) the "chain builder," who uses a blend of company and franchised outlets, and (2) the "turnkey," who sells business opportunities but does not own any outlets. To benefit from their chosen strategy, franchisors must put resources in place to support it. We argue that franchisors use the chain building strategy to strike a balance between standardization and innovation by building resources that foster trust and encourage knowledge sharing with franchisees. In contrast, for turnkeys, a valuable set of operational routines is the critical strategic resource. To better appreciate how franchisors choose between the chain builder and turnkey strategies, we gathered survey information from 263 franchisors. Via this data, and as described herein, we learned that franchisors perform better when they invest in resources that best support their selected strategy.

Suggested Citation

  • Gillis, William E. & Combs, James G., 2009. "Franchisor strategy and firm performance: Making the most of strategic resource investments," Business Horizons, Elsevier, vol. 52(6), pages 553-561, November.
  • Handle: RePEc:eee:bushor:v:52:y:2009:i:6:p:553-561
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    References listed on IDEAS

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    1. Francine Lafontaine, 1992. "Agency Theory and Franchising: Some Empirical Results," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 263-283, Summer.
    2. Michael, Steven C., 2000. "The effect of organizational form on quality: the case of franchising," Journal of Economic Behavior & Organization, Elsevier, vol. 43(3), pages 295-318, November.
    3. Eric D. Darr & Linda Argote & Dennis Epple, 1995. "The Acquisition, Transfer, and Depreciation of Knowledge in Service Organizations: Productivity in Franchises," Management Science, INFORMS, vol. 41(11), pages 1750-1762, November.
    4. Kaufmann, Patrick J. & Eroglu, Sevgin, 1999. "Standardization and adaptation in business format franchising," Journal of Business Venturing, Elsevier, vol. 14(1), pages 69-85, January.
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    Citations

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    Cited by:

    1. Evelien P. M. Croonen & Maryse J. Brand & Eelko K. R. E. Huizingh, 2016. "To be entrepreneurial, or not to be entrepreneurial? Explaining differences in franchisee entrepreneurial behavior within a franchise system," International Entrepreneurship and Management Journal, Springer, vol. 12(2), pages 531-553, June.
    2. repec:eee:touman:v:33:y:2012:i:3:p:580-591 is not listed on IDEAS
    3. Odile Chanut & Carole Poirel, 2011. "La réactivité dans les relations interorganisationnelles en temps de crise : comment bien réagir à plusieurs pour surmonter les perturbations économiques ?," Post-Print hal-01773195, HAL.
    4. Dominique Bonet Fernandez & Odile Chanut & François Fulconis & Carole Poirel & Gilles Paché, 2014. "La réactivité des réseaux de franchise face aux chocs externes : proposition d’un modèle conceptuel," Working Papers 2014-163, Department of Research, Ipag Business School.
    5. Josef Windsperger, 2013. "The governance of franchising networks," Chapters,in: Handbook of Economic Organization, chapter 27 Edward Elgar Publishing.
    6. repec:eee:jouret:v:93:y:2017:i:3:p:350-368 is not listed on IDEAS
    7. Dominique Fernandez & Odile Chanut & François Fulconis & Gilles Paché & Carole Poirel & Carolina Serrano, 2010. "Capacité de réactivité des réseaux de franchise en contexte de crise. Rapport réalisé par pour le compte de la Fédération Française de la Franchise," Working Papers hal-01742083, HAL.
    8. Odile Chanut & Carole Poirel, 2014. "La réactivité dans les relations interorganisationnelles en temps de crise : comment bien réagir à plusieurs pour surmonter les perturbations économiques ?," Working Papers 2014-378, Department of Research, Ipag Business School.
    9. Watson, Anna & Dada, Olufunmilola (Lola) & Grünhagen, Marko & Wollan, Melody L., 2016. "When do franchisors select entrepreneurial franchisees? An organizational identity perspective," Journal of Business Research, Elsevier, vol. 69(12), pages 5934-5945.
    10. Odile Chanut & Carole Poirel, 2012. "Quand les organisations en réseau réagissent collectivement face à la crise," Post-Print hal-01767218, HAL.
    11. Francesco Baldi, 2016. "Multi-unit franchising strategies: a real options logic," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 43(2), pages 175-217, June.

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