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Franchising Research: A Literature Review and Synthesis*
Abstract
This article presents a broad review of franchising research, which can be broadly divided into three streams franchising and society, creation of the franchising relationship, and operation of a
franchising system. Researchers have made significant contributions, but considerable room for improvement exists. Suggestions are offered to direct future research.
In the last 20 years, a significant amount of research on franchising has been conducted in various disciplines, including economics, law, management, marketing, and management science. A major goal of this article is to provide a comprehensive overview of the existing literature. A second goal of this article is to enumerate steps that can be taken to improve both the rigor and relevance of franchising research. Since this represents an initial overview of a very broad research field, we have not attempted to develop a tightly focused research agenda on any one topic. Instead we present several relatively general, widely applicable suggestions that can significantly improve future research. We first split existing research into three categories and provide reasons for this split. Each of the categories is then reviewed, and suggestions are offered to improve research. Finally, methodologies for franchising research are discussed.
Franchising sales of goods and services in the U.S. are estimated at $758 billion (LI.S. Department of Census 1994), with further expansion expected (Hoffman and Preble 1991). There are 2177 franchisors with 542,000 units (U.S. Department of Census 1994); 374 U.S. franchisors operate about 35,000 franchised units abroad, 75 percent of which are in Canada, Japan, Western Europe, and Australia (U.S. Department of Commerce 1988; U.S. Department of Census 1994). Franchising is an important means of doing business for many entrepreneurs. It is suited for environments characterized by intense competition, rapidly changing customer tastes, and a trend towards localized market segments. It provides large company advantages such as economies of scale in marketing and production while providing for entrepreneurial discretion at the unit level.
Franchising is an organizational form in which a company grants an individual or another company the right to do business in a prescribed manner over a certain period of time in a specified place in return for royalties or the payment of other fees. The company granting the...