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Toward a relational perspective of franchising chains

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Abstract

In many professional and services industries, firms try to scale up their operations by reproducing practices in new locations through franchising arrangements, especially business format franchising. The classic but still prevailing explanations for franchising related phenomena, especially the initiative of franchising, the propensity to franchise, and the franchise performance, are mostly based on two orders of reasons (or a combination of them): franchising is either explained as a means to deal with resource scarcity or (and) as a mechanism for franchisor and franchisee to align incentives between themselves. However, empirical studies have shown limited support for both such claims, especially in face of the so called plural form, where proprietary and franchised units of the same franchisor co-exist. It may also be argued that the traditional literature on franchising has assumed a high level of homogeneity within and between franchising “networks,” possibly due to the perception that they tend to be “dominated” by a high level of standardization and replication of practices, both operative and relational. However, learning processes in such “networks” have recently been brought in as an attempt to capture other mechanisms that may underlie their operation and sustainability. This article seeks to explore a third perspective to look at franchising “networks,” by drawing from the literatures on capabilities and industrial networks. Seen from this perspective, business format franchising may involve more than the mere replication or exploitation of a recipe, especially if we take into consideration the partly idiosyncratic nature of both the relationships between actors and their capabilities and intentions. Within this perspective, variety preservation, and not only uniformity, may be recognized by participants as relevant for the performance of the franchise chain. In other words, variety may reflect the need for the refinement of the “package” throughout time, in more than one ways, together with the gradual development of the network and the learning experiences that take place in that context.

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Notes

  1. Langlois and Foss (1999, pp. 207–208) define capabilities as “team-embodied and partly tacit production and organizational knowledge that can be employed by team-members for a strategic purpose.” Dosi et al. (2000, pp. 207–208) describe them as “the know-how that enables organisations to perform (…) [their] activities.”

  2. As noted above, the plural form is the combination of company-owned and franchised units in the same network. The traditional theory has mainly focused on the option between franchising or vertically integrating a particular unit (e.g., Brickley and Dark 1987). More recent studies have tried to uncover the advantages of mixing both (e.g., Bradach 1998).

  3. For example, Luciano Benetton in Benetton (1990), especially in Chaps. 5 and 8, concerning the launching of franchised shops in Europe and the USA, respectively, is quite emphatic on the need for empathy and trust between both parties to a franchise agreement, deemed more important than formal contracts.

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Authors and Affiliations

  1. Departamento de Gestão, Faculdade de Economia, Universidade do Porto, Rua Dr. Roberto Frias, s/n, 4200-464, Porto, Portugal

    Luis M. De Castro

  2. Departamento de Gestão, ISEG – Instituto Superior de Economia e Gestão, UTL – Universidade Técnica de Lisboa, Rua Miguel Lupi, 20, 1200-781, Lisbon, Portugal

    João Mota

  3. Instituto Superior da Maia, CEL, UID 707-FCT, Av. Carlos Oliveira Campos, Castelo da Maia, 4475-690, S. Pedro de Avioso, Portugal

    Sandra Marnoto

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  1. Luis M. De Castro
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  2. João Mota
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  3. Sandra Marnoto
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Correspondence to Luis M. De Castro.

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De Castro, L.M., Mota, J. & Marnoto, S. Toward a relational perspective of franchising chains. Serv Bus 3, 15–30 (2009). https://doi.org/10.1007/s11628-008-0050-6

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