Academic journal article Journal of Business Economics and Management

Choosing a Travel Agency Franchise by Mean of a Global Composite Indicator: An Application in Spain

Academic journal article Journal of Business Economics and Management

Choosing a Travel Agency Franchise by Mean of a Global Composite Indicator: An Application in Spain

Article excerpt

Introduction

Franchising represents an important contributor towards the economy of many countries, since it plays a vital role in the development and growth of small businesses (Rahatullah, Raeside 2009). Franchising data from various parts of the world confirms that this business system constitutes a significant and increasingly popular aid to economic growth.

Franchising can be viewed as a particular type of partner selection (Altinay 2006; Clarkin, Swavely 2006; Jambulingam, Nevin 1999) or as a type of collaborative business with the existence of a profit-sharing problem.

Partner selection between the franchisor and the franchisee is critical to the long-term success of a franchise since franchising is a strategic partnership formed by two agents (Xiao et al. 2008), and hence this selection has remained the subject of research by researchers for many recent decades. The literature has primarily taken the viewpoint of franchisors (Clarkin, Swavely 2006; Jambulingam, Nevin 1999; Taylor 2000), but has largely failed to explore the perspective of the potential franchisee (Xiao et al. 2008). From the franchisee's point of view, great attention has been paid to certain areas, such as to the advantages of the franchise over other forms of commerce (Bates 1995; Dant 1995; Kaufmann 1999; Kaufmann, Stanworth 1995; Knight 1986), and the motives which lead the newcomer to go into franchising (Guilloux et al. 2004; Knight 1986; Peterson, Dant 1990; Ramirez-Hurtado, Quattrociocchi 2009; Kaufmann, Stanworth 1985; Williams 1999; Withane 1991). However, recent literature has barely analysed the question as to which franchise the potential franchisee should choose. An analysis of the literature reveals the need for new research into this question, which would seek a definition of those analytical tools adequate to help the franchisee make the most appropriate decision.

When selecting a franchisor, the potential franchisee must make a decision based on a vast amount of heterogeneous information of a multidimensional nature. The existing recommendations, given by franchise associations, consultants and manuals, are based on the selection of only one or a few variables. This could lead to a serious error, where not all the necessary information is simultaneously taken into account.

The object of this work is, first of all, to propose the definition of a system of indicators which includes all the relevant information that the potential franchisee should take into consideration when choosing a chain. Secondly, the work also aims to obtain a comprehensive composite indicator from a series of strategic dimensions in order to make it possible to establish a ranking of franchisors. In order to achieve the aforementioned goals, a multiplicative aggregation procedure based on the principle of loss of information is used, which takes the work of Zhou et al. (2006, 2010) as reference. Based on these studies, a composite indicator is constructed with a common weighting system with the lowest possible degree of subjectivity.

Given the heterogeneity of the existing franchising sectors, the focus of this study is on travel agencies which constitute a highly significant sector in franchising. The justification for using this sector is that it is extremely dynamic, and presents one of the most sustained and major expansions over recent years, thanks to the support it receives from professionals and entrepreneurs in the tourist trade (Franquiciashoy 2008). Without doubt, travel agencies represent one of the most significant sectors of the numerous franchising systems worldwide.

This work differs from previous research in two aspects. First, this paper highlights the complexity of the franchise-partner selection process from a franchisee's perspective. Secondly, this paper states a ranking of franchisors by means of the use of a composite indicator. From a practical point of view, this work eases the decision-making process for those entrepreneurs who wish to join a franchise chain. …

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