IDEAS home Printed from https://ideas.repec.org/a/gam/jadmsc/v13y2023i9p194-d1224808.html
   My bibliography  Save this article

Franchisors’ Strategic Pricing Approaches for Franchise Fee Decisions and the Moderating Role of the Competitive Condition: Evidence from the Korean Franchising Market

Author

Listed:
  • Kyung-A Sun

    (Department of Tourism Management, Gachon University, Seongnam 13120, Republic of Korea)

  • Joonho Moon

    (Department of Tourism Administration, Kangwon National University, Chuncheon 24341, Republic of Korea)

Abstract

As franchising provides several benefits to both corporations and small business owners, a growing number of contracts have been written through which corporations offer the right to use their brand name and business model, and small business owners pay fees for accepting the offers. In this franchisor–franchisee market, the franchise fee plays a pricing role in the exchange between two parties. In this context, we investigate the influence of franchisors’ strategic pricing approaches (i.e., cost- and value-based approaches) on franchise fee decisions. Furthermore, by examining the moderating effect of the competitive condition on the relationships between pricing approaches and franchise fees, we uncover franchisors’ pricing practices in greater detail. The results show that both pricing approaches have significant influences on franchise fee decisions, and the competitive condition moderates the relationship between the value-based approach and franchise fees but does not moderate the relationship between the cost-based approach and franchise fees. The findings contribute to the franchising and pricing literature and to industry practitioners.

Suggested Citation

  • Kyung-A Sun & Joonho Moon, 2023. "Franchisors’ Strategic Pricing Approaches for Franchise Fee Decisions and the Moderating Role of the Competitive Condition: Evidence from the Korean Franchising Market," Administrative Sciences, MDPI, vol. 13(9), pages 1-14, August.
    • Handle: RePEc:gam:jadmsc:v:13:y:2023:i:9:p:194-:d:1224808
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2076-3387/13/9/194/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2076-3387/13/9/194/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. K. Sudhir, 2001. "Competitive Pricing Behavior in the Auto Market: A Structural Analysis," Marketing Science, INFORMS, vol. 20(1), pages 42-60, January.
    2. Lee, Jinkook & Seo, Myoungshik, 2022. "Franchise Market, Contract Conditions, and Welfare Implications: Evidence from Korea," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 44(1), pages 49-75.
    3. Shantanu Dutta & Mark J. Zbaracki & Mark Bergen, 2003. "Pricing process as a capability: a resource‐based perspective," Strategic Management Journal, Wiley Blackwell, vol. 24(7), pages 615-630, July.
    4. Juliet Cox & Colin Mason, 2007. "Standardisation versus Adaptation: Geographical Pressures to Deviate from Franchise Formats," The Service Industries Journal, Taylor & Francis Journals, vol. 27(8), pages 1053-1072, December.
    5. Raja, Jawwad Z. & Frandsen, Thomas & Kowalkowski, Christian & Jarmatz, Martin, 2020. "Learning to discover value: Value-based pricing and selling capabilities for services and solutions," Journal of Business Research, Elsevier, vol. 114(C), pages 142-159.
    6. Reinaldo Guerreiro & Carlos Alberto Pereira & Fábio Frezatti, 2006. "Evaluating management accounting change according to the institutional theory approach," Journal of Accounting & Organizational Change, Emerald Group Publishing Limited, vol. 2(3), pages 196-228, September.
    7. Peter M. Noble & Thomas S. Gruca, 1999. "Industrial Pricing: Theory and Managerial Practice," Marketing Science, INFORMS, vol. 18(3), pages 435-454.
    8. Peter M. Noble & Thomas S. Gruca, 1999. "Response to the Comments on “Industrial Pricing: Theory and Managerial Practice”," Marketing Science, INFORMS, vol. 18(3), pages 458-459.
    9. K. Sudhir, 2001. "Competitive Pricing Behavior in the US Auto Market: A Structural Analysis," Yale School of Management Working Papers ysm228, Yale School of Management.
    10. Karel Cool & Ingemar Dierickx, 1993. "Abstract," Strategic Management Journal, Wiley Blackwell, vol. 14(1), pages 47-59, January.
    11. Hinterhuber, Andreas, 2016. "The six pricing myths that kill profits," Business Horizons, Elsevier, vol. 59(1), pages 71-83.
    12. Masayoshi Maruyama & Yu Yamashita, 2012. "Franchise Fees and Royalties: Theory and Empirical Results," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(3), pages 167-189, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Feng & Du, Timon C. & Wei, Ying, 2020. "Enhancing supply chain decisions with consumers’ behavioral factors: An illustration of decoy effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).
    2. Joshua A. Gerlick & Stephan M. Liozu, 2020. "Ethical and legal considerations of artificial intelligence and algorithmic decision-making in personalized pricing," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(2), pages 85-98, April.
    3. Liozu, Stephan & Hinterhuber, Andreas, 2022. "Pricing as a driver of profitable growth: An agenda for CEOs and senior executives," Business Horizons, Elsevier, vol. 65(4), pages 457-467.
    4. Tessa Christina Flatten & Andreas Engelen & Timo Möller & Malte Brettel, 2015. "How Entrepreneurial Firms Profit from Pricing Capabilities: An Examination of Technology–Based Ventures," Entrepreneurship Theory and Practice, , vol. 39(5), pages 1111-1136, September.
    5. Juan Bu & Eric Yanfei Zhao & Krista J. Li & Joanna Mingxuan Li, 2022. "Multilevel optimal distinctiveness: Examining the impact of within‐ and between‐organization distinctiveness of product design on market performance," Strategic Management Journal, Wiley Blackwell, vol. 43(9), pages 1793-1822, September.
    6. Murthy, D.N.P. & Hagmark, P.-E. & Virtanen, S., 2009. "Product variety and reliability," Reliability Engineering and System Safety, Elsevier, vol. 94(10), pages 1601-1608.
    7. A. Yeşim Orhun & Sriram Venkataraman & Pradeep K. Chintagunta, 2016. "Impact of Competition on Product Decisions: Movie Choices of Exhibitors," Marketing Science, INFORMS, vol. 35(1), pages 73-92, January.
    8. Sergio Meza & K. Sudhir, 2006. "Pass-through timing," Quantitative Marketing and Economics (QME), Springer, vol. 4(4), pages 351-382, December.
    9. Oseni, Musiliu O. & Pollitt, Michael G., 2017. "The prospects for smart energy prices: Observations from 50 years of residential pricing for fixed line telecoms and electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 150-160.
    10. Pasquale Schiraldi, 2006. "Second-Hand Markets and Collusion by Manufacturers of Semidurable Goods," Boston University - Department of Economics - Working Papers Series WP2006-028, Boston University - Department of Economics.
    11. Xinbo Hu & Paul J. Zak, 2022. "A Procedure to Set Prices and Select Inventory in Thinly Traded Markets Using Data from eBay," JRFM, MDPI, vol. 15(7), pages 1-8, July.
    12. Srinivas, Sharan & Ramachandiran, Surya & Rajendran, Suchithra, 2022. "Autonomous robot-driven deliveries: A review of recent developments and future directions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    13. Verboven, Frank & Bourreau, Marc & Sun, Yutec, 2018. "Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market," CEPR Discussion Papers 12866, C.E.P.R. Discussion Papers.
    14. Claude, DASPREMONT & Rodolphe, DOS SANTOS FERREIRA & Jacques, THEPOT, 2007. "Hawks and doves in segmented markets : a formal approach to competitive aggressiveness," Discussion Papers (ECON - Département des Sciences Economiques) 2007039, Université catholique de Louvain, Département des Sciences Economiques.
    15. J. B. G. Frenk & Canan Pehlivan & Semih O. Sezer, 2019. "Order and exit decisions under non-increasing price curves for products with short life cycles," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 90(3), pages 365-397, December.
    16. Ting Zhu & Hongju Liu & Pradeep Chintagunta, 2015. "Wireless Carriers’ Exclusive Handset Arrangements: an Empirical Look at the iPhone," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 2(2), pages 177-190, June.
    17. Chatterjee, Sheshadri & Chaudhuri, Ranjan & Vrontis, Demetris, 2023. "Masstige marketing: An empirical study of consumer perception and product attributes with moderating role of status, emotion, and pride," Journal of Business Research, Elsevier, vol. 155(PA).
    18. Markus Christen, 2005. "Research Note---Cost Uncertainty Is Bliss: The Effect of Competition on the Acquisition of Cost Information for Pricing New Products," Management Science, INFORMS, vol. 51(4), pages 668-676, April.
    19. Abhik Roy & Jagmohan Raju, 2011. "The influence of demand factors on dynamic competitive pricing strategy: An empirical study," Marketing Letters, Springer, vol. 22(3), pages 259-281, September.
    20. Wallusch Jacek, 2023. "Pricing and data science: The tale of two accidentally parallel transitions," Economics and Business Review, Sciendo, vol. 9(2), pages 115-132, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jadmsc:v:13:y:2023:i:9:p:194-:d:1224808. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.