Franchisee Configuration and Its Implications on Franchise System Performance


Student thesis: Doctoral Thesis

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Award date13 Dec 2021


This dissertation examines franchise system performance from the perspective of franchise system configuration. Two interrelated essays explore the influence of franchisee configuration on franchisees and franchisors’ performance respectively.

The first essay proposes that franchisee proportion, which is defined as the proportion of franchised outlets to total outlets in franchise systems, influences franchisee failure. Drawing on social identity theory, this study argues that franchisee proportion is negatively related to franchisee identification, a franchisee’s perception of belongingness towards the franchisee group in their franchise system, which facilitates tacit knowledge sharing and use, which consequently reduces franchisee failure. Two experiments are designed to test this mechanism, which provide strong support for the hypotheses. Furthermore, the relationship between franchisee proportion and franchisee failure is moderated by intra- and inter- brand competition. Specifically, the effect is stronger when intra-brand competition (inter-brand competition) is high (low). Archival data of 3248 observations across 21 franchise systems over a ten-year window (2003-2012) from the fast-food industry was analysed and the results marginally supported the hypotheses.

The second essay proposes that the effect of ads spending on sales performance is bounded by franchisee proportion and franchisee dispersion. Specifically, drawing on the advertising literature and agency theory, this study proposes a positive baseline relationship between franchisors’ ads spending and sales performance, and argues that such a relationship is stronger when franchisee proportion is high, but dispersion is narrow. Archival data of 409 observations across 62 franchise systems over a ten-year window (2003-2012) across seven industries was analysed and the results supported the hypotheses.

Overall, this dissertation focuses on the role of franchise system configuration in terms of both proportion and geographical dispersion in driving franchise system performance, including franchisee failure and franchisor advertising effectiveness. Jointly, this dissertation contributes to the franchise literature by enriching the construct of franchisee configuration and examining franchise system performance through the lens of social identity theory. Managerial implications with respect to franchisee configuration are discussed.

    Research areas

  • Franchisee Configuration, Franchisee Identification, Franchisee Proportion, Franchisee Dispersion, Franchisee Failure, Ads Spending, Sales Performance