ORIGINAL EMPIRICAL RESEARCH

An introspective examination of single-unitversus multi-unit franchisees

Rajiv P. Dant & Scott K. Weaven & Brent L. Baker &

Hyo Jin (Jean) Jeon

Received: 17 February 2010 /Accepted: 2 June 2011 /Published online: 21 June 2011# Academy of Marketing Science 2011

Abstract Multi-unit franchisees (MUFees; i.e., franchiseesthat operate more than one outlet within a franchise system)represent a pervasive and even dominant form of franchiseownership in many sectors. However, much of thefranchising literature has been developed with a focus onsingle-unit franchisees (SUFees). The goals of this articleare to introspectively compare MUFees and SUFees interms of (1) the factors franchisees consider important wheninitially buying a franchise, (2) how these considerationschange when SUFees become MUFees, and (3) howSUFees and MUFees characterize their relationships withtheir franchisors in terms of relational constructs. Our datareveal significant differences between these two groups interms of purchase motivations as well as relational senti-

ments. Importantly, franchisor preferences for multi-unitfranchising notwithstanding, it is the SUFees that charac-terize their dyadic relationships with their franchisors asmore relational as compared to their MUFees counterparts.

Keywords Franchising .Multi-unit versus single-unitfranchising . Organizational structure .

Relational marketing .Motivations for franchise purchase .

Entrepreneurship . Dependence theory

Introduction

It is well known amongst franchising scholars that franchisingis big business in the retailing field (Baker and Dant 2008;Winter and Szulanski 2001). There are over 3,000 franchisesystems in the U.S. (Franchise Facts 2011), operating in over300 business lines (International Franchise Association2011). This count represents an estimated 901,093 franchisedand company-owned outlets, generating approximately $868billion in payroll (PricewaterhouseCoopers 2009). The sectoremploys approximately 18 million people (i.e., one out ofseven jobs in the U.S,. or about 20 employees per franchiseoutlet), in turn generating an economic output of over $2.1trillion, which equals to more than 10% of the U.S. private-sector economy (International Franchise Association 2011;Reynolds 2004). Franchising is also an American inventionthat has been cited as one of the fastest growing U.S. exportsto the world (House Committee on Small Business 1990),and it is arguably the fastest growing form of retailing in theworld (Dant et al. 2008a).

Franchising is also somewhat unique from a publicpolicy perspective in that it is a net foreign exchange earnerand does not, over time, create future foreign competitors

R. P. Dant (*) :H. J. (Jean) JeonMichael F. Price College of Business,The University of Oklahoma,307 West Brooks, Suite 1-K,Norman, OK 73019-4001, USAe-mail: rdant@ou.edu

H. J. (Jean) Jeone-mail: jeanjeon@ou.edu

S. K. WeavenGriffith Business School, Gold Coast Campus, Griffith University,PMB 50 Gold Coast Mail Centre,Brisbane, Queensland 9726, Australiae-mail: s.weaven@griffith.edu.au

B. L. BakerCollege of Business and Public Administration,University of North Dakota,Gamble Hall, Room 175E, 293 Centennial Drive,Grand Forks, ND 58202, USAe-mail: bbaker@business.und.edu

J. of the Acad. Mark. Sci. (2013) 41:473–496DOI 10.1007/s11747-011-0265-2

that come back to compete in the domestic economies perthe international product life cycle (IPLC)1 phenomenon(Gillespie et al. 2007). Moreover, franchising is touted asplaying a very important role in the key public policy goalof inclusion of women and minorities in national entrepre-neurial enterprise (Bates 1996; Dant et al. 1996; Hunt1972). In addition to being a huge and growing portion ofmodern retailing with significant public policy repercus-sions, franchising represents a very complex behavioralphenomenon, and in some ways a very rich and uniqueresearch context. For example, it represents a mixed motiveasymmetrical power behavioral system where the principal(franchisor) simultaneously competes with its agents (fran-chisees) through company-owned outlets, and wheresupposedly independent franchisees are de facto straightjacketed by the procedural uniformity mandated by thefranchise contracts.

As one may imagine, this fascinating inter-organizationalform has generated a very large amount of multi-disciplinary research on franchising topics. Unfortunately,within the mainstream marketing journals, franchising hasbeen used more as a context of empirical sampling (e.g.,Anand and Stern 1985; Antia and Frazier 2001; Brown etal. 2000; Dant and Schul 1992; Mishra et al. 1998), and thetheoretical issues or the ontology unique to this fascinatingB2B inter-organizational structure have been largely ig-nored. For example, the heated debate over the issue ofownership redirection thesis (i.e., the sinister premise thatresource flush successful franchisors will, over time, buyback all their well performing franchisee units; cf.,Oxenfeldt and Kelly 1969; Ozanne and Hunt 1971) hasmostly occurred in management, economics, and financejournals. This paper explores another theoretical issueunique to the franchising context, namely, the incidence ofmulti-unit franchisees (MUFees; i.e., franchisees thatoperate more than one outlet within a franchise system)that function virtually as mini hierarchies within the overallfranchisor–franchisee hierarchical structure.

In a national survey of the franchised fast-food industry,Kaufmann and Dant (1996) found that 88% of the 152franchisors surveyed had multi-unit franchisees within theirsystem. Similarly, Kalnins and Lafontaine (2004) note that49% of franchisees of seven large national fast-food

restaurant chains were multi-unit owners and that thesefranchisees owned 84% of the franchised units in thesechains. And although the incidence of multi-unit franchis-ing (MUF)2 is likely to vary across business sectors, abroad-based survey commissioned by International Fran-chise Association (IFA) uncovered that MUFees operate52.6% of all franchised units across different sectors (TheIFA Educational Foundation 2002). However, even thoughMUF is widely recognized as the pervasive and evendominant form of franchising in many sectors, much of theextant franchising literature has been developed with afocus on single-unit franchisees (SUFees).3 Fundamentalquestions like the nature of motivational differences acrossMUFees and SUFees, the evolution of these motivations asSUFees convert into MUFees, and how these transitionsinfluence the working relationships between franchiseesand their franchisors remain virtually unanswered despitethe fact that proponents of MUF tout the value of thisorganizational form in terms of economies of scaleassociated with monitoring expenses, rapid system growth,system-wide adaptation to competition, minimization ofhorizontal free-riding, a general reduction of systemattrition rates, and the strategic delegation of price orquantity choices to franchisees (cf., Dant et al. 2008b;Kalnins and Lafontaine 2004; Kalnins et al. 2006; Shane2001).

This article aims to fill this significant void in theliterature. To begin the process of developing franchisingtheory that more accurately mirrors the contemporarycontextual reality of franchising rather than the presumedfictional setting of SUFees, this paper compares andcontrasts MUFees and SUFees in terms of their mostfundamental motivational considerations and relationalcharacteristics. Specifically, the paper seeks to compareMUFees and SUFees in terms of (1) the factors that theyconsider important when initially buying into a franchise

1 The notion of IPLC describes an internationalization processwherein a local manufacturer in an advanced country (e.g., USA)commences with selling a new, technologically advanced product inits market, but over time, ends up becoming a net importer of theproduct as this product is produced at a lower cost either bycompetitors in lesser developed countries or, if the innovator hasdeveloped into a multinational manufacturer, by its foreign-basedproduction facilities.

Since franchising revenues are based on contractually vestedroyalty remittals, there is no danger of franchise systems becomingvictims of IPLC.

2 We use the acronyms SUF and MUF to represent the businessorganizational forms of single unit franchising and multi-unitfranchising, respectively. When referring to the actual franchisees,we use the analogous acronyms of SUFees and MUFees.3 The most commonplace basis for the existence of MUFees is theincremental growth amongst existing franchisees. The successfulSUFees typically seek additional units in order to grow theirbusinesses, and permission for such expansion is usually based onthe performance of existing units. This form of MUF is sometimesalso referred to as incremental or sequential expansion, and it isdistinct from master franchising in which a franchisee is granted therights to multiple units from the outset (Kaufmann and Dant 1996).One familiar form of master franchising, the area developmentagreement, entitles (and even obligates) the master franchisee to openand operate multiple outlets under a pre specified schedule. Theincidence of master franchisees or area developers, however, isrelatively rare and is most often utilized by franchisors embarkingon international expansion of their systems. In our sample, we hadonly two master franchisees and one area developer.

474 J. of the Acad. Mark. Sci. (2013) 41:473–496

system, (2) how these initial considerations change whenthe SUFees convert to MUFees with a purchase of a secondunit, and (3) how the two groups characterize theirrelationships with their franchisors in terms of relationalsentiments like trust, commitment, and relationship satis-faction. Theoretically, we see the transition from SUFees toMUFees largely as a case of deepening dependence of thefranchisees on their franchisors, and we invoke thedependence theory as the overarching theoretical frame-work for the development of our hypotheses. The empiricalresults, which support this premise of deepening depen-dence, are based on a broad-based survey of franchiseesexecuted in Australia. The paper concludes with implica-tions for practitioners and academic researchers.

Theoretical framework and hypotheses

Perhaps due to the inherent contextual uniqueness associ-ated with franchising alluded to above, scholars have foundsingle theoretical frameworks as typically deficient inaccurately capturing the essence of this complexity (cf.,Castrogiovanni et al. 2006a, b; Combs and Ketchen 1999a,b; Combs et al. 2004; Dant 2008; Michael and Combs2008). As shown in Table 1, this is especially true of thefranchising literature dealing with the multi-unit phenom-enon where multi-theoretic orientation is the rule ratherthan the exception.4 In the following section, we draw ondependence theory as the overarching framework for thetheoretical development of our hypotheses.

Dependence theory

The construct of dependence, a natural consequence ofdivision of labor within distributive arrangements (Dant andGundlach 1999), occupies a central role within channeltheory (Brown and Day 1981; Bucklin and Sengupta 1993;Frazier 1999; Kumar et al. 1995; Palmatier et al. 2007;Reve and Stern 1979; Stern and El-Ansary 1982). Depen-dence is nomologically related to several core channelconstructs like power, conflict, and satisfaction (cf. Brownet al. 1983; Etgar 1976a, b; Gaski 1984; Frazier et al. 1989;Heide and John 1988). The core arguments behind theselinkages can be traced to the familiar theoretical reasoning ofEmerson (1962) and French and Raven (1959) that positdependence as the inverse of power. Emerson (1962, pp. 32–

33) defined dependence of actor B upon actor A as being (1)directly proportional to B’s motivational investment in goalsmediated by A and (2) inversely proportional to theavailability of those goals to B outside of the A-B relationship.

That dependence occupies a particularly central role in afranchisee–franchisor relationship can be easily and almostdefinitionally demonstrated. First off, as contractuallyvested relationships between a comparatively much largerparty (the franchisor) and relatively smaller entities (thefranchisees), the franchisee–franchisor relationship can beportrayed as one typified with an enduring sense ofdependence asymmetry. Moreover, franchisees are expectedto deal exclusively with their focal franchisors’ brand(s),precluding any prospects of availability of alternativesources of business revenue. And while franchisors dependon franchisees to grow and develop the franchise brand,transfer local market knowledge, and generate revenuethrough the collection of initial franchising fees andongoing royalties, franchisees depend on franchisors toprovide initial training, ongoing services, and support aswell as the all-important use of the franchised brand, whichvastly exceeds the costs of developing a new brand throughthe alternative of the more traditional entrepreneurshipendeavor. Moreover, the franchising contract obligates thefranchisees to invest in relationship-specific assets withminimal salvage value outside the focal franchisee–franchi-sor relationship. Hence, aside from some naiveté on the partof SUFees who continue to equate franchising with beingindependent entrepreneurs, we expect dependence senti-ments to fundamentally define and drive the franchisor–franchisee relationships.

Specifically, within the context of the present study, namely,the comparison of SUFees versus MUFees, we see depen-dence perceptions playing a seminal foundational role. Asargued throughout the derivation of specific hypotheses in thefollowing sections, we see dependence perceptions of SUFeesinfluencing their ratings of the importance of franchisorstrategy, the financial benefits to be derived from theirbusiness partnership, and franchisor experience more thantheir MUFees counterparts as related to their initial franchisepurchase. After all, at this juncture, SUFees are relativelyuninitiated to the functioning of their enterprise and aretherefore likely to rely much more on their franchisors to aidthem in successfully executing their businesses. However,during the acquisition of their second unit, with much moreinvested in the business relationship (or deepening sense ofdependence), we expect MUFees to rate these same attributeshigher than their SUFees counterparts.

Determinants of initial franchise purchase

This section addresses the most fundamental of variablesrelated to franchising (i.e., the motivations that drive

4 In fact, under the premise that theories typically underdetermine thephenomenon (Kuhn 1962), there is an increasing trend toward usingmulti-theoretic derivation of hypotheses in mainstream businessarticles as well (e.g., Cropanzano et al. 2002; Greenberg and Scott1996; Griffith et al. 2006; Heide and John 1988; Husted and Folger2004; Lusch and Brown 1996; Palmatier et al. 2007; Ramaswami andSingh 2003).

J. of the Acad. Mark. Sci. (2013) 41:473–496 475

aspiring would-be franchisees into choosing the franchisingoption). As noted by Dant (1995) and Peterson and Dant(1990), even in the context of SUF, much of this literaturehas been written from the perspective of the franchisorspeculating on the presumed benefits of franchising forthese franchisees. To the best of our knowledge, this is thefirst empirical investigation of how such motivations maydiffer across MUFees versus SUFees. To tap thesemotivations, based on the extant literature (Dant 1995;Grünhagen and Mittelstaedt 2001, 2002, 2005; Hing 1995;Hunt 1977; Izreali 1972; Johns et al. 2004; Kaufmann andDant 1996; Knight 1986; Kalnins and Lafontaine 2004;Morrison 1997; Peterson and Dant 1990; Stanworth and

Curran 1999; Stanworth and Kaufmann 1996; Wadsworth2002; Weaven and Frazer 2003, 2006; Withane 1991) andsome focus groups (see Appendix 2) a series of items weregenerated to measure four critical characteristics associatedwith the franchising option, namely (1) franchisor strategy,(2) dependence, (3) financial benefits, and (4) franchisorexperience.

Franchisor strategy The goal was to assess the differencesbetween SUFees and MUFees with regard to the respectiveemphasis they place on the attractiveness of the franchisorstrategy. For the purposes of this study, we approach theconcept of franchisor strategy from the perspective of the

Study Study focus Theoretical frameworksemployed

Bradach (1995) System growth, Uniformity, Theory of the firm

Local responsiveness Agency theory

Kaufmann and Kim (1995) System growth, Transaction cost theory

System efficiency Theory of the firm

Kaufmann and Dant (1996) System growth Resource constraints theory

Commitment Agency theory

Dant and Nasr (1998) Information sharing Agency theory

Power theory

Dant and Gundlach (1999) Dependence Dependence theory

Autonomy Autonomy theory

Agency Theory

Grünhagen and Mittelstaedt (2002) Decision participation Power theory

Economies of scale Dependence theory

Theory of the firm

Weaven and Frazer (2003) Degree of cooperation, Involvementof franchisee at store, Experience,Conflict, System growth, Contiguity,Financial rewards, Agency cost

Agency theory

Transaction cost theory

Conflict theory

Resource based view

Theory of the firm

Kalnins and Lafontaine (2004) Distance Agency theory

Contiguity Strategic entry

Demography Deterrence theory

Franchisee characteristics Power theory

Garg et al. (2005) Organizational form, System growth,Local responsiveness, Uniformity

Agency theory

Grünhagen and Mittelstaedt (2005) Entrepreneurship motivation Resource constraint theory

Types of Multi-Unit Franchisees Agency theory

Garg and Rasheed (2006) Shirking, Adverse selection, Informationflow, Inefficient risk bearing,Free-riding, Quasi-rent appropriation

Agency theory

Weaven and Frazer (2006) Motivational differences Motivation theory

Evaluating franchise opportunities Dependence theory

Dant et al. (2008b) Personality traits Personality theory

Gender effects Relational exchange theory

Hussain and Windsperger (2010) Integrative theoretical framework Six theories including

System growth TCA & Agency theory

Table 1 Extant literature onmulti-unit franchising

476 J. of the Acad. Mark. Sci. (2013) 41:473–496

broader and more inclusive concept of business agility (Lee2006). Agility is a concept that incorporates the ideas offlexibility, balance, adaptability, and coordination under oneumbrella (Tsourveloudi and Valavanis 2002) and can beconceptually defined as a firm’s “ability and capacity towithstand systemic discontinuities and adapt to new riskenvironments,” and a “resilient organization effectivelyaligns its strategy, operations, management systems, gover-nance structure, and decision-support capabilities so that itcan uncover and adjust to continually changing risks,endure disruptions to its primary earnings drivers, andcreate advantages over less adaptive competitors” (Starr etal. 2003, p. 3).

We predict that SUFees, being uninitiated newcomers totheir businesses, will experience a much greater sense ofdependence on their franchisors and hence will value thefranchisor strategy more than will MUFees. According toCarney and Gedajlovic (1991), at a point in time whenprospective SUFees contemplate acquiring their initialfranchise outlet, they are driven by the attractive opportu-nity to gain access to extra capital and technology at alower cost by taking advantage of the superior financialcapabilities of the franchisor. Hence, the franchisee reliesheavily on the extent to which the franchisor is marketoriented and agile, as a more market-oriented, agilefranchisor would provide higher brand name equity,improved technology, sharper location analysis expertise,and a smoother functioning turn-key business system(Baucus et al. 1996). Conversely, MUFees have presumablyalready accumulated valuable knowledge through on-the-job training and have gained hands-on experience indevising new strategies as well as in formulating newsolutions to a wide variety of business problems. Much likethe fundamental differences between the perspectives ofnovices and experts (cf. Zeitz 1994), this kind of experienceinevitably makes MUFees market oriented and willing andable to take strategic risk through the exercise of their ownstrategic discretion (Julian and Castrogiovanni 1995).Hence, we propose:

H1: SUFees will rate the importance of franchisor strategyhigher than will their MUFees counterparts.

Financial benefits Some of the principal reasons forbecoming a franchisee include the availability of a provenbusiness format, lower resultant risk, quick start-up possi-bilities, and the confidence about ability to earn money(Knight 1984). In addition, franchise chains bring theadvantages of pooled advertising and economies of scalerelated to bulk purchasing at levels normally beyond theability of independent start-up businesses. Indeed, theliterature documents a strong relationship between thefinancial and business benefits of franchising and the

decision to purchase a franchise (e.g., Kaufmann 1999).Although the purchase of a franchise entails a number ofstart-up costs such as a non-refundable up-front initial fee,ongoing royalties, and advertising fees (Dant and Berger1996), these investments are traded off against potentiallosses due to costly mistakes by immature entrepreneurs,difficulties associated with attracting customers to a newbrand and business, and tough entry barriers. It is importantto recognize, nonetheless, that SUFees cannot avoidbearing substantial residual risk even if the origin of therisk is traceable to other franchisees, a master franchisee, oreven the franchisor (Norton 1988; Vaughn 1979). Indeed,even though the franchise environment is more stable thanan independent business, risk taking is thought to be one ofthe most important success factors for franchisees (Withane1991).

In absolute terms, a larger amount of financial commit-ment of MUFees is controlled by the franchisor, thesystem’s goodwill in the marketplace, and the associatedeconomic rent (Grünhagen and Mittelstaedt 2005). MUFeesare also assuming a higher level of risk by limiting theirinvestment solely to a particular franchise system whenthey could be diversifying their risks by investments infinancial portfolios. While this may be true, MUFeesdefinitionally have much deeper pockets than SUFees.Moreover, MUFees behave more like the franchisor thanSUFees do in that their interests are closely aligned withthat of the franchisor in safeguarding brand name capitaland adopting a longer-term profitability perspective (Gargand Rasheed 2006). On the other hand, during thefranchising contract period, a substantial portion of typicalSUFees’ personal savings and nest eggs serve as theworking capital for business. Hence, the relative financialrisks borne by SUFees are greater than those taken byMUFees. This should generate relatively stronger senti-ments of dependence on their franchisors for SUFees. Notsurprisingly then, SUFees are likely to value the financialbenefits emanating from the economies of scale related topurchase of cheaper business supplies, national and localadvertising, and promotion much more than MUFees. Thisreasoning suggests:

H2: SUFees will rate the importance of financial benefitshigher than will their MUFees counterparts.

Franchisor experience The core arguments linking SUFeesversus MUFees status and the importance of franchisorexperience closely parallel those advanced for deriving H2.A number of organizational scholars have emphasized thesignificance of operational experience and industry com-petitive experience of organizations in ensuring survival,longevity, and market performance of the firms (Alchian1950; Friedman 1953; Ingram and Baum 1997; Slater and

J. of the Acad. Mark. Sci. (2013) 41:473–496 477

Narver 1995; Williamson 1991; Winter 1964). The Bates(1995) study on franchisor survival rates also shows a muchhigher failure rate for very young franchises and a risingsurvival rate as young firms grow older, again underscoringthe value of franchisor experience.

Entrepreneurs with limited capital capability and expe-rience (i.e., prospective SUFees) can still gain relativelyeasy access to an industry with a reasonable chance ofsuccess via the vehicle of franchising (Schwartz 1973;Weaven and Frazer 2006). However, Weaven and Herrington(2007) find that it is the relatively inexperienced franchi-sors that prefer to promote their businesses to the potentialSUFees rather than to the savvier investors who operatethe MUF systems. Conversely, prospective SUFees mightfind it difficult to contract with an experienced franchisorsince such franchisors are more likely to be attracted toMUFees since the latter represent operational efficiency interms of economies of scale in monitoring, rapid systemgrowth, system-wide adaptation to competition, minimi-zation of horizontal free-riding, a general reduction ofsystem attrition rates, and the strategic delegation of priceor quantity choices to franchisees (cf., Dant et al. 2008b;Kalnins and Lafontaine 2004; Kalnins et al. 2006; Shane2001). Hence a curious pattern emerges. The SUFees whoare likely to be more dependent on their franchisors andneed much more mentoring (and therefore, those that arelikely to value franchisor experience more) are often not asattractive to the more experienced franchisors mostcapable of providing such training. The MUFees whopresumably already have their own previous businessexperience (and therefore value the franchisor experienceless) are more sought out. But regardless of this discon-nect, there is little doubt that an experienced franchisorassumes the role of a greater mentor for the relativelyinexperienced and more dependent SUFees by providingongoing support for daily operations and managementtools. Hence, we argue:

H3: SUFees will rate the importance of franchisor experi-ence higher than will their MUFees counterparts.

The overarching effect of dependence It is apparent fromH1 through H3 that a strong undercurrent of dependence isimplied in their deduction. To briefly recap, we have arguedthat SUFees, with their typically limited capital capabilityand limited business experience, will value the significanceof franchisor’s strategy (H1), financial benefits (H2), andfranchisor experience (H3) more than their MUFeescounterparts will because they depend more on theirfranchisors to provide them with (1) instant name recogni-tion of a proven brand and business format, (2) betteraccess to capital and appropriate technology, (3) sharperlocation analysis, (4) economies of scale associated with

advertising and centralized purchasing, and (5) the wealthof experience associated with having created a viablefranchise concept. In effect, franchisors represent a rela-tively easy opportunity of financial gain and successfulaccess to an industry, and they are the fundamental raisond’être for the emergence and success of franchising.

From the perspective of dependence theory, it is clearthat SUFees with a significant proportion of their personalsavings and nest eggs invested in the franchise business andwith limited past business experience will be much morereliant on their franchisors (i.e., will have a much greatermotivational investment in the franchisee–franchisor rela-tionship) than their MUFees counterparts. The aboveimplies that dependence would have an overarching effecton how franchisor strategy (H1), financial benefits (H2),and franchisor experience (H3) are perceived by SUFeesand MUFees. This argument leads us to the followingprediction:

H4: Perceptions of dependence will significantly mediatethe linkages between SUFees versus MUFees statusand franchisor’s strategy, financial benefits, andfranchisor experience.

Determinants of the second franchise purchase

In this section, we develop arguments for why and how themotivations of MUFees are likely to change when they areon the verge of purchasing their second unit in terms of thesame three critical advantages of choosing the franchisingoption, namely (1) franchisor strategy, (2) financial benefits,and (3) franchisor experience, as well as their perceptionsof dependence on their franchisors. The essential theoreticalarguments proposed in H1 through H3 still apply with onevery important difference: now these MUFees have had theexperience of owning the initial franchised unit within theirfocal systems. Also, now the comparison is not between theindependent sub-samples of SUFees and MUFees but is awithin group comparison of MUFees’ motivations duringthe initial purchase versus MUFees’ motivations during thepoint of their subsequent unit purchase. Two studies haveexamined the effect of prior experience on franchiseemotivations (i.e., Dant and Gundlach 1999; Peterson andDant 1990). In general, both studies conclude that theprevious experience makes the franchisees gain greater self-confidence and feel more empowered about what they canaccomplish on their own (Frazier et al. 1989). They are alsolikely to have an enhanced self-perception of their criticalityto the franchisor (Dwyer and Oh 1987) and hence expect agreater level of autonomy in managing their units.

However, since the acquisition of multiple franchiseunits means much larger financial commitment and stake in

478 J. of the Acad. Mark. Sci. (2013) 41:473–496

the system, the significance of franchisor strategy andfranchisor experience are likely to become more salient toMUFees at the point of transitioning from SUFees toMUFees. For similar reasons, the importance of financialbenefits can be expected to increase as well. In effect, thesepredictions are consistent with dependence theory, whichstipulates that as the motivational investment in a relation-ship grows stronger (a natural consequence of largerfinancial commitment on the part of MUFees) they willfeel more dependent on and therefore more beholden totheir franchisors for the significant help afforded by thefranchisor’s strategy and experience and the resultantfinancial benefits. The above reasoning leads to:

H5: MUFees will rate the importance of franchisorstrategy higher when acquiring the second unit inthe system than during the initial unit purchase.

H6: MUFees will rate the importance of financial benefitshigher when acquiring the second unit in the systemthan during the initial unit purchase.

H7: MUFees will rate the importance of franchisorexperience higher when acquiring the second unit inthe system than during the initial unit purchase.

These same arguments would also suggest that MUFees,being the beneficiaries of the positive effects of franchisorstrategy, franchisor experience, and the resultant financialbenefits, will not mind the resultant deepening sense ofdependence.Moreover, MUFees presumably alreadywill havea much more realistic understanding of the latitude theirfranchisors will permit to act autonomously and be morecognizant of what they can accomplish by themselves (Frazieret al. 1989). Therefore, we put forth the following hypothesis:

H8: MUFees will rate the importance of dependencelower when acquiring the second unit in the systemthan during the initial unit purchase.

Relational strength

A number of relationship marketing scholars have exam-ined different components of relational strength (Palmatieret al. 2006), and much controversy has been generated inthe literature as to which components of relational strengthare most critical. Since the primary focus of this effort is toexamine differences across SUFees and MUFees, we havechosen to side-step that controversy by adopting the mostwidely supported set of relational constructs we could findin the extant literature. Operationally, we adopt a threedimensional construal of relationship strength within afranchising context to tap this construct, namely, (1) trust,(2) commitment, and (3) relationship satisfaction (Andersonand Narus 1984; Kumar et al. 1994; Moorman et al. 1992;Morgan and Hunt 1994; Palmatier 2008a; Palmatier et al.

2006, 2007). These three constructs emerged as the mostfrequently studied relational mediators in the meta-analysisperformed by Palmatier et al. (2006) as well as mostimpactful on the relationship outcomes.5

Morgan and Hunt (1994) conceptualize trust as one partyhaving confidence in an exchange partner’s reliability andintegrity, whereas commitment has been defined as the desireand intention to continue a valued relationship (Andersonand Weitz 1992; Moorman et al. 1992; Morgan and Hunt1994; Scheer and Stern 1992). Sentiments of trust andcommitment are inextricably tied up with the level andfrequency of interactions possible and likely between thefranchisor and the MUFees versus SUFees. SUFees defini-tionally have more frequent interactions with the franchisoras compared to their MUFees counterparts because they aremore dependent on their franchisors and require more hand-holding. This also stems from the task environments facingSUFees versus MUFees: the SUFees are involved in more ofthe daily operations than the MUFees, who are oftenrestricted to overseeing the managerial complexities andnuances of owning and operating more than one unit. Hence,MUFees frequently hire personnel to handle the dailyoperations of individual units, whereas SUFees handle theseresponsibilities personally. Consequently, SUFees interactmore frequently, with longer durations, on more issues(e.g., shipping, deliveries, local area promotions, training ofthe personnel) and hence interact with more of thefranchisor’s personnel than the MUFees, whose infrequentinteractions may be limited to (say) the regional vicepresident. Such frequent interactions are likely to lead toexchanges of more information (Doney and Cannon 1997;Leuthesser 1997; Nicholson et al. 2001), thereby reducingbusiness uncertainties and/or strengthening the relationship(i.e., fostering sentiments of trust and commitment). Interac-tion frequency has been shown to positively influence trust(e.g., Doney and Cannon 1997) and commitment (e.g.,Palmatier 2008b) between channel partners. The abovearguments lead to the following two hypotheses:

H9: SUFees will perceive the franchisee–franchisor rela-tionship as characterized more by trust than will theirMUFees counterparts.

5 The most frequently occurring effects documented by Palmatier et al.(2006) involved the construct of trust (105 effects), followed bycommitment (60 effects) and relationship satisfaction (29 effects) (cf.,Palmatier et al. 2006, Table 4, p. 146). We decided to drop their fourthrelational mediator, relationship quality (with 21 effects) because ithas itself been “conceptualized as a multi-dimensional construct”(Palmatier et al. 2006, p. 139). In terms of their impact on relationshipoutcomes, the sample weighted reliability adjusted average effect sizefor trust was r=0.564, followed by commitment (r=0.532) andrelationship satisfaction (r=0.502). The average impact of relationshipquality was r=0.448. These summary statistics have been generatedby manipulating the numbers presented in their Table 4.

J. of the Acad. Mark. Sci. (2013) 41:473–496 479

H10: SUFees will perceive the franchisee–franchisorrelationship as characterized more by commitmentthan will their MUFees counterparts.

The third dimension of relationship strength, relationshipsatisfaction, has been defined as the overall positiveaffective appraisal of one’s exchange partner (Andersonand Narus 1984; Gaski and Nevin 1985; Geyskens et al.1999; Scheer and Stern 1992). The preceding section hasalready presented evidence of the key role played by thisconstruct in relationship management literature. And whilethe literature is mixed regarding the effect of dependence onrelationship satisfaction,6 in both meta-analyses (i.e.,Geyskens et al. [1999, Table 1, p. 230] and Palmatier etal. [2006, Table 3, p. 144]), dependence has been found tobe positively related to relationship satisfaction. The aboverationale suggests our final hypothesis:

H11: SUFees will perceive the franchisee–franchisorrelationship as more satisfactory than will theirMUFees counterparts.

Method and results

Sampling procedures

The data for this investigation were collected using thedatabase of the Franchising Council of Australia. Usingrandom sampling, 2,000 franchisees dispersed acrossAustralia were mailed the survey. The prospective respond-ents were incentivized to participate with a random lotterydraw of an iPhone in the appeal letter. Two reply-paidenvelopes were also provided with the mailed survey: oneto return the completed survey and the second to return thedraw entry in order to ensure anonymity of responses.Dillman’s (2000) approach to survey administration wasfollowed in the execution of the survey.

Respondents were asked to react to three batteries ofquestions organized in three different sections in thequestionnaire. The first two sections were targeted at allrespondents. The first section presented scales aimed at

capturing the determinants of the initial franchise purchase,while the second section contained relational strengthitems. The third section was completed only by theMUFees and sought their responses to the same set ofdeterminants of franchise purchase, but this time anchoredto the point of time of their second unit purchase (seeAppendix 1 for additional details).

A total of 341 completed surveys were returned,representing a response rate of 17%. However, 15 respond-ents indicated that they worked in company-owned units,and so they were naturally omitted from the analyzeddataset. We also eliminated three respondents who haddescribed themselves as an area developer and masterfranchisees (see footnote 3), yielding the final sample sizeof N=323. The database characteristics indicated broadrepresentation of franchise systems in Australia, with all its28 franchise system sectors being represented in thedatabase (cf., Frazer et al. 2008). As shown in Table 2,the typical SUFees respondents (N=225) were male(74.42%), aged 45.36 years, and had been associated withthe focal franchise system for a period of 5.47 years; thetypical MUFees respondents (N=98) were also male(71.88%), aged 44.64 years, had been associated with theirfranchise chains for an average of 5.93 years, and operatedan average of 2.55 units. Notably, there were no statisticallysignificant differences across any of these demographicvariables across the two sub-groups. The average respon-dent profile appears to mirror the general characteristics ofthe typical Australian franchisees per the database ofFranchising Council of Australia. We also compared earlyversus late respondents on our constructs and found themnot to be statistically different (Armstrong and Overton1977). Hence, any non response biases are expected to beminimal.

As can be seen from Table 2, the average number ofyears of association of our MUFees respondents with theirfocal franchise systems was over 5 years (although notstatistically different from that of our SUFees respondents).This raises legitimate concerns about the accuracy of theirrecall after 5 years. However, the literature appears to beequivocal on this front. Some of the literature suggests thatbeyond 2 years, biases, attributions, demand characteristics,and imagination may explain more variance than truesignals. However, we also found that a number of scholarshave used a period of 5 years (e.g., Burgess et al. 1997, p.328; Cagliano et al. 2005, p. 706; Freyens 2006, p. 502; )for recall of past events with no apparent loss in validity. AsBailar (1989) and Groves et al. (2004) note, there is noaxiomatic time frame for judging the accuracies of recalledevents. And the received view appears to be to anchor therecall period to a memorable event, especially if thesalience of this event is enhanced by large dollar outlays(Sudman and Bradburn 1973). We contend that the

6 The premise is that as the dependence of the weaker party on itspartner increases, the stronger partner faces strong temptations to actopportunistically (Kumar et al. 1998) and utilize coercive powersources to glean disproportionate share of benefits from the exchangerelationships, which in turn would lead to dissatisfaction perceptions.However, most scholars (e.g., Brown and Frazier 1978; Frazier andRody 1991; Frazier and Summers 1986) predict that with increaseddependence of the weaker party, the stronger party will have less needto rely on coercive strategies and will instead employ non coercivestrategies to gain compliance, thereby generating relationship satis-faction perceptions. This is especially true in a franchising contextwhere a franchisor’s potential coercive actions are likely to havesystemic reactions from the rest of its chain through adverse publicity.

480 J. of the Acad. Mark. Sci. (2013) 41:473–496

decisions to purchase franchise business units qualify asfinancially significant, memorable events.7

Moreover, we were relieved that a comparison ofMUFees reporting on their own perceptions of motivationsduring the initial unit purchase and the second unitpurchase (see Table 6) showed highly significant differ-ences (and was accompanied by very large effect sizes andhigh statistical power). This pattern of results attests to twoinferences: (1) that MUFees’ motivations indeed changedas they were transitioning from SUFees to MUFees and (2)that they can differentially recall their motivations and werenot simply repeating their answers to the two sets ofidentical scale items.

Common method bias was addressed in accordance withPodsakoff et al.’s (2003) recommendations to collectanonymous responses and use measures from previouslyestablished instruments. Our responses were obtained in ananonymous fashion, and most of our measures wereobtained from previously validated literature sources.Tables 3 and 4 show that among the correlations betweenfactors in this study, the highest correlation is r=0.684,which is well below the threshold of r=0.90 prescribed byPodsakoff et al. (2003) as signifying common method bias.We had also included a “marker” variable (cf. Podsakoff etal. 2003), namely the statement “Australian products, first,

last and foremost,” an adaptation from some well knownethnocentrism scales (Klein et al. 1998; Shimp and Sharma1987) in the questionnaire. There are no theoretical reasonsto expect this ethnocentrism item to be related to either thestrategy constructs or the relationship constructs. Resultsshowed that none of the correlations with this markervariable were significant. These findings, together, indicatethat common method bias, if it does exist, is unlikely toconfound interpretation of the results.

Measures employed

As noted above, two categories of latent constructs wereemployed in this research: (1) determinant factors consid-ered important by the franchisees at the point of their initialand second franchise purchase and (2) a battery of threerelational constructs aimed at capturing how the franchiseescharacterized their relationships with their focal franchisors.The MUFees versus SUFees status was nominally mea-sured in the questionnaire. Finally, measures of selecteddemographic variables were obtained. Appendix 1 presentsthe full battery of latent items utilized in this research. Themeasures of the first two categories of constructs wereprovided with a seven-point Likert-type response rangingfrom Very Unimportant = 1 to Very Important = 7. For therelational constructs, seven-point Likert-type scales an-chored with Strongly Disagree = 1 to Strongly Agree = 7were supplied to the participants to express their level ofagreement with the statements. Hence, in each case, largervalues indicate greater importance or greater agreementassociated with the scale statements.

As described in more detail in Appendix 2, items for theconstructs of Financial Benefits and Franchisor Experiencewere developed afresh for this investigation using explor-

7 However, to ascertain this empirically, we subdivided our sampleinto those who had been with the system for two years or less andthose with more than two years of association with their franchisesystems, and we carried out a MANOVA analysis to see if there weresignificant differences across these two groups. The results wereinsignificant (p=0.554) suggesting that whatever erosion of memory(if any) occurred, it affected both groups equally. However, toreiterate, we believe that salient events like decisions to purchasefranchise business units qualify as financially significant andmemorable events.

Table 2 Respondent profiles of MUFees versus SUFees on selected demographic variables

Demographic variable Response N=98 N=225 Z-Test for proportionsMUFees MUFees SUFees SUFeesCounts Percent Counts Percent Z-value p-value

1 Whether enquired about future MUFeestatus at the time of purchase

Yes 22 of 36 66.11% 98 of 170 57.65% 0.196 >0.15

2 Gender Male 69 of 96 71.88% 160 of 215 74.42% 0.330 >0.25

3 Average age of the respondent (years)a Means -> 44.64 SD-> 10.28 45.36 SD-> 10.44 F=0.754 >0.57

4 Average annual sales turnover(in Australian dollars)b

Means -> 755000 SD-> 487904 661565 SD-> 1082329 NA NA

5 Average age of associationwith the system (years)a

Means -> 5.93 SD-> 2.66 5.47 SD-> 4.75 F=1.120 >0.21

a These being metric variables were compared using MANOVA-t-test procedures to contain the experimentwise error rate to 0.05.

MANOVA yielded an equivalent F=0.794 (df=2,298) which was non-significant (p>0.453). The follow-up ANOVA results are presented in theTable.

SD refers to standard deviations.b Only two MUFees answered this question. Hence, a meaningful inferential comparison was not possible.

J. of the Acad. Mark. Sci. (2013) 41:473–496 481

atory research and focus groups. All other latent constructmeasures were adapted from pedigreed literature sourceswhere they had undergone rigorous psychometric scrutiny.The scale items for franchisor strategy, stressing franchi-sor’s proactive adaptation to the marketplace dynamics,were adapted from Tsourveloudi and Valavanis (2002). Thedependence scale items were taken from Dant andGundlach (1999) and represent the reverse coded versionsof their autonomy items focused on the importancefranchisees ascribe to operational freedom, newfound jobsatisfaction (relative to employment), and the ability tobalance work and family demands. The measures for trustand commitment were adapted from Crosby et al. (1990)and Kumar et al. (1994), respectively. In operationalizingrelationship satisfaction, consistent with the constitutivemeaning of the construct, we tap the overall affectiveevaluations in terms of seven descriptors drawn from a hostof established channel satisfaction literature. The specific

items were taken from the scales validated by Dant (1986)(see Appendix 1 for a listing of a complete set of scaleitems employed in this research).

Psychometric assessment of measurement models

We evaluated the psychometric properties of our measurementmodels in two CFAs. The first CFA relates to the full sample(N=323) while the second CFA is based on just the MUFees(N=98) since only the MUFees had answered the secondfranchise purchase battery of questions (see Appendix 1).The inter-trait correlations, means, standard deviations, andpsychometric diagnostics of these results are presented inTables 3 and 4.

The unidimensionality and convergent validity of ourmeasures were examined with confirmatory factor analysis(CFA) using CALIS with two separate CFAs. As seen inTables 3 and 4, all constructs displayed acceptable

Table 3 Determinants of initial franchise purchase and relational constructs: correlations, descriptive statistics and psychometric diagnostics (N=323)a

Mean Standarddeviation

α AVE IP1 IP2 IP3 IP4 R1 R2 R3

Franchisor strategy IP1 5.33 1.01 0.89 0.60 1.000

Dependence IP2 2.77 0.98 0.76 0.51 0.491 1.000

Financial benefits IP3 5.30 0.91 0.85 0.51 0.338 0.394 1.000

Franchisor experience IP4 5.15 0.98 0.83 0.50 0.645 0.463 0.425 1.000

Trust R1 4.70 1.14 0.92 0.62 0.128* 0.302 0.179 0.154 1.000

Commitment R2 3.54 1.39 0.91 0.62 0.142* 0.099** 0.095** 0.203 0.298 1.000

Relationship satisfaction R3 4.37 0.99 0.96 0.79 0.157 0.217 0.062** 0.089** 0.662 0.173 1.000

aα refers to composite reliability coefficients while AVE refers to average variance extracted.

CFA Model Fit Statistics were as follows: χ2 =476.29 (p<0.01), RMR=0.059, and CFI=0.92.

Correlations marked with a single * are significant at 0.05 level; those marked with ** are not significant. All others are significant at p<0.01.

The CFA Fit Statistics are taken from bootstrapped data without over-sampling.

Table 4 Determinants of the second franchise purchase: correlations, descriptive statistics and psychometric diagnostics (N=98)a

Mean Standard deviation α AVE SP1 SP2 SP3 SP4

Franchisor strategy SP1 5.91 0.81 0.82 0.53 1.000

Dependence SP2 2.38 0.86 0.75 0.51 0.376 1.000

Financial benefits SP3 6.04 0.75 0.80 0.48 0.684 0.508 1.000

Franchisor experience SP4 5.98 1.56 0.84 0.52 0.327 0.251* 0.396 1.000

a All correlations except the ones marked by an * are significant at p<0.01; the r=0.251 is significant at 0.05 level.

α refers to composite reliability coefficients while AVE refers to average variance extracted.

CFA Model Fit Statistics were as follows: χ2 =3034.26 (p<0.01), RMR=0.068, and CFI=0.85.

The CFA Fit Statistics are taken from bootstrapped data with over-sampling.

The over-sampling was utilized to evaluate the stability of the estimates given our relatively small sample size (Byrne 2001). Under this procedure,multiple subsamples are randomly drawn with replacement from the original sample. The original dataset had yielded χ2 =2694.45 (p<0.01), RMR=0.064, and CFI=0.81, which suggests minimal departures from results based on just N=89. Hence, we can infer that these fit statistics are stable.

482 J. of the Acad. Mark. Sci. (2013) 41:473–496

composite reliabilities that ranged from 0.75 to 0.96 andexceeded the commonly accepted 0.70 cutoff. Further, asAppendix 1 shows, all items loaded significantly on theirrespective constructs with large loadings each significant atp<0.001, showing satisfactory convergent validity (Andersonand Gerbing 1988). Finally, convergent validity is alsoindicated by the large average variance extracted (AVE) foreach construct (see Tables 3 and 4), which meets thesuggested threshold of 0.50 (Fornell and Larcker 1981).

The measurement fit indices for two models are asfollows: Full Sample CFA (Table 3): χ2=476.29 (p<0.01), comparative fit index (CFI)=0.92, root meansquare residual (RMR)=0.059; MUF Sub Sample CFA(Table 4): χ2=3034.26 (p<0.01), CFI=0.85, RMR=0.068. Convergent validity of our measures appears tobe well established.

We evaluated the discriminant validity of our measuresusing methods prescribed by Fornell and Larcker (1981).Discriminant validity is evident when the square root of theAVE (see Tables 3 and 4) is larger than the correlations ofother constructs (the smallest square root of AVE is 0.707[calculation not shown in Tables], which exceeds allcorrelation coefficients) or when the square of the correla-tions is less than the AVE (Fornell and Larcker 1981). Boththese tests demonstrated discriminant validity.

Statistical analyses

Test of hypotheses: determinants of initial franchisepurchase The comparison of SUFees versus MUFees interms of factors they considered to be important whenchoosing their initial purchase of the franchise unit wasevaluated by MANOVA. MANOVA is useful when thereare multiple metrically scaled criterion variables and one ormore categorical predictor variables (in our case, just one,the MUF versus SUF dichotomy) (Green 1978). The resultsfor the determinant factors for the initial franchise purchasedecision are presented in Table 5.

Two sets of results are presented in this table. H1, H2and H3 were tested using the conventional MANOVA-ANOVA routine. The overarching effect of dependence(H4) was examined by mounting covariate analyses usingMANCOVA and ANCOVA in conjunction with ourMANOVA-ANOVA analyses (Gamst et al. 2008; Hair etal. 2006; Malhotra 1996), the premise being akin tomediation analysis (i.e., the introduction of the dependencecovariate should remove the main effect of SUFees versusMUFees classification, if in fact, dependence is the rootcause of differences in the outcome measures). Thisprocedure is preferable to creating a randomized blockdesign with MANOVA using a median split measure of thedependence construct because it retains the metric dataproperty of our dependence measure (Hair, et al. 2006, p.

405). We also present an independent sample t-test of thedependence construct across the two groups (Table 5) andfind them to be statistically different, thereby legitimizingthe use of dependence as a covariate in the ensuingMANCOVA analyses.

Test of hypotheses: determinants of the second franchisepurchase The questions related to the determinants of thesecond franchise purchase were relevant only to theMUFees (N=98) part of the sample and were aimed attracking potential changes in the mindset of MUFees fromthe time they purchased their initial franchise to the point oftheir purchase of their second purchase.

Since these were the same respondents answeringquestions about the importance of factors they consideredsignificant during the initial franchise purchase versus thesecond unit purchase, the appropriate analytical techniqueappeared to be repeated measures MANOVA, to befollowed by repeated measures ANOVA, and multiplepaired comparisons. As before, since our categoricalvariable is a dichotomy (i.e., SUFees versus MUFees),multiple paired comparisons were not tenable. The resultsof these repeated measures analyses are presented inTable 6.

Test of hypotheses: relational sentiments Once again, thedata setup required that we carry out the MANOVA-ANOVA routine in comparing SUFees versus MUFees interms of the three relational constructs of (1) trust, (2)commitment, and (3) relationship satisfaction. Since thepredictor variable was a dichotomy (i.e., MUFees versusSUFees), we did not need paired multiple comparisons. Theresults of these analyses are presented in Table 7.

Substantive results

All eleven hypotheses were supported by our analyses. Weunderscore the results associated with H4, the premise ofthe overarching effect of dependence sentiments driving thepurported differences across the SUF and MUF formats offranchise ownership and operation. We further elaborate onthese details below.

Test of hypotheses: determinants of initial franchisepurchase As can be seen from Table 5 MANOVA-ANOVA results, SUFees rated the importance of (1)franchisor strategy, (2) financial benefits, and (3) franchisorexperience at significantly higher levels than their MUFeescounterparts, supporting H1, H2, and H3. We additionallynote that these significance tests were directionally consis-tent with our a priori predictions and accompanied bysignificant effect size estimates and very high statistical

J. of the Acad. Mark. Sci. (2013) 41:473–496 483

Tab

le5

SUFeesversus

MUFeesanddepend

ence

covariateeffectson

initial

considerations

forchoo

sing

currentfranchisor

NMean

Standard

deviation

F(df=

1,321)

Effectsize

aStatistical.

power

p-value

Substantiv

econclusions

t-test

Dependence

SUFees

225

2.58

1.07

t(df=

321)

0.863

0.999

0.000

SUFeesrate

theim

portance

ofdependence

onfranchisor

MUFees

983.21

0.52

−7.132

lower

than

theMUFees

ANOVA

Franchisorstrategy

SUFees

225

5.40

1.10

4.814

0.267

0.932

0.029

SUFeesrate

theim

portance

ofasoundfranchisor

strategy

higher

than

theMUFees

MUFees

985.17

0.74

ANCOVA

Maineffect

0.910

0.115

0.148

0.363

SUFeesrate

theim

portance

offranchisor

strategy

higher

dueto

thedependence

effectsc

Covariate

effect

99.534

1.207

0.999

0.000

ANOVA

Financial

benefits

SUFees

225

5.43

0.82

4.038

0.243

0.993

0.000

SUFeesrate

theim

portance

offinancialbenefitsof

belonging

toafranchisechainhigher

than

theMUFees

MUFees

984.99

1.05

ANCOVA

Maineffect

3.514

0.227

0.464

0.062

SUFeesrate

theim

portance

offinancialbenefitshigher

due

tothedependence

effectsc

Covariate

effect

47.041

0.830

0.999

0.000

ANOVA

Franchisorexperience

SUFees

225

5.29

1.09

4.854

0.267

0.926

0.000

SUFeesrate

theim

portance

offranchisor’sbusinesses

experience

higher

than

theMUFees

MUFees

984.85

0.53

ANCOVA

Maineffect

1.917

0.168

0.282

0.167

SUFeesrate

theim

portance

offranchisor’sexperience

higher

dueto

thedependence

effectsc

Covariate

effect

73.681

1.039

0.999

0.000

Effectsize

b η2Multiv

ariate

(MANOVA)summary

Wilk

s’Lam

bdaconvertedto

F(df=

3,319)

6.726

0.38

0.993

0.000

With

outcovariateinclusion,

theSUFees/MUFeesdichotom

yhasalargeandsignificanteffect.

Multiv

ariate

(MANCOVA)summary

Wilk

s’Lam

bdaconvertedto

F(df=

3,319)

2.806

0.03

0.673

0.040

With

covariateinclusion,

theSUFees/MUFeesdichotom

yeffect

disappears

andissubstituted

forby

alargeandsignificant

dependence

effect.

Covariate

Wilk

s’Lam

bdaconvertedto

F(df=

3,319)

43.788

0.29

0.999

0.000

aEffectsizesarerepo

rted

usingthedstatistics.Coh

en(197

7,pages22–2

7)prov

ides

thefollo

wingbenchm

arks

fordstatistics:values

ofabou

t0.20

sign

ify“small”

effects,values

of0.50

deno

te“m

edium”effect,andvalues

of0.80

orhigh

erdeno

te“large”effect

size.

bη2

oreta2,u

sedto

estim

atetheeffectsize

associated

with

MANOVA/M

ANCOVA,can

beinterpretedas

analog

ousto

R2.η

2values

over

0.13

8aredeem

edto

belargeby

Coh

en(197

7,p.

287).

cThese

inferences

referto

ANCOVA

results

(i.e.,theeffectsof

depend

ence

covariate)

rather

than

maineffects,which

areinsign

ificant.

484 J. of the Acad. Mark. Sci. (2013) 41:473–496

Tab

le6

Con

sideratio

nsdu

ring

buying

:differencesbetweentheinitial

versus

second

franchisepu

rchase

(MUFeesN=98

)

NMean

Stand

ard

deviation

F(df=

1,94)

Effectsize

aStatistical.

power

p-value

Sub

stantiv

econclusion

s

Dependenceconcerns

become

less

impo

rtantdu

ring

the

Secon

dUnitPurchase

t-test:Dependence

Initial

unitpu

rchase

983.21

2.58

t(df=

98)

1.18

20.99

90.00

0

Secon

dun

itpu

rchase

982.38

3.21

8.27

5

Franchisorstrategy

Initial

unitpu

rchase

985.18

0.74

78.358

0.94

0.99

90.00

0FranchisorStrategybecomes

moreim

portantdu

ring

the

Secon

dUnitPurchase

Secon

dun

itpu

rchase

985.91

0.81

Financial

benefits

Initial

unitpu

rchase

985.02

1.06

69.890

1.11

0.99

90.00

0Financial

Benefits

concerns

becomemoreim

portant

during

theSecon

dUnit

Purchase

Secon

dun

itpu

rchase

986.04

0.75

Franchisorexperience

Initial

unitpu

rchase

984.87

0.52

46.813

0.95

0.99

90.00

0FranchisorExp

erienceconcerns

becomemoreim

portantdu

ring

theSecon

dUnitPurchase

Secon

dun

itpu

rchase

985.98

1.56

Multiv

ariate

(MANOVA)summary

Effectsize

b η2

Wilk

s’Lam

bdaconv

ertedto

F(df=

3,94)

65.886

0.40

0.99

90.00

0

aEffectsizesarerepo

rted

usingthedstatistics.Coh

en(197

7,pages22–2

7)prov

ides

thefollo

wingbenchm

arks

fordstatistics:values

ofabou

t0.20

sign

ify“small”

effects,values

of0.50

deno

te“m

edium”effect,andvalues

of0.80

orhigh

erdeno

te“large”effect

size.

bη2

oreta2,used

toestim

atetheeffect

size

associated

with

MANOVA,canbe

interpretedas

analog

ousto

R2.η2

values

over

0.138aredeem

edto

belargeby

Cohen

(197

7,page

287).

J. of the Acad. Mark. Sci. (2013) 41:473–496 485

power.8 However, as noted above, the MANCOVA-ANCOVA results are much more revelatory in that notonly are the effects of dependence on each of the outcomemeasures of franchisor strategy, financial benefits, andfranchisor experience highly significant (and accompaniedwith large effect sizes and statistical power), but theanalogous main effects of SUFees versus MUFees classi-fication virtually disappear for each of the outcomemeasures under ANCOVA analyses.

Test of hypotheses: determinants of the second franchisepurchase As Table 6 shows, all four effects were statisti-cally significant, were directionally consistent with our apriori predictions, and were accompanied by very largeeffect sizes (all of them categorized as large using Cohen’s[1977] benchmarks) and high statistical power (at 0.999,significantly larger than the cutoff of 0.80). Hence H5through H8 were all supported by the data: with greaterfinancial stake at risk, it is only logical that the importanceof franchisor strategy, financial benefits, and franchisorexperience should exceed MUFees’ parallel sentimentstheir parallel sentiments when they were operating asSUFees. Once again, support for H8, which captures thepervasive effect of deepening dependence sentiments ofMUFees as they contemplate the purchase of their secondunit, is especially noteworthy. Although MUFees likelyperceive themselves as successful business persons deserv-ing more respect from the franchisor and therefore can beexpected to crave more independence, our analyses suggestthat with larger financial stakes in their MUF relationshipswith their franchisors, MUFees rate the importance ofdependence lower than they did when they were SUFees.No doubt, this pattern of findings is also buttressed by theirde facto experience of having operated within their systemsas successful SUFees and thereby having a more realisticsense of latitude their franchisors are likely to accord them.

Test of hypotheses: relational strength All three relationalsentiments yielded directionally correct, significant differ-ences across the MUFees versus SUFees comparison (seeTable 7), supporting H9 through H11. Once again, theseresults were accompanied by very large effect sizes andhigh statistical power. Moreover, the absolute magnitudes ofmeans show that SUFees answered these questions in theagree range while the MUFees answered them in thedisagree range.

8 The notion of statistical power, operationally (1-β), where β refers toType II errors can be loosely translated as the probability of makingthe correct inference about the hypotheses under test since β alreadyaccounts for α or Type I error. Cohen (1977, page 14) has proposedthe widely accepted benchmark of 1-β=0.80 for behavioral sciencesas the desirable level of power for statistical tests.T

able

7The

effect

ofsing

leversus

multiun

itstatus

onrelatio

nalsentim

ents

NMean

Stand

ard

deviation

F(df=

1,321)

Effectsize

aStatistical.

power

p-value

Sub

stantiv

econclusion

s

Trust

SUFees

225

5.33

0.55

578.21

03.07

0.99

90.00

0SUFeescharacterize

therelatio

nshipas

trustin

gwhile

theMUFeesdisagree

with

thissentim

ent

MUFees

983.27

0.77

Com

mitm

ent

SUFees

225

4.86

1.50

73.737

0.91

0.99

90.00

0SUFeescharacterize

therelatio

nshipas

exhibitin

gcommitm

entwhile

the

MUFeesdisagree

with

thissentim

ent

MUFees

983.80

0.70

Relationshipsatisfaction

SUFees

225

4.70

0.97

164.19

91.38

0.99

90.00

0SUFeescharacterize

therelatio

nshipas

satisfactorywhile

theMUFeesdisagree

with

thissentim

ent

MUFees

983.62

0.54

Multiv

ariate

(MANOVA)summary

Effectsize

b η2

Wilk

s’Lam

bdaconv

ertedto

F(df=

3,319)

263.28

50.71

40.99

90.00

0

aEffectsizesarerepo

rted

usingthedstatistics.Coh

en(197

7,pages22–2

7)prov

ides

thefollo

wingbenchm

arks

fordstatistics:values

ofabou

t0.20

sign

ify“small”

effects,values

of0.50

deno

te“m

edium”effect,andvalues

of0.80

orhigh

erdeno

te“large”effect

size.

bη2

oreta2,used

toestim

atetheeffect

size

associated

with

MANOVA,canbe

interpretedas

analog

ousto

R2.η2

values

over

0.138aredeem

edto

belargeby

Cohen

(197

7,page

287).

486 J. of the Acad. Mark. Sci. (2013) 41:473–496

Conclusions and discussion

Even though MUF is ubiquitous and even dominant inmany sectors of franchising, there have rarely been anysystematic investigations of the differences betweenSUFees and MUFees. This effort is offered as an initialenquiry into this issue. Even though we propose and test aseries of hypotheses on these two categories of franchiseeslargely couched within the overarching theoretical frame-work of dependence theory, the overriding goal behind thisinvestigation was to provide some inferentially groundeddescriptive literature on this subject. It is hoped that thisbackground material will provide initial theoretical anchor-ing to other scholars investigating the SUFees versusMUFees phenomenon.

The principal intent of this study was to bridge the widegap in the extant empirical franchising literature byexamining the salient differences that exist between SUFeesand MUFees. There appears to be a fundamental misun-derstanding regarding the nature of franchisee–franchisorrelationships. This misunderstanding is rooted in the factthat the vast majority of work has been couched in theSUFees–franchisor context, while the MUFees–franchisorcontext has been largely ignored, even though as notedearlier, MUF represents a pervasive and even dominantform of franchise ownership in many sectors. Though weinvestigate specific differences between the two contexts,the larger value of our work lies in the fact that it is one ofthe few pieces of literature to empirically demonstrate thesignificant differences that underlie the relationshipsSUFees and MUFees have with their franchisors. Thesedifferences are important not just because so much of theliterature is rooted in the SUFees–franchisor perspective butalso because so much of the contemporary franchisingenvironment involves MUFees. In effect, we are currentlyblind-sighted about a dominant part of this importantenterprise format in the economy. Our findings offervaluable insights into the extent to which these two groupsof franchisees are different in terms of their (1) underlyingmotivations at two points in time (i.e., the time of the initialpurchase of a franchise outlet and the time of thesubsequent purchase of a franchise outlet) and (2) theirperceptions of relationship strength that reflects the qualityof their dyadic interactions with their franchisors. Thus, wehope our empirical results will signal a call to action toresearchers for conducting franchising research with thisfundamental contextual adjustment. We found strongstatistical support for all our hypotheses not just in termsof significance levels but also in terms of magnitude ofeffects and high statistical power (cf., Tables 5, 6 and 7).

The uncovered differences between SUFees andMUFees cast a deep shadow on what we currently knowabout the dominant research ontology within franchising

domain. For example, the entire research stream onownership redirection thesis (cf., Oxenfeldt and Kelly1969), which has largely ignored these differences, needsto be reexamined through the lenses of this dichotomy.Some of the other most controversial subject matters withinthe franchising research stream are (1) the emergence of therival successor stable plural forms thesis (cf., Baker andDant 2008; Bradach and Eccles 1989; Dant and Kaufmann2003), (2) the issue of defining and determining successand failure of franchisees, and (3) the growing internation-alization of the franchising enterprise.

While the ownership redirection thesis argues thatsuccessful, resource-flush franchise systems will ultimatelytend toward becoming wholly company-owned systems dueto opportunistic reacquisition activity by the powerfulfranchisors, the plural forms thesis contends that since eachtype of ownership structure provides its own uniquegovernance benefits, franchise systems are likely tocontinue to simultaneously invest in both company-ownedand franchised outlets.

First off, ownership redirection takes on a completelydifferent meaning when the franchisor is trying to re-acquire select SUFees versus MUFees; the latter may takeon the flavor of corporate hostile takeovers and mergers. Asto the stable plural forms thesis, we now know that thedichotomy of company-owned versus franchised outletsshould be supplanted by a trichotomy due to the mindsetdifferences between SUFees and MUFees operations. Itmay be that MUFees, being mini-hierarchies in and ofthemselves, may mirror the governance benefits of theirparent franchisors. Alternatively (and this may be especiallytrue with area developers operating in overseas markets),MUFees may bring a whole new slate of governancebenefits to the table.

Franchise system performance has been measured indifferent ways in the extant literature, including survival ofthe franchise systems, financial performance, total numberof franchising units in franchise systems, and totaloperating units. The issue of franchisee failure, on theother hand, is frequently contrasted with comparable failurerates of nascent entrepreneurial ventures. Included in thisliterature is the controversy of precise operational definitionof failure (e.g., how does one count incidents of franchisorsresuscitating failing units by buying them back and sellingthem on to different operators, etc.). It is easy to see that thefailure of SUFees versus MUFees would have vastlydifferent financial effects on their focal franchisors. On theother hand, the field will need to conceptualize alternativeoperationalizations of the construct of MUF failure.

Finally, the inexorable internationalization process occur-ring in the franchising industry (not just in terms ofhomegrown systems being exported, but also the successfullaunching of non-U.S. franchise companies like Canada’s

J. of the Acad. Mark. Sci. (2013) 41:473–496 487

H&R Block and Yogen Fruz, Australia’s Bark Busters andCartridge World, UK’s LCF language clubs, Denmark’sBoConcept furniture stores, Japan’s Kumon learning centersin the U.S. markets) has significant implications in light ofSUF versus MUF dichotomy. Unlike many U.S.-basedfranchise systems that frequently enter foreign markets usingarea developers and master franchisees (cf., footnote 3),systems from abroad have not followed one specific route ofmarket entry. It would be interesting to investigate the thinkingbehind these different formats of market entry given thedemonstrated differences between the SUFees and MUFees.

In general, as previously stated, most franchisingresearch has been couched under the assumptions of amom-and-pop SUF operating model. The topics brieflynoted above, then, constitute but a small subset of futureresearch agenda that we encourage other franchisingscholars to pursue and investigate through the lenses ofSUFees-MUFees dichotomy.

Theoretical and managerial contributions

In order to explicate the differences between SUFees andMUFees in terms of the factors they consider critical whenchoosing the franchising option, we examined the impor-tance of the focal motivators of (1) franchisor strategy, (2)financial benefits, and (3) franchisor experience as per-ceived by franchisees when making the investment into theinitial franchise outlet as well as the subsequent franchiseoutlet. We find that at the time of investment into theirinitial franchise outlet, a majority of franchisees from boththe SUFees (57.65%) and MUFees (66.11%) cohortsinquired about the future possibility of expanding their unitholdings (cf. Table 2, statistically a non significant pattern).However, franchisees who realized their goal of owningmultiple units and the group that did not (SUFees)apparently held markedly different perceptions of therelative advantages associated with joining their franchisesystems. The observed trend can be explained by theoret-ical explanation of a deepening sense of dependence as theerstwhile SUFees transition into MUFees.

It is important to note that while all MUFees were onceSUFees, not all SUFees necessarily end up becomingMUFees with the passage of time. Again, as seen in Table 2,when we compare the SUF and MUF respondents on“average age of association with the system” we find themalmost alike with no statistical difference, suggesting thatthe two groups of franchisees are approximately alike interms of their experience with their focal franchisors.Hence, their differences in perceptions at the point of theinitial purchase cannot be accounted for by simple passageof time or evolutionary cycle explanations.

Indeed, MUFees appear to possess a longer-termentrepreneurial philosophical orientation (Grünhagen and

Mittelstaedt 2005) compared to SUFees. While SUFeesseemingly equate system success with the expertise andexperience of the franchisor together with perceivedbenefits associated with the quasi-independent managementof their franchise unit at the local market level, MUFeesappear to focus on familiarizing themselves with franchiseunit operations with the goal of realizing scale economiesthrough future development and management of their“mini-chains.” There are at least two potential explanationsfor this pattern: (1) the explanation may lie in personalitydifferentials across SUFees and MUFees and the impact ofthese personality traits on a franchisee’s choice of gover-nance structure (Weaven et al. 2009), and/or alternatively,(2) as Oxenfeldt and Kelly (1969) asserted, different typesof franchisees may join a system for different reasons (e.g.,some may simply lack the ambition to grow or seefranchising as a secure, steady source of moderate levelsof income). At any rate, these premises and theoretical rivalexplanations need further empirical scrutiny.

With passage of time, the more growth-minded franchi-sees are faced with the dilemma of retaining their singlefranchise outlet or adding more franchise units to theirbusiness portfolio. As previously noted (see footnote 3),most MUFees develop their franchise unit subsystemthrough the sequential acquisition of additional franchiseoutlets once they have demonstrated an ability to success-fully own and operate their franchise unit (Kaufmann andDant 1996). However, central to this decision is thisfranchisee’s revised evaluation of the relative merits of thefranchise offer. Our results show that all three focalmotivators become increasingly important to the franchiseeas s/he transitions from SUFees to MUFees status (cf.Table 7). Considering that through acquiring additionalunits in the system the MUFees will assume greater risk, itis likely that they will possess higher expectations of futurefranchisor contributions to the ongoing success of theirmini-chains. This finding compliments the work of Dantand Nasr (1998), who suggest that MUFees (their enhancedneed for independence notwithstanding) are highly depen-dent upon their franchisors and tend to adopt administrativeand coordinative approaches that mimic franchisor oper-ations in building their own subsystem’s brand equity.

The general implication here is that franchisors can craftmore effective and better targeted messages to attractpotential franchisees by emphasizing advantages of thefranchising option such as franchisor strategy (e.g., locationanalysis expertise, supplier relationships), financial benefits(e.g. risk minimization through association with an estab-lished trademark, financial benefits associated with estateplanning), and franchisor experience (e.g., provision ofinitial and ongoing training and support). Moreover,franchisors can develop and retain successful franchiseesby communicating the market orientation and experience of

488 J. of the Acad. Mark. Sci. (2013) 41:473–496

the parent franchisor (e.g., adaptation to competition) andproviding higher financial incentives available to them forfacilitating growth through consistently meeting and/orexceeding objectives.

As to the second objective of trying to understand thedifferences between SUFees and MUFees in terms of theprevalent dispositions and feelings that characterize theirrelationships with franchisors, we probed into the franchi-sees’ perceptions of relational strength in terms of (1) trust,(2) commitment, and (3) relationship satisfaction. Ourfindings indicate that there are sharp contrasts betweenMUFees and SUFees (cf. Table 7). Not only are thesesentiments statistically significantly different (and accom-panied by large effects and statistical power), but we alsonote the substantive directional differences: for all threeconstructs, the means of SUFees are in the agree rangewhile those of MUFees are in the disagree range.

Trust and commitment represent key components of anysuccessful dyadic relationship in fostering cooperation andimproving profitability (Dwyer et al. 1987; Morgan andHunt 1994). Franchise systems exhibiting high levels oftrust and commitment are more likely to encounter lowerlevels of agency-related expenses arising from the oppor-tunistic behaviors of incumbent franchisees (Palmatier et al.2007). In general, the SUFees’ dispositions and feelingstoward their franchisors characterize their dyadic relation-ships as generally cooperative. This result is not surprisinggiven that SUFees choose the franchising option tominimize experiential (and often financial) deficits toentering self-employment through joining a proven busi-ness concept and maintaining a close working relationshipwith their franchisor. Moreover, as SUFees generally have aproportionately large personal financial stake and contributea great deal of time in personally managing the business,they understandably have a significant interest in ensuringthe ongoing continuation of the franchising relationship.

Conversely, the perceptions of the dyadic relationshipsheld by MUFees indicate that MUFees are inclined to viewtheir relationship with franchisors as less cooperative. Thispattern is somewhat troublesome as a franchise system’sability to foster vertical and horizontal collaborativerelationships largely determines its ability to stabilize itsenvironment under increasingly competitive and volatilemarket conditions as well as to enhance productivity. Whilemany MUFees will inevitably challenge the franchisor’sauthority as they become more experienced businessoperators (Baucus et al. 1996), these results may beindicative of the failure of franchisors to deliver on theirpromises, such as in providing administrative support (e.g.,assistance in staff recruitment) for MUFees (Giddings et al.2009).

The general implication here is that this may occur eventhough franchisors may prefer to devise specific interven-

tions aimed at the MUFees in order to prevent MUFeesfrom developing adversarial sentiments that may potentiallyundermine the well-being of the franchise system in thelong run. One possible solution would be to purposivelyencourage MUFees to assume a greater role in the strategicdecision making in the franchise system (e.g., inclusion ofMUFees on franchise advisory boards and franchiseeassociations). This management-by-consensus approachwould presumably improve communication, minimizemisunderstandings, and foster a climate of engagementand risk-taking in the franchise system.

The theoretical implications of this work should not beunderstated. Our results strongly support the viability ofunderstanding the MUFees versus SUFees differencesthrough the lenses of dependence theory. The empiricalresults revealed by this investigation demand that futureresearch conducted on franchisor–franchisee relationshipsemploy expanded and/or altered theoretical foundations toaccount for the differences in MUFees’ and SUFees’relationship dynamics with their franchisors.

We also draw heavily from the theoretical foundations ofrelationship marketing, specifically the commitment-trusttheoretical perspective for deriving H9 and H10, whichproposes that commitment and trust are the key relationalconstructs needed to understand organizational relation-ships (cf., Palmatier et al. 2007). It appears, then, that thisphenomenon requires utilizing competing frameworks in acomplementary fashion (cf., Palmatier et al. 2007). In otherwords, extant theoretical frameworks may not be adequatein explaining the SUFees–MUFees differentials underscor-ing the need for dynamic, adaptable theories capable ofaccounting for the differing relational structures within thefranchising context.

We also recommend that future scholars investigate suchostensive differences across MUFees and SUFees throughthe lenses of other covariates like trust, commitment, andrelationship satisfaction. For example, it may be that it isdifferentials in sentiments like trust or commitment aredriving the uncovered differences.

Limitations

Even though this effort represents the first systematicinvestigation of the differences across MUFees andSUFees, the confidence in our conclusions can be substan-tially enhanced with longitudinal data and dyadic data. Ascan be seen from Table 2, none of the demographicvariables were statistically significant. Essentially, thismeans that MUFees and SUFees are alike in terms ofvariables like past self-employment history, past franchiseownership history, gender, age, and even annual averagesales turnover. A rival explanation for these null findingsmay be that we simply failed to tap the right demographic

J. of the Acad. Mark. Sci. (2013) 41:473–496 489

dimensions that differentiate between MUFees and SUFees.For instance, it is possible that it is not the SUFees andMUFees that are different but that real differences lie incomparing area developers versus sequentially developedMUFees (cf., Grünhagen and Mittelstaedt 2005). However,as noted before, the meager incidence of this organizationalform made such a comparison statistically impossible in thecurrent investigation.

Our results are based on an Australian dataset and hence,at least theoretically, the generalizability of these findingsmay be limited. However, several scholars have noted thegrowing maturity and sophistication of franchising oper-ations in Australia and similarities between the U.S. andAustralian franchising landscape (e.g., Weaven et al. 2009).So even though the findings may apply to other developedeconomies, a cross-national investigation is needed to fully

allay these concerns. Moreover, our dataset is comprised offranchisee respondents drawn from 28 major sectors offranchising in Australia (Frazer et al. 2008), and although itbolsters the arguments for generalizability of our findings,systematic biases resulting from disproportionate represen-tation of certain sectors cannot be ruled out. Further, welooked at only three determinants of franchise purchase andone covariate. Other elements that could have also mediatedor moderated the discovered effects include constructs likelevel of ongoing services provided by the franchisors, brandequity, and franchisor personality dimensions. Finally, wewould be remiss in diligence if we did not acknowledge thelikely deterministic effects of environmental factors like thelevel of competitive intensity and environmental uncertain-ty confronting the respondent franchisees. We commendthese tasks to future scholarly endeavors.

Appendix 1: Measures employed, sources of scales,and psychometric assessment of measures

Table 8

Latent Construct Items StandardizedLoading

t-stat Chronbach’sAlpha

AverageVarianceExtracted

Determinants of Initial of Franchise Purchase

The same battery of questions on determinants of franchise purchase was asked twice to the respondents. First time, the questions were precededby the following stem:

The following items list a set of factors which you may have taken into consideration when you decided to first purchase a franchise within yourcurrent organization.

Please use the rating scale below to indicate the level of importance ranging from “1” for Very Unimportant, to “7” for Very Important (emphasisin the original).

Franchisor strategy 0.890 0.600

Scale Source: Adapted From Tsourveloudi and Valavanis (2002)

Confidence in the organization’s ability tointroduce successful future strategic initiatives

0.94 a

Confidence that the organization would maintain,or increase, re-investment in productdevelopment or service adaptation

0.67 67.86

The system’s ability to introduce new services, orproducts, in the future

0.67 59.18

Confidence that the organization would maintain,or increase, advertising expenditure

0.94 174.1

Dependence 0.760 0.510

Scale Source: Adapted from Dant and Gundlach (1999)

Operational freedom and control of localmarketing ( R )

0.58 a

Job satisfaction (relative to employment) ( R ) 0.70 38.84

Managing a balance of work and familydemands (R )

0.84 41.68

Financial benefits 0.850 0.510

Scale Source: New Scale Based on Exploratory Work and Focus Groups (Appendix 2)

Advertising economies of scale and reach 0.79 a

490 J. of the Acad. Mark. Sci. (2013) 41:473–496

Table 8 (continued)

Latent Construct Items StandardizedLoading

t-stat Chronbach’sAlpha

AverageVarianceExtracted

Lower risk associated with purchasing a franchiserather than establishing a new business

0.66 42.38

Magnitude of expected financial returns 0.74 37.61

Financial security in the short term 0.70 39.34

Long term viability of the organization 0.77 45.06

Financial experience 0.830 0.500

Scale Source: New Scale Based on Exploratory Work and Focus Groups (Appendix 2)

The organization had a proven track record ofadapting to changing market conditions

0.71 a

Expertise of the franchisor 0.74 52.04

The organization’s business concept 0.69 50.12

The existence of a professional managementstructure within the organization

0.75 53.65

Provision of ongoing training by the organization 0.64 45.09

Determinants of Second Franchise Purchase

The second time around, the analogous stem read:

The following items list a set of factors which you may have taken into consideration when you decided to purchase a second franchise unit withinyour current organization.

Please use the rating scale below to indicate the level of importance ranging from “1” for Very Unimportant, to “7” for Very Important (emphasis in the original).

Franchisor strategy 0.820 0.530

Scale Source: Adapted From Tsourveloudi and Valavanis (2002)

Confidence in the organization’s ability tointroduce successful future strategic initiatives

0.63 a

Confidence that the organization would maintain,or increase, re-investment in productdevelopment or service adaptation

0.51 38.57

The system’s ability to introduce new services, orproducts, in the future

0.96 33.20

Confidence that the organization would maintain,or increase, advertising expenditure

0.80 35.98

DependenceScale Source: Adapted from Dant and Gundlach (1999)

Operational freedom and control of localmarketing ( R )

0.49 a 0.75 0.51

Job satisfaction (relative to employment) ( R ) 0.82 44.85

Managing a balance ofwork and family demands (R ) 0.78 41.29

Financial benefits 0.80 0.48

Scale Source: New Scale Based on Exploratory Work and Focus Groups (Appendix 2)

Advertising economies of scale and reach 0.59 a

Lower risk associated with purchasing a franchiserather than establishing a new business

0.54 43.45

Magnitude of expected financial returns 0.70 46.23

Financial security in the short term 0.77 30.43

Long term viability of the organization 0.72 33.41

Financial experience 0.84 0.52

Scale Source: New Scale Based on Exploratory Work and Focus Groups (Appendix 2)

The organization had a proven track record ofadapting to changing market conditions

0.81 a

Expertise of the franchisor 0.66 52.36

The organization’s business concept 0.59 17.65

The existence of a professional managementstructure within the organization

0.84 49.87

Provision of ongoing training by the organization 0.67 53.61

J. of the Acad. Mark. Sci. (2013) 41:473–496 491

Appendix 2: Details of focus groups

As mentioned in the paper, a series of focus groups wasconducted to develop the battery of items related to thedeterminants of the initial and second franchise purchases.Focus groups were chosen as they provide rich experientialdata through the observation of participant attitudes andperceptions developed through group interaction (Asbury

1995). Following the generation of an initial item list fromthe extant literature (Dant and Gundlach 1999; Grünhagenand Mittelstaedt 2001, 2002, 2005; Hing 1995; Hunt 1977;Izreali 1972; Johns et al. 2004; Kalnins and Lafontaine2004; Kaufmann and Dant 1996; Knight 1986; Morrison1997; Peterson and Dant 1990; Stanworth and Curran 1999;Stanworth and Kaufmann 1996; Tsourveloudi and Valavanis2002; Wadsworth 2002; Weaven and Frazer 2003, 2006;

Table 8 (continued)

Latent Construct Items StandardizedLoading

t-stat Chronbach’sAlpha

AverageVarianceExtracted

Relational Constructs

The two batteries (shown above) were separated by the following section on Relationship Constructs.

The relational construct set of questions were anchored with a 7-point LIKERT type scale ranging from “1” = Strongly Disagree to “7” = Strongly Agree.

Trust

Scale Source: Adapted from Crosby et al. (1990)

I can count on my franchisor to be honest in itsdealings with me

0.94 a 0.92 0.62

My franchisor is a company that stands by itsword

0.78 77.22

I can rely on my franchisor to keep the promisesthey make to me

0.71 76.34

My franchisor is sincere in its dealings with me 0.97 86.99

My franchisor can be counted on to do what isright

0.77 83.74

My franchisor is a company that I have greatconfidence in

0.62 69.75

Commitment

Scale Source: Adapted from Kumar et al. (1994)

We have a mutually beneficial relationship 0.68 a 0.91 0.62

I enjoy working with this franchisor 0.80 73.08

It feels like the franchisor and I are constantlydoing something for each other

0.73 67.85

I feel as though the franchisor and I are “in ittogether”

0.75 68.23

I feel that the values of this franchise systemmatch my own

0.79 73.44

The franchisor and I get along well together 0.82 73.86

The franchisor and I tend to share similar values 0.83 75.93

Since franchises are contractually vested relationships for a pre-specified length of time, we focus on the “a valued relationship” part of theconstitutive definition rather than the “enduring” aspect of this construct. See Dant and Schul (1992) for discussion of how franchising contextsdiffers from other inter-firm research settings.

Relationship satisfaction

Scale Source: Dant (1986)

Satisfying 0.88 a 0.92 0.79

Friendly 0.88 111.10

Fair 0.92 142.20

Supportive 0.85 124.30

Considerate 0.85 131.90

Healthy 0.84 130.40

Cordial 0.86 121.50

a Value set to 1.

492 J. of the Acad. Mark. Sci. (2013) 41:473–496

Withane 1991), single and multiple unit franchisees drawnfrom the contiguous geographic areas were utilized tovalidate existing items and to generate new items. Focusgroups were deemed appropriate as existing criteria listshave been criticized for not fully capturing the complexityof franchisee motivations (Gauzente 2002).

A total of three focus groups with 26 single-unitfranchisees and three focus groups with 15 multi-unitfranchisees were conducted. Group sessions were plannedto last approximately 90 min, and as a result, a structuredmediating style was adopted to allow for greater coverageof topic areas (Greenbaum 1988). Focus group memberswere asked to listen to each item and then decide (as agroup) whether the item represented a valid motivation forthem to initially enter franchising (or purchase additionalunits within the franchise system). This approach assisted inachieving a balance between qualitative and quantitativeinformation (Krueger 1994). Interpretative accuracy waspromoted through the integration of non-verbal observa-tions with verbal responses, facilitator notes of theproceedings, and transcriptions of the focus-group discus-sions (Krueger 1994). Throughout the process, the moder-ator considered issues of bias including the possibility ofleading questions by the moderator, interpretation of thefindings to anticipated results and the social desirability ofprovided responses (Morgan 1988).

Once the final lists of initial purchase motivations andthe second purchase motivations had been compiled by thisprocess, the research team eliminated items that wereunique to specific purchase motivations to isolate itemsthat were mirrored in both purchase situations. This led tothe retention of 5 items each for tapping the constructs ofFinancial Benefits and Franchisor Experience.

These items are shown in Appendix 1.

References

Alchian, A. A. (1950). Uncertainty, evolution, and economic theory.Journal of Political Economy, 58(January), 211–222.

Anand, P., & Stern, L. W. (1985). A sociopsychological explanationfor why marketing channel members relinquish control. Journalof Marketing, 22(November), 265–276.

Anderson, J. C., & Gerbing, D. W. (1988). Structural equationmodeling in practice: a review and recommended two-stepapproach. Psychological Bulletin, 103(3), 411–423.

Anderson, J. C., & Narus, J. A. (1984). A model of the distributor’sperspective of distributor-manufacturer working relationships.Journal of Marketing, 48(4), 62–74.

Anderson, E., & Weitz, B. (1992). The use of pledges to build andsustain commitment in distribution channels. Journal of MarketingResearch, 29(February), 18–34.

Antia, K. D., & Frazier, G. L. (2001). The severity of contractenforcement in interfirm channel relationships. Journal ofMarketing, 65(October), 67–81.

Armstrong, J. C., &Overton, T. S. (1977). Estimating nonresponse bias inmail surveys. Journal of Marketing Research, 14, 396–402.

Asbury, J. (1995). Overview of focus group research. QualitativeHealth Research, 5(4), 414–420.

Bailar, B. (1989). Information needs, surveys, and measurementerrors. In D. Kasprzyk, G. Duncan, G. Kalton, & M. P. Singh(Eds.), Panel surveys (p. 7). New York: Wiley.

Baker, B. L., & Dant, R. (2008). Stable plural forms in franchisesystems: An examination of the evolution of ownership redirectionresearch. In G.W. J. Hendrikse, M. Tuunanen, J. Windsperger, & G.Cliquet (Eds.), Strategy and governance of networks: Coopera-tives, franchising and strategic alliances (pp. 87–112). Heidelberg:Physica-Verlag, a Springer Company.

Bates, T. (1995). A comparison of franchise and independent smallbusiness survival rates. Small Business Economics, 7(5), 377–388.

Bates, T. (1996). The financial needs of black owned businesses.Journal of Developmental Entrepreneurship, 1(1), 1–17.

Baucus, D. A., Baucus, M. S., & Human, S. E. (1996). Consensus infranchise organizations: a cooperative agreement among entre-preneurs. Journal of Business Venturing, 11(5), 359–378.

Bradach, J. L. (1995). Chains within chains: The role of multi-unitfranchisees. In R. P. Dant & P. J. Kaufmann (Eds.), Franchising:Contemporary issues and research. The Haworth Press, Inc.

Bradach, J. L., & Eccles, R. G. (1989). Price, authority, and trust: fromideal types to plural forms. Annual Review of Sociology, 15(97),118.

Brown, J. R., & Day, R. L. (1981). Measures of manifest conflict indistribution channels. Journal of Marketing Research, 18(3),263–274.

Brown, J. R., & Frazier, G. L. (1978). The application of channelpower: its effects and connotations. In AMA SummerEducators’ Conference (pp. 266–270). Chicago: AmericanMarketing Association.

Brown, J. R., Lusch, R. F., & Muehling, D. D. (1983). Conflict andpower-dependence relations in retailer-supplier channels. Journalof Retailing, 59(4), 53–80.

Brown, J. R., Dev, C. S., & Lee, D. (2000). Managing marketingchannel opportunism: the efficacy of alternative governancemechanisms. Journal of Marketing, 64(April), 51–65.

Bucklin, L. P., & Sengupta, S. (1993). Organizing successful co-marketingalliances. Journal of Marketing, 57(2), 32–46.

Burgess, T. F., Gules, H. K., & Tekin, M. (1997). Supply-chaincollaboration and success in technology implementation. Inte-grated Manufacturing System, 8(5), 323–332.

Byrne, B. M. (2001). Structural equation modeling with Amos.Mahwah: Lawrence Erlbaum.

Cagliano, R., Acur, N., & Boer, H. (2005). Patterns of change inmanufacturing strategy configurations. International Journal ofOperations & Production Management, 25(7), 701–718.

Carney, M., & Gedajlovic, E. (1991). Vertical integration in franchisesystems: agency theory and resource explanations. StrategicManagement Journal, 12(8), 607–625.

Castrogiovanni, G. J., Combs, J. G., & Justis, R. T. (2006a). Resourcescarcity and agency theory predictions concerning the continueduse of franchising in multi-outlet networks. Journal of SmallBusiness Management, 44(1), 27–44.

Castrogiovanni, G. J., Combs, J. G., & Justis, R. T. (2006b). Shiftingimperatives: an integrative view of resource scarcity and agencyreasons for franchising. Entrepreneurship Theory and Practice,30(1), 23–40.

Cohen, J. (1977). Statistical power analysis for the behaviouralsciences. New York: Academic.

Combs, J. G., & Ketchen, D. J. (1999a). Can capital scarcity helpagency theory explain franchising? A test of the capital scarcityhypothesis. Academy of Management Journal, 42(2), 196–207.

J. of the Acad. Mark. Sci. (2013) 41:473–496 493

Combs, J. G., & Ketchen, D. J. (1999b). Explaining interfirmcooperation and performance: toward a reconciliation of pre-dictions from the resource-based view and organizationaleconomics. Strategic Management Journal, 20, 867–888.

Combs, J. G., Michael, S. C., & Castrogiovanni, G. J. (2004).Franchising: a review and avenues to greater theoretical diversity.Journal of Management, 30(6), 907–931.

Cropanzano, R., Prehar, C. A., & Chen, P. Y. (2002). Using socialexchange theory to distinguish procedure interactional justice.Group and Organizational Management, 27, 324–351.

Crosby, L. A., Evans, K. R., & Cowles, D. (1990). Relationshipquality in services selling: an interpersonal influence perspective.Journal of Marketing, 54(3), 68–81.

Dant, R. P. (1986). An investigation of the relationships between issue-specific channel conflict and cooperation and overall channelconflict and cooperation, Unpublished Doctoral Dissertation.Blacksburg, Virginia: Virginia Polytechnic Institute and StateUniversity.

Dant, R. P. (1995). Motivation for franchising: rhetoric versus reality.International Small Business Journal, 14(1), 10–32.

Dant, R. P. (2008). A futuristic research agenda for the field offranchising. Journal of Small Business Management, 46(1), 91–98.

Dant, R. P., & Berger, P. D. (1996). Modeling cooperative advertisingdecisions in franchising. Journal of the Operational ResearchSociety, 47(9), 1120–1136.

Dant, R. P., & Gundlach, G. T. (1999). The challenge of autonomy anddependence in franchised channels of distribution. Journal ofBusiness Venturing, 14(1), 35–67.

Dant, R. P., & Kaufmann, P. J. (2003). Structural and strategicdynamics in franchising. Journal of Retailing, 79(2), 63–75.

Dant, R. P., & Nasr, N. I. (1998). Control techniques and upward flow ofinformation in franchising in distant markets: conceptualization andpreliminary evidence. Journal of Business Venturing, 13(1), 3–28.

Dant, R. P., & Schul, P. L. (1992). Conflict resolution processes incontractual channels of distribution. Journal of Marketing, 56(1),38–54.

Dant, R. P., Brush, C. G., & Iniesta, F. (1996). Participation pattern ofwomen in franchising. Journal of Small Business Management,(April), 14–28.

Dant, R. P., Perrigot, R., & Cliquet, G. (2008a). A cross culturalcomparison of the plural form in franchise networks: USA,France and Brazil. Journal of Small Business Management, 46(2), 286–311.

Dant, R. P., Weaven, S. K., & Herington, C. (2008b). Franchiseepersonality traits, gender and multi-unit structure as predictors offranchisee-franchisor relationship strength. In G. Cliquet (Ed.),The 22nd annual conference of the international society offranchising (pp. 1–47). Fort Lauderdale: International Institutefor Franchise Education, Nova Southeastern University.

Dillman, D. A. (2000). Mail and internet surveys. Hoboken: Wiley.Doney, P. M., & Cannon, J. P. (1997). An examination of the nature of

trust in buyer-seller relationships. Journal of Marketing, 61(2),35–51.

Dwyer, R. F., & Oh, S. (1987). Output sector munificence effects onthe internal political economy of marketing channels. Journal ofMarketing Research, 24(November), 347–358.

Dwyer, R. F., Schurr, P. H., & Oh, S. (1987). Developing buyer-sellerrelationships. Journal of Marketing, 51(2), 11–27.

Emerson, R. M. (1962). Power-dependence relations. AmericanSociological Review, 27(February), 31–41.

Etgar, M. (1976a). Effects of administrative control on efficiency ofvertical marketing systems. Journal of Marketing Research, 13(February), 12–24.

Etgar, M. (1976b). Channel domination and countervailing power indistributive channels. Journal of Marketing Research, 13(August),254–262.

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equationmodels with unobservable variables and measurement error.Journal of Marketing Research, 18(1), 39–50.

Franchise Facts. (2011). Capturing the Franchise Experience: Fran-chisee Satisfaction Survey: Annual Report 2010, http://www.franchisefactsusa.com/pdfs/Franchisee_Satisfaction_Survey_Annual_Report_2010.pdf. Accessed May 7, 2011.

Frazer, L., Weaven, S., &Wright, O. (2008). Franchising Australia 2008survey. Service Industry Research Centre, Griffith University.

Frazier, G. L. (1999). Organizing and managing channels ofdistribution. Journal of the Academy of Marketing Science, 27(2), 226–240.

Frazier, G. L., & Rody, R. C. (1991). The use of influence strategies ininterfirm relationships in industrial product channels. Journal ofMarketing, 55(January), 52–69.

Frazier, G. L., & Summers, J. O. (1986). Perceptions of interfirmpower and its use within a franchise channel of distribution.Journal of Marketing Research, 23(May), 169–176.

Frazier, G. L., Gill, J. D., & Kale, S. H. (1989). Dealer dependencelevels and reciprocal actions in a channel of distribution in adeveloping country. Journal of Marketing, 53(1), 50–70.

French, J. R. P., & Raven, B. (1959). The bases of social power. In D.Cartwright (Ed.), Studies in social power. Ann Arbor: Universityof Michigan Press.

Freyens, B. (2006). Measures of training costs in Australia.ManagementResearch News, 29(8), 495–511.

Friedman, M. (1953). Essays in positive economics. Chicago:University of Chicago Press.

Gamst, G., Meyers, L. S., & Guarino, A. J. (2008). Analysis ofvariance designs (1st ed). Cambridge University Press.

Garg, V. K., & Rasheed, A. A. (2006). An explanation of internationalfranchisors’ preference for multi-unit franchising. InternationalJournal of Entrepreneurship, 10, 1–20.

Garg, V. K., Rasheed, A. A., & Priem, R. L. (2005). Explainingfranchisors’ choices of organizational forms within franchisesystems. Strategic Organization, 3(2), 185–217.

Gaski, J. F. (1984). The theory of power and conflict in channels ofdistribution. Journal of Marketing, 48(3), 9–29.

Gaski, J. F., & Nevin, J. R. (1985). The differential effects of exercisedand unexercised power sources in a marketing channel. Journalof Marketing Research, 22(2), 130–142.

Gauzente, C. (2002). Using qualitative methods in franchise research:An application in understanding the franchised entrepreneurs’motivations. Qualitative Social Research, 3(1), Art. 20.

Geyskens, I., Steenkamp, J. M., & Kumar, N. (1999). A meta-analysisof satisfaction in marketing channel relationships. Journal ofMarketing Research, 36(2), 223–238.

Giddings, J., Frazer, L., Weaven, S., & Grace, D. (2009). Understand-ing the dynamics of conflict within business franchise systems.Australian Dispute Resolution Journal, 20(February), 24–32.

Gillespie, K., Jeannet, J. P., & Hennessey, H. D. (2007). Globalmarketing. Boston: Houghton Mifflin Company.

Green, P. E. (1978). Analyzing multivariate data. Hindsdale: DrydenPress.

Greenbaum, T. L. (1988). The practical handbook and guide to focusgroup research. Newbury Park: Sage Publications.

Greenberg, J., & Scott, K. S. (1996). Why do workers bite the handsthat feed them? Employee theft as a social exchange process. InL. L. Cummings & B. M. Staw (Eds.), Research in organiza-tional behavior. Greenwich: JAI Press.

Griffith, D. A., Harvey, M. G., & Lusch, R. F. (2006). Social exchangein supply chain relationships: the resulting benefits of proceduraland distributive justice. Journal of Operations Management, 24(2), 85–98.

Groves, R. M., Fowler, F. J., Couper, M. P., Lepkowski, J. M., Singer, E.,& Tourangeau, R. (2004). Survey methodology. New York: Wiley.

494 J. of the Acad. Mark. Sci. (2013) 41:473–496

Grünhagen, M., & Mittelstaedt, R. A. (2001). Franchising from thefranchisee’s perspective: a review of the multi-unit paradox.Entrepreneurship and Innovation, 2(1), 73–80.

Grünhagen, M., & Mittelstaedt, R. A. (2002). Is bigger better? Theanticipation of scale efficiencies and decision participation asmotivations for aspiring multi-unit franchisees. InternationalJournal of Entrepreneurial Behaviour & Research, 8(3), 188–200.

Grünhagen, M., & Mittelstaedt, R. A. (2005). Entrepreneurs orinvestors: do multi-unit franchisees have different philosophicalorientations? Journal of Small Business Management, 43(3),207–225.

Hair, J. F., Black, B., Babin, B., Anderson, R. E., & Tatham, R. L.(2006). Multivariate data analysis (6th ed.). Prentice Hall.

Heide, J. B., & John, G. (1988). The role of dependence balancing insafeguarding transaction-specific assets in conventional channels.Journal of Marketing, 52(January), 20–35.

Hing, N. (1995). An empirical analysis of the benefits and limitationsfor restaurant franchisees. Journal of Small Business Manage-ment, 15(2), 177–187.

House Committee on Small Business. (1990). Franchising in the U.S.economy: Prospects and problems. Washington D.C.: U.S.Government Printing Office.

Hunt, S. D. (1972). The socioeconomic consequences of the franchisesystem of distribution. Journal of Marketing, 36, 32–38.

Hunt, S. D. (1977). Franchising: promises, problems, prospects.Journal of Retailing, 53(3), 71–84.

Hussain, D., & Windsperger, J. (2010). Multi-unit ownership strategyin franchising: development of an integrative model. Journal ofMarketing Channels, 17(1), 3–31.

Husted, B. W., & Folger, R. (2004). Fairness and transaction costs: thecontribution of organizational justice theory to an integrativemodel of economic organization. Organization Science, 15(6),719–729.

Ingram, P., & Baum, J. (1997). Opportunity and constraint: organ-izations’ learning from the operating and competitive experienceof industries. Strategic Management Journal, 18(1), 75–98.

International Franchise Association. (2011). http://www.franchise.orgAccessed May 7, 2011.

International Franchise Association (IFA) Educational Foundation.(2002). Multi-Unit Owners Study. Washington DC.

Izreali, D. (1972). Franchising and the total distribution system.London: Longman.

Johns, R., Paswan, A. K., & Strutton, D. (2004). Franchise selectionprocesses: a preliminary investigation of the decisional criteriaused by franchisees. In R. Stasson, (Ed.) The 18th InternationalSociety of Franchising Conference. Las Vegas, NV.

Julian, S. D., & Castrogiovanni, G. J. (1995). Franchisor geographicexpansion. Journal of Small Business Management, 33(2), 1–11.

Kalnins, A., & Lafontaine, F. (2004). Multi-unit ownership infranchising: evidence from the fast-food industry in Texas. TheRand Journal of Economics, 35(4), 747–761.

Kalnins, A., Swamninathan, A., & Mitchell, W. (2006). Turnoverevents, vicarious information, and the reduced likelihood ofoutlet-level exit among small multiunit organizations. OrganizationScience, 17(1), 118–131.

Kaufmann, P. (1999). Franchising and the choice of self-employment.Journal of Business Venturing, 14(4), 345–362.

Kaufmann, P. J., & Dant, R. P. (1996). Multi-unit franchising: growth andmanagement issues. Journal of Business Venturing, 11(5), 343–358.

Kaufmann, P. J., & Kim, S. H. (1995). Master franchising and systemgrowth rates. In R. P. Dant & P. J. Kaufmann (Eds). Franchising:Contemporary issues and research. The Haworth Press, Inc.

Klein, J. G., Ettenson, R., & Morris, M. D. (1998). The animosity modelof foreign product purchase: an empirical test in the People’sRepublic of China. Journal of Marketing, 62(1), 89–100.

Knight, R. M. (1984). The independence of the franchisee entrepreneur.Journal of Small Business Management, 22(2), 53–61.

Knight, R. M. (1986). Franchising from the franchisor and franchiseepoints of view. Journal of Small Business Management, 24(3), 8–15.

Krueger, R. A. (1994). Focus groups: A practical guide for appliedresearch (2nd ed.). London: Sage Publications.

Kuhn, T. (1962). The structure of scientific revolutions. Chicago:Chicago University Press.

Kumar, N., Hibbard, J. D., & Stern, L. W. (1994). The nature andconsequences of marketing channel intermediary commitment.Marketing Science Institute Working Paper Series No. 94–115.Cambridge, MA: Marketing Science Institute.

Kumar, N., Scheer, L. K., & Steemkamp, J. (1995). The effects ofperceived interdependence on dealer attitudes. Journal ofMarketing Research, 32(3), 348–356.

Kumar, N., Scheer, L. K., & Steemkamp, J. (1998). Interdependence,punitive capability, and the reciprocation of punitive actions inchannel relationships. Journal of Marketing Research, 35(2),225–235.

Lee, H. L. (2006). The triple a supply chain. In The 21st CenturySupply Chain Collection (pp. 2–16). Cambridge: HarvardBusiness Press.

Leuthesser, L. (1997). Supplier relational behavior: an empiricalassessment. Industrial Marketing Management, 26(2), 245–254.

Lusch, R. F., & Brown, J. R. (1996). Interdependency, contracting, andrelational behavior in marketing channels. Journal of Marketing,60(4), 19–38.

Malhotra, N. K. (1996). The impact of the academy of marketingscience on marketing scholarship: an analysis of the researchpublished in JAMS. Journal of the Academy of MarketingScience, 24(4), 291–298.

Michael, S. C., & Combs, J. G. (2008). Entrepreneurial failure: thecase of franchisees. Journal of Small Business Management, 46(1), 73–90.

Mishra, D. P., Heide, J. B., & Cort, S. G. (1998). Informationasymmetry and levels of agency relationships. Journal ofMarketing Research, 35(3), 277–295.

Moorman, C., Zaltman, G., & Deshpande, R. (1992). Relationshipsbetween providers and users of market research: the dynamics oftrust within and between organizations. Journal of MarketingResearch, 29(3), 314–328.

Morgan, D. L. (1988). Focus groups as qualitative research. NewburyPark: Sage Publications.

Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory ofrelationship marketing. Journal of Marketing, 58(3), 20–38.

Morrison, K. A. (1997). How franchise job satisfaction and person-ality affects their performance, organizational commitment,franchisor relations, and intention to remain. Journal of SmallBusiness Management, 35(3), 39–67.

Nicholson, C. Y., Compeau, L. D., & Sethi, R. (2001). The role ininterpersonal liking in building trust in long-term channelrelationships. Journal of the Academy of Marketing Science, 29(1), 3–15.

Norton, S. W. (1988). Franchising, brand name capital, and theentrepreneurial capacity problem. Strategic Management Journal, 9(1), 105–114.

Oxenfeldt, A. R., & Kelly, A. O. (1969). Will successful franchisesystems ultimately become wholly-owned chains? Journal ofRetailing, 44(4), 69–89.

Ozanne, U. B., & Hunt, S. D. (1971). The economic effects offranchising. Washington, D.C.: U.S. Government Printing Office.

Palmatier, R. W. (2008a). Relationship marketing. Cambridge:Marketing Science Institute.

Palmatier, R. W. (2008b). Interfirm relational drivers of customervalue. Journal of Marketing, 72(4), 76–89.

J. of the Acad. Mark. Sci. (2013) 41:473–496 495

Palmatier, R. W., Dant, R., Grewal, D., & Evans, K. R. (2006). Factorsinfluencing the effectiveness of relationship marketing: a meta-analysis. Journal of Marketing, 70(4), 136–153.

Palmatier, R. W., Dant, R., & Grewal, D. (2007). A comparativelongitudinal analysis of theoretical perspectives of interorganizationalrelationship performance. Journal of Marketing, 71(4), 172–194.

Peterson, A., & Dant, R. (1990). Perceived advantages of the franchiseoption from the franchisee perspective: empirical insights from aservice franchise. Journal of Small Business Management, 28(3),46–61.

Podsakoff, P. H., MacKenzie, S. B., Podsakoff, N. P., & Lee, J. Y.(2003). The mismeasure of man(agement) and its implications forleadership research. Leadership Quarterly, 14(6), 615–656.

PricewaterhouseCoopers. (2009). 2010 Franchise Business EconomicOutlook, http://www.franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/2010%20Franchise%20Business%20Outlook%20Report_Final%202009.12.21.pdf.Accessed May 7, 2011.

Ramaswami, S. N., & Singh, J. (2003). Antecedents and consequencesof merit pay fairness for industrial salespeople. Journal ofMarketing, 67(4), 46–66.

Reve, T., & Stern, L.W. (1979). Interorganizational relations inmarketingchannels. Academy of Management Review, 4(3), 405–416.

Reynolds, J. (2004). Economics 101: how franchising makes musicfor the U.S. economy. Franchising World, 36(4), 37–40.

Scheer, L. K., & Stern, L. W. (1992). The effect of influence type andperformance outcomes on attitude toward the influencer. Journalof Marketing Research, 29(1), 128–142.

Schwartz, E. B. (1973). Franchising in the seventies: where is itheaded? Journal of Small Business Management, 11, 35–40.

Shane, S. (2001). Technological opportunities and new firm creation.Management Science, 47(2), 205–220.

Shimp, T., & Sharma, S. (1987). Consumer ethnocentricism: constructionand validation of the CETSCALE. Journal of Marketing Research,24(3), 280–289.

Slater, S. F., & Narver, J. C. (1995). Market orientation and thelearning organization. Journal of Marketing, 59(3), 63–74.

Stanworth, J., & Curran, J. (1999). Colas, burgers, shakes, andshirkers: towards a sociological model of franchising in themarket economy. Journal of Business Venturing, 14(4), 323–344.

Stanworth, J., & Kaufmann, P. J. (1996). Similarities and differencesin UK and US franchise research data: towards a dynamic modelof franchisee motivation. International Small Business Journal,14(3), 57–70.

Starr, R., Newfrock, J., & Delurey, M. (2003). Enterprise resilience:Managing risk in the networked economy. Strategy+BuisnessIssue 30, Booz, Allen & Hamilton, Inc. http://www.boozallen.com/media/file/Enterprise_Resilience_Report.pdf. AccessedMay 8, 2011.

Stern, L. W., & El-Ansary, A. (1982). Marketing channels (2nd ed.).Englewood Cliffs: Prentice-Hall, Inc.

Sudman, S., & Bradburn, N. M. (1973). Effects of time and memoryfactors on response in surveys. Journal of American StatisticalAssociation, 68(Number 344), 805–815.

Tsourveloudi, N. C., & Valavanis, K. P. (2002). On the measurement ofenterprise agility. Journal of Intelligent and Robotic Systems, 33,329–342.

Vaughn, C. N. (1979). Franchising (2nd ed.). Lexington: LexingtonBooks, D.C. Heath Company.

Wadsworth, F. (2002). Multi-unit owners study. IFA EducationalFoundation. Washington, D.C.

Weaven, S., & Frazer, L. (2003). Predicting multiple unit franchising:a franchisor and franchisee perspective. Journal of MarketingChannels, 10(3), 53–82.

Weaven, S., & Frazer, L. (2006). Investment incentives for single andmultiple unit franchisees. Qualitative Market Research: AnInternational Journal, 9(3), 225–242.

Weaven, S., & Herrington, C. (2007). Factors influencing governancechoice and human resource management within services fran-chising networks. Journal of Management & Organization, 13(2), 126–144.

Weaven, S., Grace, D., & Manning, M. (2009). Franchisee personal-ity: an examination in the context of franchise unit density andservice classification. European Journal of Marketing, 43(1/2),90–109.

Williamson, O. E. (1991). Strategizing, economizing, and economicorganization. Strategic Management Journal, 12(2), 75–94.

Winter, S. G., Jr. (1964). Economic ‘natural selection’ and the theoryof the firm. Yale Economic Essays, 4, 225–272.

Winter, S. G., Jr., & Szulanski, G. (2001). Replication as strategy.Organization Science, 12(6), 730–743.

Withane, S. (1991). Franchising and franchisee behavior: an exami-nation of opinions, personal characteristics, and motives ofCanadian franchisee entrepreneurs. Journal of Small BusinessManagement, 29(1), 22–29.

Zeitz, C. M. (1994). Expert-novice differences in memory, abstractionand reasoning in the domain of literature. Cognition andInstruction, 12(4), 277–313.

496 J. of the Acad. Mark. Sci. (2013) 41:473–496

ERRATUM

Erratum to: An introspective examination of single-unitversus multi-unit franchisees

Rajiv P. Dant & Scott K. Weaven & Brent L. Baker &

Hyo Jin (Jean) Jeon

Published online: 8 January 2013# Academy of Marketing Science 2012

Erratum to: J. of the Acad. Mark. Sci.DOI 10.1007/s11747-011-0265-2

Table 2

We would like to clarify that per the first footnote (a)the metric variables, strictly speaking, were comparedusing MANOVA-ANOVA procedures rather thanMANOVA-t-test procedures as currently stated even thoughin a two group context, t-test is conceptually equivalent toANOVA.

Table 6

We would also like to clarify that the means and standarddeviations for MUFees are identical between Tables 5 and 6.These tables both report the importance of franchisor strate-gies, financial benefits and franchisor experience to MUFeesduring their initial unit purchase, albeit in different contexts.The correct numbers appear in Table 5. Also, added are thesubstantive interpretations of the MANOVA results in theamended Table 6.

Table 7

The substantive interpretations of the MANOVA results havenow been added in the corrected Table 7.

The online version of the original article can be found at http://dx.doi.org/10.1007/s11747-011-0265-2.

R. P. Dant (*) :H. J. (Jean) JeonMichael F. Price College of Business,The University of Oklahoma,307 West Brooks, Suite 1-K,Norman, OK 73019-4001, USAe-mail: rdant@ou.edu

H. J. (Jean) Jeone-mail: jeanjeon@ou.edu

S. K. WeavenGriffith Business School, Gold Coast Campus, Griffith University,PMB 50 Gold Coast Mail Centre,Brisbane, Queensland 9726, Australiae-mail: s.weaven@griffith.edu.au

B. L. BakerCollege of Business and Public Administration,University of North Dakota,Gamble Hall, Room 175E, 293 Centennial Drive,Grand Forks, ND 58202, USAe-mail: bbaker@business.und.edu

J. of the Acad. Mark. Sci. (2013) 41:497–500DOI 10.1007/s11747-012-0322-5

Table 2 Respondent Profiles of MUFees versus SUFees on Selected Demographic Variables

N098 MUFees N0225 SUFees Z-Test forproportionsMUFees SUFees

Demographic Variable Response Counts Percent Counts Percent Z-value p-value

1 Whether inquired about future MUFeestatus at the time of purchase?

Yes 22 of 36 66.11% 98 of 170 57.65% 0.20 > 0.15

2 Gender Male 69 of 96 71.88% 160 of 215 74.42% 0.33 > 0.25

3 Average Age of the Respondent (years)a Means -> 44.64 SD-> 10.28 45.36 SD-> 10.44 F0 0.75 > 0.57

4 Average Annual Sales Turnover(in Australian dollars)b

Means -> 755,000 SD-> 487,904 661,565 SD-> 1,082,329 NA NA

5 Average Age of Associationwith the System (years)a

Means -> 5.93 SD-> 2.66 5.47 SD-> 4.75 F0 1.12 > 0.21

a These being metric variables were compared using MANOVA-ANOVA procedures to contain the experimentwise error rate to 0.05.

MANOVA yielded an equivalent F00.79 (df02,298) which was non-significant (p > 0.45). The follow-up ANOVA results are presented in theTable.

SD refers to standard deviations.b Only two MUFees answered this question. Hence, a meaningful inferential comparison was not possible.

498 J. of the Acad. Mark. Sci. (2013) 41:497–500

Tab

le6

Con

sideratio

nsDuringBuy

ing:

Differences

BetweentheIN

ITIA

Lversus

SECOND

Franchise

Purchase(M

UFeesN098

)

NMean

Stand

ard

F(df01,94)

EffectSizea

Statistical.

p-value

Sub

stantiv

eCon

clusions

Deviatio

nPow

er

t-test:Dependence

Initial

UnitPurchase

983.21

0.52

t(df098)

1.18

20.99

90.00

0Dependenceconcerns

becomeless

impo

rtant

during

theSecon

dUnitPurchase

Secon

dUnitPurchase

982.38

0.86

8.27

5

FranchisorStrategy

Initial

UnitPurchase

985.17

0.74

78.358

0.94

0.99

90.00

0FranchisorStrategybecomes

moreim

portant

during

theSecon

dUnitPurchase

Secon

dUnitPurchase

985.91

0.81

Financial

Benefits

Initial

UnitPurchase

984.99

1.05

69.890

1.11

0.99

90.00

0Financial

Benefits

concerns

becomemore

impo

rtantdu

ring

theSecon

dUnitPurchase

Secon

dUnitPurchase

986.04

0.75

FranchisorExp

erience

Initial

UnitPurchase

984.85

0.53

46.813

0.95

0.99

90.00

0FranchisorExp

erienceconcerns

becomemore

impo

rtantdu

ring

theSecon

dUnitPurchase

Secon

dUnitPurchase

985.98

1.56

Multivariate

(MANOVA

)Su

mmary

EffectSizeb

η2

Wilk

s'Lam

bdaCon

verted

toF

(df03,94)

65.886

0.40

0.99

90.00

0The

Initial

versus

Secon

dpu

rchase

dichotom

yhasalargeandsignificanteffect.

aEffectsizesarerepo

rted

usingthedstatistics.

Coh

en(197

7,pages22

-27)

prov

ides

thefollo

wingbenchm

arks

fordstatistics:values

ofabou

t0.20

sign

ify"small"effects,values

of0.50

deno

te"m

edium"effect,andvalues

of0.80

orhigher

denote

"large"effect

size

bη2

oreta2,used

toestim

atetheeffect

size

associated

with

MANOVA,canbe

interpretedas

analog

ousto

R2.η2

values

over

0.138aredeem

edto

belargeby

Cohen

(1977,

page

287)

J. of the Acad. Mark. Sci. (2013) 41:497–500 499

Tab

le7

The

Effectof

SingleVersusMultiUnitStatuson

RelationalSentim

ents

NMean

Stand

ard

F(df01,321)

EffectSizea

Statistical

p-value

Sub

stantiv

eCon

clusions

Deviatio

nPow

er

Trust

SingleUnitFranchisees

225

5.33

0.55

578.21

03.07

0.99

90.00

0SUFeescharacterize

therelatio

nshipas

trustin

gwhile

theMUFeesdisagree

with

thissentim

ent

MultiUnitFranchisees

983.27

0.77

Com

mitm

ent

SingleUnitFranchisees

225

4.86

1.50

73.737

0.91

0.99

90.00

0SUFeescharacterize

therelatio

nshipas

exhibitin

gcommitm

entwhile

theMUFeesdisagree

with

thissentim

ent

MultiUnitFranchisees

983.80

0.70

Relationship

SingleUnitFranchisees

225

4.70

0.97

164.19

91.38

0.99

90.00

0SUFeescharacterize

therelatio

nshipas

satisfactory

while

theMUFeesdisagree

with

thissentim

ent

Satisfaction

MultiUnitFranchisees

983.62

0.54

Multivariate

(MANOVA

)Su

mmary

EffectSizeb

η2

Wilk

s'Lam

bdaCon

verted

toF

(df03,319)

263.28

50.71

40.99

90.00

0The

SUFees/MUFeesdichotom

yhasalargeand

sign

ificanteffect.

aEffectsizesarerepo

rted

usingthedstatistics.

Coh

en(197

7,pages22

-27)

prov

ides

thefollo

wingbenchm

arks

fordstatistics:values

ofabou

t0.20

sign

ify"small"effects,values

of0.50

deno

te"m

edium"effect,andvalues

of0.80

orhigh

erdeno

te"large"effect

size

bη2

oreta2,used

toestim

atetheeffect

size

associated

with

MANOVA,canbe

interpretedas

analog

ousto

R2.η2

values

over

0.13

8aredeem

edto

belargeby

Coh

en(197

7,page

287)

500 J. of the Acad. Mark. Sci. (2013) 41:497–500