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Journal of Business Ethics (2010) 95:191209 Springer 2010 DOI 10.1007/s10551-009-0354-z
Trust and Fairness During Strategic ChangeProcesses in Franchise Systems Evelien Croonen
ABSTRACT. A very important challenge for franchisors is adapting the strategies of their franchise systems to new threats and opportunities. During such strategic change processes (SCPs) franchisees are often required to make major financial investments and/or adjustments in their trade practices without any guarantee of positive benefits. It is, therefore, important that franchisees trust their fran-chisors during such change processes and that they perceive the change process as fair. This article aims to generate theory on franchisees perceptions of trust and fairness during SCPs. On the basis of case studies regarding eight change processes in four Dutch drugstore franchise systems, this article distinguishes different levels of franchisee trust and discusses five instruments that franchisors can institutionalize in their franchise systems to influence their franchisees trust and fairness perceptions.
KEY WORDS: business format franchising, fairness, justice, strategic change, trust
Introduction
In business format franchising, a franchisor owns a complete business format entailing a shared identity toward customers and detailed operating procedures and replicates it by forming alliances with independent business owners (franchisees) who use the business format in return for fees. A franchise system consists of all the franchised units and units owned and managed by the franchisor itself (i.e., company-owned units) that all operate under more or less the same business format (Elango and Fried, 1997).
In the past few decades, business format franchising has become an increasingly popular business strategy in different industries in various parts of the world (Welsh et al., 2006). Even though franchising has increased in popularity, there are several
challenges that franchisors have to deal with in managing their franchise systems. A very important one is adapting the systems strategy to new opportunities and threats that arise over time (system wide adaptation in terms of Bradach 1997, 1998), for example, by introducing new product or service groups, a new unit interior, or a completely new market positioning.
Strategic change in franchise systems is particularly challenging because franchisors have to persuade their franchisees to implement the proposed changes in their units (Bradach 1997, 1998; Parsa, 1999). During such strategic change processes (SCPs), franchisees are often required to make major nancial...