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ABSTRACT
The extant literature on franchising has failed to distinguish among different types of franchising systems. In this paper a typology is developed to propose that franchises vary in terms of (1) whether the production/sourcing is localized or centralized and (2) whether the product/service is standardized or personalized. Based on the typology, four different types of franchises are identified- localization franchise, brand name franchise, quality assurance franchise, and relationship franchise. Next, the task analysis methodology is used to identify the level of attributes necessary to successfully operate franchised units in each of the four types of franchising systems. Implications for research and suggestions for franchisors and potential franchisees are offered.
INTRODUCTION
Franchising related sales in the U.S. economy is estimated at $ 800 billion. There are more than 2300 franchisors and 550,000 franchised units across the United States employing about seven million individuals. In general, franchising refers to an organizational form in which a company grants an individual or another company the right to use a particular trademark and/or sell a product or service in a prescribed manner in return for financial and other commitments. The ability to provide advantages of a large company, such as economies of scale in marketing and production while simultaneously enabling the franchisee to exercise discretion at the unit level, makes franchising a preferred organizational form in today's competitive business environment (Elango & Fried, 1997).
The success of a franchising system depends on the collective successes of individual franchisees. Thus, individual franchisees significantly contribute to the success of a franchising system and play a crucial role in shaping its future potential. The franchisee runs the day-to-day operations of the franchised unit and is generally responsible for all operations of the unit. For example, the franchisee hires, orients, and manages employees, deals with customers, performs routine maintenance of equipment, purchases supplies and manages inventory levels, and performs various other tasks necessary for the general upkeep of the unit (Elango & Fried, 1997). Depending on the franchising system, the franchisee may also commit his or her own capital for the initial startup and as well provide for the working capital of the unit. The ability of the franchisee to operate the franchising unit level is a major factor influencing the...