Key Success Factors of Franchising Systems In the ... - Mimts.org

36 Key Success Factors of Franchising Systems In the Retailing Sector
cade. The concentration on a single industry is also experimentally preferred
(Dant, et al,. 1996; Sen, 1998; and Alon, 1999).
A growing, but contrasting, evidence on the success and failure of
franchisors needs to be examined. While some studies point to the success
of franchising over independent businesses (e.g., Justis, et al., 1992;
Castrogiovanni, et al. 1993; and IFA, 1998), a growing literature that is
critical of this view is emerging (e.g., Bates, 1995; and Stanworth, et al.
1997). An examination into the causal factors of success among franchisors
should, therefore, broaden the body of knowledge on this critical issue.
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This study attempts to develop a managerially useful framework, which
has the potential to help franchisors develop better strategies to achieve
competitive advantage. The focus is, therefore, on the controllable elements
of the franchising organization (organizational factors). Factors that are
selected are also readily available to prospective franchisees and investors
prior to the purchase, thus potentially increasing the rationality of the decision.
MODEL DEVELOPMENT
The literature of success/failure of franchisors has shown inconclusive findings.
While studies sponsored by franchising associations, most notably the
International Franchise Association and the British Franchise Association,
have found that franchising is a highly successful method of doing business,
a few other reports argued to the contrary.
An IFA survey of 1,001 franchisees selected randomly from 4,000 registered
franchisors conducted by the Gallup Organization between September
and October 1997 and released in March 1998 found that 8 out of 10
were small businesses with only one franchise; 92 per cent of franchisees
considered themselves very or somewhat successful; the majority of franchise
owners were satisfied with their business; 65 per cent say they would
purchase the franchise again if given the opportunity; 93 per cent believe
that being associated with the franchise gives them a competitive advantage;
72 per cent said their expectations were met; and on average, gross
earnings ranged from $76,000 for a single unit franchisee to $142,000 for a
multiple-unit franchisee. The picture that emerges is that franchising is a
highly successful method of doing business which provides sustainable com-
Management & Change, Volume 9 Number 2 (2005)