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42 Key Success Factors of Franchising Systems In the Retailing Sector
Independent Variables
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Ten independent variables relating to the franchisor were examined. Five
of them are the hypothesized variables: (i) years-to-franchising, (ii) internationalization,
(iii) proportion of franchising, (iv) number of company-owned
outlets, (v) age/experience. The rest are the control variables: (vi) fee, (vii)
royalty rate, (viii) financing, (ix) availability of financing and (x) start-up
costs. Similar conceptualization of these variables were used in previous
research (Shane, 1996a, 1996b; Combs and Castrogiovanni, 1994; and Alon,
1999). The use of this data is advantageous because the study can be
replicated and because this data is available to all stakeholders of the franchising
firm. Table 1 summarizes the hypothesized relationships and their
corresponding measures.
ANALYSIS AND RESULTS
Table 2 shows the descriptive statistics of the dependent and independent
variables, while Table 3 provides a correlation matrix. Taken together these
tables show some of the simple relationships that exist among the variables
under investigation. Finally, Table 4 tests the key success factor model in
the franchising sector. The model has an adjusted R-squared of 57 per
cent, which significantly explains the success of the franchisors in the retailing
sector.
Different variables, namely, years to franchising, internationalization,
proportion of franchising, company-owned outlets, and age/experience, exhibit
a coefficient consistent with our hypothesized relationships. With the
exception of internationalization all are significant at the p=0.05 level. The
internationalization variable is mildly significant in the hypothesized direction.
One explanation for the weak coefficient is that internationalization is
often a challenge for franchisors that drains resources and puts the franchisors
in new competitive environments.
According to this study, franchisors that want to achieve a higher level
of success in terms of growth and scale should become franchised quickly
after opening, internationalize their system to appeal to a larger global audience,
grow the franchising line of their business, operate a sufficient number
of company-owned stores, and accumulate experience over time which
will help them increase their competitiveness. Similar studies of different
industries can be useful in demonstrating validity of the study findings and
Management & Change, Volume 9 Number 2 (2005)