FRANCHISE BUSINESS VS STARTING A NEW BUSINESS

Franchise Business Vs Starting a New Business

Franchise Business Vs Starting a New Business

Introduction

Business format franchise systems represent a large and fast growing segment of the retail sector in developed economies like the USA and the UK (Mendelsohn, 1995). In these systems, a franchisor grants its franchisees the right to engage in a business developed by it using its brand name and trademark. Typically, the franchisor provides franchisees managerial assistance for setting up and running the franchise business and the franchisees agree to run the business according to conditions stipulated by the franchisor in the franchise contract (Coughlan et al., 2001). The franchisees, however, have some decision control over the marketing mix variables that affect the demand and profitability at the local level (Dant and Gundlach, 1999).

Franchise Business Vs Starting a New Business

A franchise system is not only an economic system, but also a social system in which the franchisor and franchisees have a close working relationship (Strutton et al., 1995; Etgar, 1979). Accordingly, the fundamental behavioral dimensions of power/dependence, communications, and conflict that characterize a social system (Stern and Reve, 1980) are also characteristic of a franchise system. Franchising scholars have studied the behavioral dimensions of the franchise relationship to determine how it can be coordinated effectively (Quinn and Doherty, 2000; Dant and Gundlach, 1999; Spinelli and Birley, 1996; Strutton et al., 1995).

This study contributes to the franchise relationship literature by examining the linkages between a franchisor's use of influence to coordinate its franchisees and conflict in the franchise relationship. Among other ways, a franchisor coordinates its franchisees by using the power it possesses over them. To exercise its power a channel member requires to direct some type of communication at its channel partner (Frazier and Summers, 1984). The different types of communication that channel members employ to try and change the behavior of their channel partners have been labeled influence strategies and categorized as recommendations, information exchange, promises, requests, threats, and legalistic pleas (Boyle et al., 1992; Frazier and Summers, 1986, 1984). Specifically, this study examines the linkages between a franchisor's use of different influence strategies and franchisee perceptions of conflict in the franchise relationship.

The remainder of the paper is organized as follows: we first review the relevant literature and then develop the research hypotheses. Next, we describe the research methodology and present the results. Finally, we discuss the contribution and managerial implications of the study, outline the limitations of the study, and suggest areas for future research.

The concepts of power and dependence are central concepts in channels theory (Dant and Gundlach, 1999). Power is defined as the ability of one party (A) to get another party (B) to do something it otherwise would not have done (Emerson, 1962). A party derives power over another party through the reward, coercive, expert, referent, and legitimate bases of power (French and Raven, 1959). Dependence is the inverse of power and is defined by Emerson (1962) as, “The dependence of actor A upon actor B is 1) ...