Explaining Franchisors Tendency To Use Multi-Unit Franchising: Development Of A Theoretical Model

Abstract

In this theoretical paper, we give an overview of the development of literature on multi-unit franchising, discuss the theoretical and methodological deficits, and develop a model for empirical test. The main focus of existing franchising research has been on single unit franchising. Although several empirical studies were published on multi-unit franchising in the last decade, the research deficit primarily results from the lack of theoretical foundation of this ownership strategy in franchising networks. As an attempt to address this research gap, we develop an integrative model. The propositions explain the franchisor’s tendency to use multi-unit franchising in context of transaction cost theory (franchisee’s specific investments and market uncertainty), resource based view (financial resources scarcity), organizational capabilities view (local market know-how and system specific assets) and agency theory (behavioral uncertainty). We plan to empirically test the proposed model in the near future.