Exploring Franchisor Franchisee Relationship: Building a Predictive Model of Franchisee Performance

Abstract

Although the selection of suitable franchisees has been identified as an important dimension of success of a Franchise Network, the same has been at the best a subjective process. This study is amongst the first studies, in the Indian context, which relates the selection criteria used by the franchisors in the selection of potential franchisees to their behavioural outcomes that the franchisors desire. It also provides direction to use prudent selection criteria as an input control strategy. This study has empirically demonstrated that well-chosen selection criteria can explain a significant component of variance in the franchisee behaviour. Moreover, the study also alludes that the franchisors should be able to identify and select franchisees which are more likely to perceive their relationship with the franchisors to be more cooperative and behave less opportunistically. In fact, the franchisees with favourable dispositions and desirable characteristics can lower the agency costs to the franchisors in the form of less safeguarding and monitoring costs.