Academic journal article Journal of Business Economics and Management

Identifying the Franchisee Profiles Franchisors prefer/Fransize, Jos Naudotojai: Ispanijos Atvejis

Academic journal article Journal of Business Economics and Management

Identifying the Franchisee Profiles Franchisors prefer/Fransize, Jos Naudotojai: Ispanijos Atvejis

Article excerpt

1. Introduction

Effects of franchising in the world are extensive and important. Franchising helps as a business development and growth strategy in numerous contexts around the globe (Rahatullah, Raeside 2009). With sales accounting for over three percent of the United States GDP, business format franchise systems represent a significant segment of the retail sector of the U. S. economy (Lafontaine, Shaw 1999). In other countries, franchising has also experienced a rapid growth in the last decades (Tormo and Associates 2010). Franchising has been one of the most popular means of engaging in business in recent years (Peretiatko et al. 2009). The development of franchising in many countries is due to the expansion objective generated by many companies that have suitable positioning. Also, an initial domestic presence is viewed as crucial for successful international expansion (Quinn, Alexander 2002).

Franchising's longevity and success may be due to the fact that, organizationally, it represents a collaborative alliance (Hoffman, Preble 2003) that depends on the cooperation of two entrepreneurs (franchisor / franchisee) in order to be successful (Shane, Hoy 1996). Selecting the right partner is vital for the success of relationships (Leiser 2002; Sanders 2002; Rahatullah, Raeside 2009). This selection should not to be based solely on experience, intuition or chance. Robust studies are necessary to help franchisors with this topic (Ramirez 2007).

This paper evaluates franchisors preferences about franchisees. Specifically, the objective of this study is to identify the characteristics that form the franchisee profile preferred by the franchisors that operate in the Spanish market. Several hypotheses regarding this profile are contrasted. These hypotheses are related to the ideal franchisee, sector, financial level, number of franchisee units and age of franchisors. In order to answer all these questions conjoint analysis is used.

This work differs essentially from the majority of previous works in two aspects. First, in the study of the franchisee profile a specific set of defined a posteriori variables by experts in franchising is carried out. Secondly, the franchisee profile was obtained using a methodology that is rarely used in this field: conjoint analysis. The article proceeds with a brief review of the literature on selection of franchisees, after which we develop our hypothesis about the franchisee profiles. We then describe the data, methods and results, after which we offer our conclusions.

2. An overview of the literature

Franchising is a business format in which franchisors compete in at least two markets: (1) candidates to be franchisees, where they commercialize their concept of business, and (2) consumers, where they market their final products or services (Lopez, Ventura 2001). Franchising is a type of collaborative business with the existing of a profit sharing problem (Stein, Ginevicius 2010). Contrary to other types of retail channel arrangement, franchise networks represent a type of coordination that is much deeper than simple buyer-sellers relationships (Gauzente 2010). In this sense, cooperation is very important because it mainly affects the profitability of an enterprise (Ginevicius 2010).

Selection of franchisees is perceived as one of the most important operational problems for franchisors. An appropriate selection of franchisees may bring about remarkable results. On the contrary, a poor selection of them may cause problems in the net (Justis, Judd 1989). The future success of franchisors depends, to a great extent, on a systematic process of selecting good potential franchisees (Olm et al. 1988). Therefore franchising system can be more appropriate for some franchisees than for others (Jambulingam, Nevin 1999).

A degree of conflict prevails in any franchise system as the partners have different behaviours, approaches, and goals. …

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