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Franchisor strategy and firm performance: Making the most of strategic resource investments

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  • Gillis, William E.
  • Combs, James G.

Abstract

A key decision for entrepreneurs in many retail and service firms is whether, and how much, to use franchising. If the decision is made to franchise, the actor may assume one of two "identities" or tactics: (1) the "chain builder," who uses a blend of company and franchised outlets, and (2) the "turnkey," who sells business opportunities but does not own any outlets. To benefit from their chosen strategy, franchisors must put resources in place to support it. We argue that franchisors use the chain building strategy to strike a balance between standardization and innovation by building resources that foster trust and encourage knowledge sharing with franchisees. In contrast, for turnkeys, a valuable set of operational routines is the critical strategic resource. To better appreciate how franchisors choose between the chain builder and turnkey strategies, we gathered survey information from 263 franchisors. Via this data, and as described herein, we learned that franchisors perform better when they invest in resources that best support their selected strategy.

Suggested Citation

  • Gillis, William E. & Combs, James G., 2009. "Franchisor strategy and firm performance: Making the most of strategic resource investments," Business Horizons, Elsevier, vol. 52(6), pages 553-561, November.
    • Handle: RePEc:eee:bushor:v:52:y:2009:i:6:p:553-561
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    Cited by:

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    2. Evelien P. M. Croonen & Maryse J. Brand & Eelko K. R. E. Huizingh, 2016. "To be entrepreneurial, or not to be entrepreneurial? Explaining differences in franchisee entrepreneurial behavior within a franchise system," International Entrepreneurship and Management Journal, Springer, vol. 12(2), pages 531-553, June.
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    4. Melih Madanoglu, 2018. "Theories of economic and social exchange in entrepreneurial partnerships: an agenda for future research," International Entrepreneurship and Management Journal, Springer, vol. 14(3), pages 649-656, September.
    5. Odile Chanut & Carole Poirel, 2011. "La réactivité dans les relations interorganisationnelles en temps de crise : comment bien réagir à plusieurs pour surmonter les perturbations économiques ?," Post-Print hal-01773195, HAL.
    6. Dominique Bonet Fernandez & Odile Chanut & François Fulconis & Carole Poirel & Gilles Paché, 2014. "La réactivité des réseaux de franchise face aux chocs externes : proposition d’un modèle conceptuel," Working Papers 2014-163, Department of Research, Ipag Business School.
    7. Josef Windsperger, 2013. "The governance of franchising networks," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 27, Edward Elgar Publishing.
    8. Semrau, Thorsten & Biemann, Torsten, 2022. "When sergeants can outrank generals: Person-organization fit and the performance of franchisees as agents of their franchisor," Journal of Business Venturing, Elsevier, vol. 37(2).
    9. Hsu, Liwu & Kaufmann, Patrick & Srinivasan, Shuba, 2017. "How Do Franchise Ownership Structure and Strategic Investment Emphasis Influence Stock Returns and Risks?," Journal of Retailing, Elsevier, vol. 93(3), pages 350-368.
    10. Fabio Musso, 2010. "Innovation in Marketing Channels," Symphonya. Emerging Issues in Management, Niccolò Cusano University, issue 1 Marketi.
    11. Dominique Bonet Fernandez & Odile Chanut & François Fulconis & Gilles Paché & Carole Poirel & Carolina Serrano-Archimi, 2010. "Capacité de réactivité des réseaux de franchise en contexte de crise. Rapport réalisé par pour le compte de la Fédération Française de la Franchise," Working Papers hal-01742083, HAL.
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    13. Odile Chanut & Carole Poirel, 2014. "La réactivité dans les relations interorganisationnelles en temps de crise : comment bien réagir à plusieurs pour surmonter les perturbations économiques ?," Working Papers 2014-378, Department of Research, Ipag Business School.
    14. Vito Bobek & Johanna Eline Maier-Kros & Anita Macek & Tatjana Horvat, 2019. "International Franchising In The Fashion Industry - The Franchisee And Franchise Store Managers Perspective," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 28(1), pages 359-379, june.
    15. Watson, Anna & Dada, Olufunmilola (Lola) & Grünhagen, Marko & Wollan, Melody L., 2016. "When do franchisors select entrepreneurial franchisees? An organizational identity perspective," Journal of Business Research, Elsevier, vol. 69(12), pages 5934-5945.
    16. Roland E. Kidwell & Arne Nygaard, 2011. "A Strategic Deviance Perspective on the Franchise Form of Organizing," Entrepreneurship Theory and Practice, , vol. 35(3), pages 467-482, May.
    17. Gillis, William E. & Combs, James G. & Yin, Xiaoli, 2020. "Franchise management capabilities and franchisor performance under alternative franchise ownership strategies," Journal of Business Venturing, Elsevier, vol. 35(1).
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    20. Eunkyung Lee & Ji-Hern Kim & Chang Seop Rhee, 2021. "Effects of Marketing Decisions on Brand Equity and Franchise Performance," Sustainability, MDPI, vol. 13(6), pages 1-15, March.

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