The Commitment-trust theory as a franchising relationship
foundation: Case study evidence from Australia and New
Zealand
Author
Grace, Anthony, Wright, Owen, Frazer, Lorelle
Published
2008
Conference Title
Proceedings of the 22nd Annual International Society of Franchising Conference
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The Commitment-trust Theory as a Franchising Relationship
Foundation: Case Study Evidence from Australia and New Zealand
Anthony Grace
Senior Research Assistant in Marketing
Griffith Business School
Griffith University
Brisbane, Australia, 4111
Telephone: +61 7 3382 1404; Fax: +61 7 3382 1404
Email: A.Grace@griffith.edu.au
Owen Wright
Lecturer in Marketing
Griffith Business School
Griffith University
Brisbane, Australia, 4111
Telephone: +61 7 3735 3557; Fax: +61 7 3735 7126
Email: O.Wright@griffith.edu.au
Lorelle Frazer
Professor in Marketing
Griffith Business School
Griffith University
Brisbane, Australia, 4111
Telephone: +61 7 3382 1179; Fax: +61 7 3382 1981
Email: L.Frazer@griffith.edu.au
Presented at the 22nd Annual
International Society of Franchising Conference
Palais du Grand Large
Saint-Malo, France
June 20-21, 2008
Abstract
This paper provides an in-depth qualitative investigation into the nature of the
franchisee/franchisor relationship. The view that stable franchising relationships are
formulated with the presence of trust and commitment is further enhanced and developed
upon Morgan & Hunt’s (1994) foundational commitment-trust theory. Primary research
in the form of face-to-face interviews with franchisees from four franchise systems was
conducted using within and across case analysis. This exploratory research attempts to
enhance franchising knowledge by shifting traditional transactional marketing (TM)
focus toward relationship marketing (RM). The emphasis on relationships as opposed to
transactional exchanges within franchising not only extends existing franchising literature
but provides practical insight into the importance of stable personal relationships between
franchisors and franchisees.
Keywords: Trust, commitment, relationship marketing, exploratory, qualitative.
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The Commitment-trust theory as a franchising relationship foundation:
Case study evidence from Australia and New Zealand
1. Introduction
There is a need in today’s globally competitive franchising environment to identify
strategies that promote franchising success; one of these strategies is the identification of
the need for the enhancement of commitment and trust in the relationship between the
franchisee and the franchisor. Australia currently has over 900 business format franchise
systems providing for an estimated 56 200 business format franchised units operating
throughout Australia (Frazer, Weaven and Wright, 2006). Of these 900 franchise systems,
twenty seven percent are currently franchising overseas with occupation in New Zealand
being the most popular destination (76%) because of its similar geographical, cultural and
political climates (Frazer, Weaven and Wright, 2006). These statistics show the
magnitude of franchising in the Australian and New Zealand region. As the success of
any franchise system is largely influenced by the relationship between the franchisee and
the franchisor (Nathan, 2000), it is important to identify contemporary issues and extend
research that relates to the franchising relationship. It is anticipated that relational
dynamics within international retail franchising systems identified in this research could
provide insight for practitioners and academics alike.
After conducting twenty face-to-face interviews with franchisees across four international
retail franchise systems, significant relational dynamics within franchising relationship
were identified and explored. A dominant question in the interviews was whether
franchisees felt that the relationship with their franchisor was built on the foundations of
trust and commitment. Franchising relationship issues were then further explored by
asking probing questions structured around an interview protocol. This qualitative
evidence was gathered and analysed resulting in the development of a conceptual model
(see figure 1) significant in assisting practitioners as well as contributing to the academic
franchising literature as it provides new insights into franchising relationship stability.
There has been very little research that examines trust and commitment contextualized in
3
the franchising relationship. However, this relationship orientation is evident in existing
marketing research of which the next section further examines.
2. Background
Borne out of economics, marketing became a distinct discipline at the start of the 20th
century where a primary focus was placed on transactions and exchanges in the business
environment (Sheth and Parvatiyar, 1995). This transactional marketing (TM) approach
was largely influenced by McCarthy’s (1960) 4P model whereby transactions with
customers were achieved by actively manipulating the 4Ps (product, price, place and
promotion). This short-term business focus in ‘doing the deal’ and ‘disappearing’
(Pathmarajah, 1993) provides for problems and limitations associated with this type of
business exchange; for example, unnecessary conflict, lawsuits, and poor reflection on
brand image. There has been a call in business managerial thinking for a paradigm shift
from TM toward relationship marketing (Baker, Buttery, and Richter-Buttery, 1998). The
emphasis on relationships as opposed to transactional exchanges redefines the domain of
marketing (Sheth, Gardner, and Garett, 1988).
There has been extensive academic research that contextualizes franchising within the
TM paradigm; largely through the development of the resource constraints theory (Caves
& Murphy, 1976; Norton, 1988; Ozanne & Hunt, 1971; and Rubin, 1978). Oxenfeldt and
Kelly (1969) developed the resource constraints model which proposes the idea that
organisations will utilize external resources, financial and human capital – provided by
the franchisees so as to increase the rate of business expansion. This theory falls within
the TM parameters as very little attention is given toward the relationships involved in
the process. Thus, there has been very little research that explores the franchising
relationship within the relationship marketing (RM) context (Doherty and Alexander,
2004).
Therefore, in order to fill a gap in the existing franchising literature, this paper explores
the relationship between the franchisee and the franchisor conceptualised within the
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relationship marketing paradigm. The franchising relationship has been classified as an
agency relationship with Lafontaine and Slade (1997) highlighting agency theory as a
motivation for franchising. Simply put, an agency relationship involves one party (the
franchisor) delegating work to another (the franchisee) who carries out that work
(Eisenhardt, 1989a). There is a significant focus within the agency theory literature on the
formal control of this relationship (Fama and Jensen, 1983; Shane, 1996; and Stanworth,
Price, Purdy, Zafiris, and Gandolfo, 1996). A contractual agreement between the
franchisee and the franchisor is a common formal control method utilized to achieve goal
congruence as well as monitor franchisees (Eisenhardt, 1989a; Leblebisi and Shalley,
1996).
Pizanti and Lerner (2003) identify this formal control as an aspect necessary for firm
growth and survival, however, the goal of this paper is to extend traditional agency
theoretical explanations of franchising toward a more relational approach. The use of
agency theory in examining the franchisee-franchisor relationship is limited as it ignores
relational complexity within the franchise system (Pizanti and Lerner, 2003). The RM
approach views the building and development of relationships as an important
cornerstone within the business environment (Baker, Buttery, and Richter-Buttery, 1998).
Essentially, this paper shifts the focus from the 4P’s of franchising as units of analysis
toward “people, organizations and the social processes that bind actors together in
ongoing relationships” (Webster 1992: p10). As Yau, McFetridge, Chow, Lee, Sin, and
Tse (2000) recognise, relationship marketing is formalised through the development of
social interaction by enhancing trust and commitment; a process deemed meaningless
without trust and commitment that “cement(s) the relationship” (Doherty and Alexander,
2004: p1229).
Morgan and Hunt (1994) theorize the presence of commitment and trust within
relationships as being integral to promoting efficiency, productivity and effectiveness.
Commitment is defined in the literature as the continued need to preserve a relationship
(Moorman, Zaltman, and Deshpande, 1992) being developed over time if partners
perceive value in the relationship benefits (Sarkar, Cavusgil, and Evirgen, 1997).
5
Essentially, a franchisee is committed to their franchisor throughout their relationship; a
relationship built on the foundation of mutual commitment and trust (Berry and
Parasuraman, 1991). Simply put, trust occurs when one person can rely on the word and
actions of another (Rotter, 1967) and has been suggested as the relationship mechanism
that facilitates cooperation and generates relationship commitment (Morgan and Hunt,
1994). Trust is part of the chemistry that allows relationships to be fruitful (Inkpen and
Birkenshaw, 1994) as well as instil the relationship with value (Madhok, 1995). In order
to trust one another, actors in a relationship (i.e. franchisees and franchisors) must feel
comfortable with each other (Rodriguez and Wilson, 2002) as trust involves elements of
risk and doubt (Currall and Judge, 1995).
Thus this paper contributes to existing marketing literature by further exploring concepts
that enhance or detract from the development of commitment and trust within franchising
relationships (i.e. organisational culture, attitude, passion, respect etc.). Qualitative
research is utilized to uncover this topic buy gaining rich and meaningful data from case
subjects as described in the following section.
3. Research Methodology
Data was gathered through the utilization of an exploratory qualitative multiple case
study (Yin, 2003) within the interpretive research paradigm (Eisenhardt, 1989b; and
Parkhe, 1993). Four major Australian franchise systems (table 1) were analysed by
conducting confidential, face-to-face interviews with franchisees in each system (table 2).
The choice of this methodology was deemed appropriate due to the need to further
explore and develop the franchising relationship in the context of RM, with the need for
commitment and trust as a relational foundation. As identified in the previous section,
this phenomenon has received little attention in the academic literature, particularly from
the perspective of franchisees. It was expected that the inductive process of data analysis
would provide a greater and deeper understanding of franchising relationship dynamics.
6
The interpretive researchers’ goal is to further understand meaningful social action - that
is, to discover how people construct meaning in natural settings (Neuman, 2006). It is
assumed that franchisee perceptions can to some extent represent the ‘real world’ (Hunt,
1990). These perceptions were digitally recorded during face-to-face interviews whereby
probing questions were asked (Carson, Gilmore, Perry, and Gronhaug, 2001) which were
developed around the themes of relational trust and commitment. The average interview
lasted 20 minutes of which the conversation was transcribed to allow for reliable data
analysis (LeCompte and Goetz, 1982). NVivo software allowed for the creation of a case
study database with which to hold and analyse the interview transcripts which further
established the reliability of this research (Lincoln and Guba, 1985). Data was analysed
using analytical coding whereby dominant themes were coded into nodes. The nodes
were then sorted into more specific categories, from which a more structured
understanding of dominant themes being developed to aid in the creation of a conceptual
model (figure 1).
4. Data
Data was gathered by conducting face-to-face interviews with twenty franchisees across
two countries (Australia and NZ) within four franchise systems. The four systems were
purposively selected primarily based on having: (1) both Australian and NZ operations
and (2), conducting business operations within the food retailing sector. Five franchisees
from each system in both the Australian and New Zealand operations were interviewed
and coded appropriately – Franchisee A1 and A2 were franchisees in Franchise A’s New
Zealand operations. Franchisees A3, A4 and A5 all operated Franchise A systems in
Australia. Further details of the franchisees interviewed are displayed in Table 2. Data
gathered from these systems in no way promote a generalisation of the entire Australian
and NZ food retailing franchising sector. Instead, this case based research allows for the
identification of common themes among and across cases making it possible to enhance
the “analytical generalisation” (Yin, 2003: p32) of contemporary franchising issues.
Table 1 describes the four franchise systems selected for the research.
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Table 1: Description of franchise systems
Franchise A
This franchise was founded in 1989 in Australia. The two founders
still have an active part in the leadership of the now international
company. This franchise first expanded internationally into New
Zealand through a master franchising agreement in 2005. It now
boasts an international portfolio of over 170 stores across Australia
and New Zealand.
Franchise B
This franchise is a well-established business that has seen huge
growth since its inception in 1975. During the 1980s as the
franchise expanded through Australia it changed its brand to adopt
a stronger Australian identity. A public offering in the 1990s saw
the franchise chain grow from 51 stores to currently having over
300 stores across Australia and NZ.
Franchise C
The first franchised store in this system commenced operation in
1991. Three years later this franchise issued a master franchise
license to cover the NZ market. The arrangement was severed in
1999 resulting in the dissolution of the NZ master franchise rights
and a direct franchisee/franchisor relationship employed. There are
currently over 45 stores in Australia and over 20 stores throughout
NZ.
Franchise D
Originating in Canada, the concept was refined by a local
Australian company, opening the first store in the QLD region in
8
1989. Five years later saw the expansion into the NZ market under
the same local Australian company which today has control of over
150 Australian stores and 36 NZ outlets.
Source: Synthesised from company websites
Table 2: Description of Interviewees
Country
Code Gender
Unit in same Number of Time in current
city as head units owned franchise
office
New Zealand A1
Female
No
1
1 year
A2
Male
No
1
Less than 1 month
B1
Male
No
1
9 years
B2
Male
No
1
8 years
B3
Male
No
1
8 years
C1
Male
No
1
3 years
C2
Male
No
1
Less than 1 month
C3
Female
No
1
1 year
D1
Female
No
1
2.5 years
D2
Male
No
3
8.5 years
Australia
A3
A4
A5
B4
Male
Female
Male
Male
Yes
Yes
Yes
Yes
3
1
2
1
5 years
Less than 1 month
6 years
Less than 1 month
9
B5
C4
C5
D3
D4
D5
Male
Female
Male
Male
Female
Male
Yes
No
No
No
No
No
1
1
1
3
1
1
2 years
0.5 years
1.5 years
8 years
3 years
5 years
Source: Developed from this research
5. Results and discussion
5.1 The commitment-trust theory
The results indicate support for Morgan and Hunt’s (1994) commitment-trust theoretical
propositions with all of the franchisees interviewed identifying the need for trust and
commitment with their franchisor. However, not all had the luxury of these social
elements within their relationship; franchisee C3 and D4 stated that they did not trust or
feel committed in any way to their franchisor. These two franchisees were considering
leaving the franchise system due to this lack of personal connection with their franchisor,
which directly influenced the stability of their franchising arrangement. Franchisee D4
stated “There probably would be an element of trust if there was a relationship, but there
is no relationship.” The lack of trust made it difficult for this particular franchisee to
commit to her relationship. This particular case is interesting because at the start of the
relationship the franchisee did trust her franchisor, even though it may have been “too
much at the beginning” (D4). However, this trust was slowly depleted through
opportunistic actions by the franchisor giving franchisee D4 the perception that “they
don’t care” (D4).
The very nature of franchising depicts the need for commitment as noted by franchisee
C2 who stated that, “you’ve got to be fully committed and your other half has to be fully
committed”. As the franchisee/franchisor relationship can be construed as a business-tobusiness relationship, there is the need for formal commitment usually in the form of
franchise agreements. Both parties have financial and legal obligations whereby all the
10
franchisees interviewed had the necessary contracts in place which ensured legal and
financial commitment to the franchise.
An interesting finding that emerged from the interviews was that under the surface of the
formal contract, it was found necessary to be committed on a personal level; similar to
that which is found in a marriage situation. The level of commitment varied across the
interviews with some of the more mature franchisees (B1, B2, B3, D2, and D3) showing
less of an interest in staying fully committed whereas new franchisees (A2, A4, B4, C2,
and C4) had a committed mindset. One franchisee found it essential that when he needed
help it was important to know that “they are (franchisor) going to be there for me” (A5).
Both parties have legal and financial commitments however after dissecting this aspect of
the franchising relationship it was found that the majority of franchisees required
commitment on a personal level. It was found this commitment on a personal level
enhanced the professional nature of the franchising arrangement. One franchisee
mentioned a situation that helped him commit to the franchise:
“The previous manager was good at taking it past the manager thing,
like when I went up to Auckland he took me out in the boat for the day,
we went sailing, we had a few drinks, so it was more a comradely,
matey thing.”(B2)
Thus, franchise systems that were able to instil a friendly, positive organisational culture
within the franchise system made it easier for franchisees to trust and commit to their
franchisor.
5.2 Organisational Culture
As depicted in figure 1, the organisational culture can have either a positive or negative
influence on trust in the franchising relationship. As “an organisation (franchise) is only
people at the end of the day” (B1) the nature of both the franchisor and the franchisee
were identified as largely influencing the overall relationship stability.
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Nature of the franchisor. This section focuses on franchisee perceptions of the nature of
their franchisor. Each franchisee had a unique perception of their franchisee. Franchisee
D3 raised an interesting point in that,
“people have different views and often it depends on whether the
business is successful or not as to what their view of the franchisor
is.” (D3)
This sentiment was a dominant theme throughout the findings whereby those suffering in
competitive business environment were generally negative toward their franchisor, as
they tended to blame the franchisor for their misfortune. However it is still necessary in
the franchising relationship for the franchisor “to deliver…the personality behind it”
(A1). Thus, each case is analysed with the relevant franchisee perceptions of the nature of
their franchisor identified below.
Franchise A received a strong positive perception of their behaviour from all franchisees.
Out of all four franchise systems, this franchise seemed to have the most positive
perception. When asked about the nature of her franchisor, franchisee A1 stated that,
“they always talk to you and address you very nicely, and their
attitude is ‘it’s not a problem’.” (A1)
She also perceived her franchisor as having a focus “beyond just money” (A1) whereby
the franchisor’s nature was,
“about seeing people succeed and not just the money behind it, and
that’s where I see this one (as) different” (A1).
The franchisors in franchise A were also “very professional, very organised, (and) very
open” (A4) whereby if a franchisee “knocked on their door…they’ve always been there
for (them)” (A5). It was also important to franchisees that the franchisor did possess a
level of industry experience which helps promote a positive perception of the franchisor
knowing that they are not “coming in blind” (A1). From the franchise A interviews it is
clear to identify a recurring positive perception toward the nature of the franchisor.
Franchise B had a less positive perception than those identified in Franchise A due to the
majority of franchisees within this system having had negative experiences that tainted
12
their perception of the nature of their franchisor. In the initial stages of the relationship,
franchisee B5 and his partner found the franchisor to be “very intimidating … (and)…very
bullying”.
Franchise C had franchisees with mixed opinions whereby one franchisee (C5) had a
negative first impression with his franchisor, because of an incident during one of the
first training sessions. The franchisee voiced his disdain for the franchisor’s (a founding
member) behaviour, which occurred at the start of a training day whereby the group of
franchisees was ignored by this franchisor who was sitting on the other side of the room.
This franchisor chose not to introduce or welcome any of the new franchisees. This lack
of emotional involvement on behalf of the franchisor resulted in a negative perception of
their nature as perceived by the respective franchisee.
Franchise D received positive ratings from both NZ franchisees (D1 & D2) and a mature
Australian franchisee (D3). However, the two remaining franchisees interviewed (D4 and
D5) both had very negative perceptions of the nature of their franchisor based on similar
experiences experienced by franchisee C5 whereby the franchisor conducted them selves
in such a manner that was off-putting toward the franchisees. These actions caused
negative perceptions, which are usually difficult to reverse whereby franchisee D5 states
that,
“ever since then, that guy (the franchisor) I’ve had absolutely no time
for. I’ve never missed an opportunity to slag him off; I never miss an
opportunity to tell that story to whomever.”
That story was essentially an instance where the franchisor abused his power and position
by embarrassing a member of the franchisees staff based on a trivial matter.
Nature of the franchisee. It is clear that the franchisees interviewed have “different
personalities and people have different ways of doing things” (C3) and every franchisee
had a different perception on how they conducted themselves in the franchising
environment. As conceptualised in the franchising relational dynamics model (figure 1),
13
four elements were found to influence the nature of the franchisee: attitude, passion,
dependence, and respect.
Franchisee A5’s attitude was that of always trying to “stay positive” whereas franchisee
B5 “tend(ed) to abide by the rules (and) play the game”. A dominant theme found
throughout the interviews was the franchisees ability to choose their attitude toward the
relationship with their franchisor,
“I think it helps to like them, I think you make yourself like people if
you’re going to shovel out some money don’t you, because you want it
to work.” (B2)
Franchisees that were “willing to be open-minded” (D1) in any situation provided
opportunities to resolve conflicts within the relationship that will always go “through ups
and downs” (D2) and can sometimes be a “love/hate relationship” (D3). The majority of
franchisees had a positive attitude.
Passion was identified as a construct associated with the nature of the franchisee that
contributed toward a stable franchising relationship. A passionate franchisee was usually
more willing to focus on the bigger picture as opposed to the small issues that would
always arise in a relationship. When asked about passion, franchisee B5 said,
“Yeah I’m a baker by trade so probably baking’s a passion for me, rather
than just a lifestyle. Like anyone can buy this franchise, do a ten week
course and then they’re a baker. But for me it’s a passion. A lot of people
at the top have been there for 30 years so their passion is bread as well so
I feel that anything we do impacts the business as well.” (B5)
Passion from both the franchisee and the franchisor had a positive influence on
relationship stability in that it provided that extra motivation in which to carry out the
daily grind of running a labour-intensive business.
A multiple-unit franchisee expressed his opinion on this matter whereby his passion not
only influenced the relationship with his franchisor but also the relationship with his own
staff, something essential for successful business operations:
“I’ve been doing this for 5…years and I do it with passion still and I have
80 people who are extremely passionate about it as well and they follow
my lead” (A3).
14
It was found that each franchisee varied in the level of dependence placed on their
franchisor, an element associated with the nature of each individual franchisee. That is,
one franchisee stated they “don’t actually like depending on people” (C3). This particular
franchisee also had very little trust and commitment within her franchising relationship.
Another independent franchisee said,
“I don’t have any problems with anyone, I say what I think, they can
say what they think to me you know, everyone’s entitled to their
opinion.” (C4)
It was also clear in the findings that not only did every franchisee possess different levels
of dependence on their franchisee but that the franchisees new to the system (A2, A4, B4,
C2 and C4) were generally more dependant on the franchisor than more mature
franchisees (B1, B2, B3, D2, and D3). However, regardless of the time spent in the
franchise, an important aspect necessary in the franchising relationship was franchisees
being “strong enough to advocate (themselves)” (D2) so as to avoid being “dictate(d)”
(C2 and C3) to by the franchisor. However, one franchisor had the mindset of believing
“that the franchisor has the right advice for me and whatever advice they give me I just
do it.” (A5). This statement provides for a positive linkage between dependence and trust
whereby a dependant franchisee usually has a high level of trust within the relationship.
Similar to that of a marriage, it was found that respect significantly influenced the
relationship stability. Franchise A1 realised that respect in her relationship improved her
performance,
“I think you do better for them because you want to do well for them
as much as you because you’ve got that respect.” (A1)
Franchisee D4 had a completely opposite perspective, as there was no respect in her
relationship. She did not want to do well for her franchisor based on the franchisor’s
prior behaviour. Respect often has to be earned, in that the actions of A1’s franchisor
allowed the fostering of mutual respect. However, where there was none or very little
respect (D4, D5), there were generally negative perceptions toward the franchisor.
5.3 Goal Congruence
15
As depicted in agency relationship situations, a direct result of having two parties is that
each “human will have its own agenda” (C2). A selection of franchisees identified their
personal agenda as being naturally inline with their franchisor (A2, A3, A5, B1, B2, and
C4). The majority of the rest of the franchisees (A1, A4, B4, B5, C1, C2, C5, D1, D2,
and D3) had to mould their goals around that of their franchisor so as to achieve goal
congruence. Even though this adjustment did not compromise any ethical or personal
values, from a business point-of-view franchisees realised the necessity to “read off the
same page” (B1) as their franchisor.
It was evident throughout the interviews that the franchisees where aware of the
franchisor’s vision and how that affected the relationship. Franchisee A3’s vision and the
vehicle the franchisor was offering matched perfectly. Franchisee A4 “aligned” her
vision with that of the franchisors.
It is evident that the respondents involved are aware of having shared values and goals in
common, but there is that element of self interest which will always be present and can
give rise to opportunistic behaviour. Although none of the respondents were willing to
announce any personal opportunistic acts, they did identify instances whereby they felt
other franchisees had acted opportunistically. These situations included serving halfportions of food, buying franchisor supplied products from an alternative cheaper
supplier, conducting local advertising campaigns, and making additions to the
standardised menu. These were identified as acts of opportunism as it involved doing
“something outside the acceptable norms of… (the) franchise system.” (A3). The point
emphasised by franchisee A4 was that franchisees were generally allowed to adapt the
standards, “you (just) run it past them (the franchisor) and nine times out of ten, they’ll
say sure.” The franchisees also established the need to view opportunistic acts on behalf
of the franchisor whereby,
“(The franchisor) make(s) changes and they stick to it. There’s a
certain amount that they dictate to us, I kind of anticipate that that
goes with the turf.” (C2)
16
It was clear from the interviews that franchisees were in situations whereby there will
always be an element of opportunistic behaviour. However, extensive opportunistic acts
can damage the stability of the franchising relationship as well as having a negative
impact on franchisor-franchisee goal congruence.
5.4 Stable personal relationship
The final element in the conceptualised model (figure 1) developed from these findings is
the presence of a stable personal relationship. The majority of franchisees had strong,
positive personal relationships with their franchisor, a luxury that makes franchising “a
lot less stressful” (A2). A dominant finding was the idea the “it is better having a good
relationship with them (franchisor) than not” (A5) whereby a stable personal relationship
had the effect of “fine tuning” (A2) the franchising arrangement.
When asked about his perception on personal relationships, franchisee D3 answered,
“I think in any relationship you are going to have disagreements. We
do with our staff, we do with our franchisor, but you need to have that
personal touch to heal that afterwards.” (D3)
This provides for a personalised approach to franchising whereby relational difficulties
are overcome because of the presence of a personal franchisee-franchisor relationship.
Four franchisees (B3, C3, D4, and D5) stated that they did not have a stable personal
relationship with their franchisor. These franchisees were already leaving or considering
leaving the franchise system. These findings establish the importance of stable personal
relationships between franchisee and franchisor in any franchise system.
After analysing the different franchisee perceptions and how they were influenced by the
unique franchise system dynamics, a conceptual model was developed. Largely
influenced by Morgan and Hunts (1994) Commitment-Trust theory, the relational
dynamics model (figure 1) identifies antecedents to, and the constructs of, trust and
commitment.
17
Thus, Morgan and Hunt’s (1994) commitment-trust theoretical explanation within the
relationship marketing paradigm is consistent and relevant within the franchising
relationship. Franchisees desire and appreciate the need for a stable relationship with their
franchisor; a relationship highlighted by the presence of trust and commitment.
Managerial and academic implications arise as a result of this finding, both of which are
discussed below.
18
Figure 1: Franchising relational dynamics model
Source: Developed for this research following convergent interviews with franchisees
6. Managerial Implications
This research provides both franchisors and franchisees with a better understanding of
the relational dynamics that contribute toward a stable franchising relationship. It is of
great importance in the franchising arrangement, from the franchisor’s perspective, to
form positive personal relationships with both domestic and international franchisees.
Franchisors heading large international franchise systems will learn that business
relationships are not purely driven by economic and material benefits (Rodriguez and
Wilson, 2002) but are also influenced by social exchanges. Thus, relationships
between the franchisor and the franchisee should have solid foundations of trust and
commitment with ongoing, effective communication instigated throughout the
relationship. It is also essential for franchisors to have continued representation
toward their franchisees. This is usually guided by the organisational culture whereby
the nature of franchisors and franchisees has an impact on the perceived culture of the
franchise. Out of the four franchise systems, franchise A was deemed to have the most
positive organisational culture: largely due to the presence of “friendly” and
“professional” people (A1) involved within the organisation, consistent in both the
Australian and New Zealand operations.
It is essential for franchisees to understand the nature of their franchisor and the
organisational culture. This understanding can only be gained through experience and
time within the franchise. Of the twenty franchisees interviewed, the more mature
(A3, A5, B1, B2, B3, D2, D3, and D5) franchisees were generally more appreciative
of the franchisor and had been through the emotional cycles identified by Nathan
(2000). It is important for franchisees to appreciate the relational challenges
associated with the management of a large franchise organisation whereby they may
not have their every need met or every goal obtained. However, by committing to the
franchising relationship they receive the associated benefits of a stable personal
relationship with their franchisor that had a positive impact on the daily operations of
the business.
This emphasis on stable personal relationships as opposed to purely transactional
exchanges between the franchisee and the franchisor provides for a shift in business
managerial thinking within franchise systems resulting in more efficient, productive
and effective operations (Morgan and Hunt, 1994).
7. Academic Implications
This paper provides significant evidence supporting the need to shift current academic
franchising research from transactional marketing thought toward contextualisation
within the relationship marketing paradigm. Emphasis on relationships as opposed to
transactional exchanges not only redefines the domain of marketing (Sheth, Gardner,
and Garett, 1988) but, as found in this paper, extends current franchising research.
This paper supports Sheth and Parvatiyar’s (1995) argument which calls for more
interactive relationships between marketing actors as opposed to the arm’s length
relationships found within the transactional orientation. By contextualising the
research within the franchising phenomenon, this paper identifies the need for stable,
interactive relationships between the two major franchising actors: the franchisor and
the franchisee. Mutual interdependence and cooperation (see Sheth and Parvatiyar,
1995) as well as mutual trust and commitment (see Morgan and Hunt, 1994) between
the franchisee and the franchisor create a higher franchise value offering when viewed
within the relationship marketing paradigm. It is therefore important to consider
contextualising franchising research within the relationship marketing orientation as
opposed to the transactional marketing orientation.
8. Conclusion
The goal of this paper was to extend traditional agency theoretical explanations of
franchising toward a more relationally focused approach. This required the
contextualisation of the franchisor/franchisee relationship into business-to-business
markets within the relationship marketing paradigm. Doherty and Alexander (2004)
laid the foundations of this paradigm shift through identification of a need to develop
successful franchising relationships.
This paper contributes to franchising knowledge by developing franchisee perceptions
from which a conceptual model was developed giving a greater understanding of trust
and commitment antecedents – goal congruence, organisational culture, and
communication – as well as the qualitative outcome; an interactive, stable personal
relationship.
21
A limitation of this paper is associated with the research design whereby only
franchisee perspectives were gathered and analysed. As the franchising relationship is
dyadic (although considered asymmetrical) it is necessary to consider the opinions of
the other relationship partner; the franchisor.
As this paper has been formulated around a qualitative case-study design there is need
for future research
to be undertaken developing a more generalisable model. This
paper provides a strong foundation whereby contemporary relational issues have been
further explored and uncovered prompting further research to extend the implications
identified.
22
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