Franchising in food retailing :a marketing channels perspective

Abstract

This study deals with franchising as a form of distribution in the UK food retail environment. Franchise systems have increased their penetration of food retail markets since the mid 1980's and are frequently commented on by industry observers as being a form of distribution likely to expand aggressively. This study comments on the potential for further franchise development and looks at the association and relationship between franchisor Satisfaction and prevailing environmental conditions from a marketing channels perspective. Because of the paucity of literature, data, statistics and law on franchising, this study uses the marketing channels literature as its theoretical basis. This body of theory is principally used to derive and test hypotheses concerning franchisor satisfaction and the environment. The approach focused on interpreting the results of test for an association and relationship between satisfaction and the environment, to comment on the prospects for further franchising development, and to simultaneously contribute to the increased specification of marketing channels theory. The specific objectives of the study were i) To comment on franchising development and its prospects from an operational perspective by understanding the character and valence of franchisor satisfaction. ii). To develop the specification of marketing channels theory in two areas. First, to examine the content, domain and character of channel member satisfaction from a franchisor's perspective, by looking at the relative importance of behavioural, strategic and corporate image based dimensions. Previous marketing channels studies have only considered franchisee satisfaction in relation to franchisor power. Second, to examine whether the variable of franchisor satisfaction has any association or relationship with external concepts of the environment, these were capacity, concentration, stability, complexity and conflict. iii) To utilise and comment on the robustness of the political economy environmental model as a theoretical and methodological approach to empirical testing of organisational and environmental concepts. Two data gathering exercises were undertaken for the study. First, an extensive number of in-depth interviews were conducted with industry practitioners in franchise firms and trade associations, and second an 8 page questionnaire was mailed to the apparent universe of 45 food franchising firms. Franchisor satisfaction was measured using a seven point, bi polar rating scale and instrumentality importance weights. The environmental concepts were measured by seven point monopolar rating scales. Descriptive statistics, correlation analysis and the multivariate techniques of factor analysis and discriminant analysis are used to analyse and interpret the results. The study reveals that i) from an operational perspective, 90% of franchisors were satisfied with their systems performance at the time of the analysis. They scored the behavioural dimensions regarding interaction with franchisees as more important to their organisation achieving its goals and objectives than strategic or image based dimensions. Instrumentality importance weights were shown not to affect franchisor satisfaction scores. ii) From a theoretical point of view, franchisor satisfaction has a negative association with environmental complexity and a positive association with environmental capacity. There is empirical evidence that discriminant functions of independent environmental variables are able to predict franchisor membership of satisfied and non satisfied groups. Statistically significant results were obtained when the analysis was conducted at an individual environmental variable level, but not at the concept level. iii) The political economy model was shown to be a robust theoretical platform for model and measure development. The model provided an approach which in analysis discriminated between concepts and behaved in a nomological way. Confirmatory factor analysis of two environmental concepts. complexity and stability, extracted factors which were consistent with the sectors of the model which were used to develop the concept measures. The findings suggest that i) under conditions of low environmental complexity and high environmental capacity we should expect higher levels of franchisor satisfaction and expansion of franchising systems. ii) The concept of franchisor satisfaction is multi dimensional and ranks behavioural aspects of the franchise relationship ahead of strategic or image attributes in goal and objective achievement. The franchisor is concerned with higher level strategic issues compared to the franchisee. Under these circumstances, franchisor satisfaction was shown to be associated and related to external concepts and variables, which is an advancement in marketing channel theory. This is because it indicates that in considering organisational satisfaction, the researcher may be overlooking important attributes of the concept if only internal organisational phenomena are considered.