Retail franchising: current themes and an agenda for future research

Retail franchising: current themes and an agenda for future research

Retail franchising: current themes and an agenda for future research

Franchising has long been a popular mode of expansion for manufacturing firms and service sector companies, particularly those operating in the fast food restaurant business. However, in recent years retailing has become a major sector of franchise growth in advanced economies. Indeed, one of the more pertinent recent trends in the retail industry in developed countries has been the increasing proportion of retail sales accounted for by franchise activity, spread across a number of subsectors such as fashion, home furnishings and cosmetics. Since the 1980s franchising has developed as a popular mode of expansion for new niche retailers which have been able to establish a network of stores quickly and at a relatively low financial cost. The Body Shop has been, perhaps, the best known retail proponent of franchise use. However, the adoption of franchising by established retail companies such as Marks & Spencer and Arcadia is particularly noteworthy. For these companies, franchising has become a major international expansion tool, offering opportunities for internationalisation into certain markets where it is more feasible for the company to externalise its operations. Despite the growth of interest in franchising among retail practitioners, the academic community has not kept up with developments and there has been little attention given to the subject of retail franchising. The academic debate on franchising has been informed, for the most part, by the activities of the manufacturing sector and other service sectors without considering, in any real depth, the unique characteristics of the retail sector.

The purpose of this special issue is to develop a richer understanding of retail franchising. The aim is to provide a collection of articles on contemporary research in the field of retail franchising which draws together the current strands of academic inquiry and provides an indication of future needs and directions. Given the lack of attention the area has received hitherto, the contributions in this special issue provide some much needed insights into the specific nature of retail franchising and in doing so aim to advance the academic debate and signal directions for future research.

Research context

The past 20-30 years have witnessed significant levels of franchise research. There is now an established franchising literature, due, in most part, to the contribution of researchers from several different disciplines including marketing, economics, law and management science. Much of the literature has been concerned with the creation and management of franchise systems and, to a lesser extent, the wider public policy/societal aspects of franchising. Traditionally, research into franchising has been conducted from a predominantly US perspective, reflecting levels of franchise activity and the USA's standing as the world's single largest franchise market. Today though, franchising is a global business activity, widespread across advanced economies and increasing in scope in lesser-developed regions. Recent research studies have recognised the global dimension of franchising and have considered franchising growth in the context of many markets worldwide, helping to move the debate away from a purely US agenda.

Academic research into franchising has been undertaken on a general, rather than industry specific, level. Empirical research studies have been based, for the most part, on the findings from large-scale postal surveys and thus have concentrated on producing a set of results that may be generalisable across sectors. However, it may be argued that a greater focus on the sector of activity would help to produce more accurate and relevant findings, and thus lead to the further refinement and development of existing conceptualisations of franchising. A sector such as retailing possesses a set of operating characteristics which makes it quite distinct from other sectors within which franchising is employed. Over the past decade or so several contributions in the retail literature have focused on the issue of retail franchising (Baron and Schmidt, 1991; Sanghavi, 1991; Whitehead, 1991; Manaresi and Uncles, 1995; Sparks, 1995; Quinn, 1998; Doherty and Quinn, 1999; Quinn and Doherty, 2000). While such studies have helped to raise awareness of the particular nature of retail franchising, a coherent body of knowledge remains to be developed.

Current research

The articles published here address various aspects of retail franchising and highlight the need for a more complete understanding of the activity. The first three articles discuss the choice of organisational form and explain, first, the circumstances in which retail companies decide to employ franchising and, second, the balance between franchise and, company-owned outlets within the retail organisation. In the existing franchising literature resource constraints and agency theories have been offered as explanations for the adoption of franchising. The resource constraint argument for franchising assumes that company ownership is the preferred method of operation, while the agency argument suggests that where outlets are difficult to monitor incentive advantages will be gained from franchising the outlets. The first article in this special issue, by Watson, Kirby and Egan, seeks to develop understanding of franchise adoption by retail companies. This paper examines the principal existing theoretical frameworks with the intention of determining their ability to explain the incidence of franchising in the retail sector. The limitations of the explanatory power of existing franchise theories are noted. With reference to the UK market, the authors seek to explain the incidence of franchising in retailing through factors such as business risk, scale economies, and human capital requirements. The paper assesses the future development of the sector and considers the development of e-commerce and its likely impact on the future of retail franchising.

Following the organisational form theme, Cliquet and Croizean's article builds on Bradach's (1998) earlier study on plural forms. Cliquet and Croizean examine the issue of plural forms and the evolution of organisational forms within the context of the French cosmetics retail market. Their article examines whether or not plural forms can benefit companies operating in a market where large multinational companies are acquisitive. In examining Bradach's (1998) model in the context of the French cosmetics retail market, Cliquet and Croizean's paper provides a valuable consideration of the applicability of existing theory within the retail sector and an alternative market environment.

Boyle's article considers not only the franchise versus company owned choice but also the choice between the various types of franchise arrangement. Boyle highlights the important role of branding in this decision making process, particularly in respect of companies operating in the retail sector. The paper takes a case study approach and focuses on Shell Retail's efforts to introduce business format franchising in its rebranding process for the UK market. In discussing the factors that hindered the company's progress, the paper illustrates the practical difficulties that may be encountered by a retail company attempting to introduce a new franchise development programme.

The final article, by Quinn and Alexander, takes a different perspective to the other papers in that it considers the adoption of retail franchising in the context of the firm's international operations. While franchising has facilitated the rapid international expansion of niche retailers, its increasing popularity among established retail companies without a domestic franchise presence, such as Marks & Spencer, makes its adoption in the retail sector quite distinct from other franchise sectors. The authors note the different perspectives that have emerged within the retail and franchise literatures to explain international retail franchising. They attempt to reconcile the contradictions that exist in the literatures, by providing a conceptual framework to explain the development of international franchising within the particular context of the retail internationalisation process.

Conclusion

The articles in this special issue attempt to build on the existing franchise literature by considering the particular context of the retail sector, and the authors pay careful attention to sector characteristics in their attempts to provide insights into franchising in the retail context. The articles highlight the need for researchers to recognise the idiosyncrasies of the commercial sector under consideration when studying franchising. While it may be argued that an appreciation of the particular characteristics of retailing can help to develop franchising knowledge, it is equally true that the insights from the study of franchising and its associated literatures can develop understanding of retailing in general. Indeed, given the significant role that franchising plays in retailing, it may be argued that studying franchising is in a sense studying retailing itself.

Knowledge on retail franchising is underdeveloped and therefore there is a wide ranging research agenda available to researchers in this area. As the articles in this special issue show, the reasons for franchise adoption, or the choice of franchising as an organisational form, and the international dimension of retail franchise activity are fruitful areas for research. Future research studies should also consider the operational, strategic and managerial issues associated with retail franchising. In particular, the trend for large, established retail companies using franchising is an interesting development. It would be beneficial to examine further how and why such firms have become involved in franchising and the implications for existing management structure and culture. Such research would build upon Forward and Fulop's (1996) exploratory study into the strategic and operational issues facing large, established firms' entry into franchising.

In terms of methodological approach, researchers should be encouraged to be innovative in their outlook. Franchising research studies have typically undertaken a postal survey approach and employed quantitative techniques. However, methodologies employing qualitative techniques would be best suited to provide the depth of insight and information which is required at this point in time to develop understanding and initial conceptualisations of retail franchising. Studies of individual company experiences would substantially improve understanding and define research questions for exploration in further research. The importance and value of individual company experiences has been illustrated by previous studies in retail franchising (Sparks, 1995; Quinn, 1999).

There remains much scope for developing our understanding of retail franchising. A coherent framework for the study of retail franchising is needed, one which utilises existing theories and conceptualisations on franchising, while at the same time recognising the particular characteristics of the retail sector and the relevance of the industry context within which franchising is employed.

On a final note, we would like to thank sincerely the editor of the IJRDM, Professor John Fernie, for giving us the opportunity to edit this special issue and for his support and guidance throughout. We would also like to voice our appreciation and thanks to all the reviewers and contributors without whose work this special issue would not have been possible.

ReferencesBaron, S. and Schmidt, R. (1991), "Operational aspects of retail franchises", International Journal of Retail & Distribution Management, Vol. 19 No. 2, pp. 13-19.Bradach, J.L. (1998), Franchise Organisations, Harvard Business School Press, Boston, MA.Doherty, A.M. and Quinn, B. (1999), "International retail franchising: an agency theory perspective", International Journal of Retail & Distribution Management, Vol. 27 No. 6, pp. 224-36.Forward, J. and Fulop, C. (1996), "Large established firms' entry into franchising: an exploratory investigation of strategic and operational issues", The International Review of Retail, Distribution and Consumer Research, Vol. 6 No. 1, pp. 34-52.Manaresi, A. and Uncles, M. (1995), "Retail franchising in Britain and Italy", in McGoldrick, P.J. and Davies, G. (Eds), International Retailing: Trends and Strategies, Pitman, London, pp. 151-67.Quinn, B. (1998), "Towards a framework for the study of franchising as an operating mode for international retail companies", The International Review of Retail, Distribution and Consumer Research, Vol. 8 No. 4, pp. 445-67.Quinn, B. (1999), "Control and support in an international franchise network", International Marketing Review, Vol. 16 No. 4/5, pp. 345-62.Quinn, B. and Doherty, A.M. (2000), "Power and control in international retail franchising: evidence from theory and practice", International Marketing Review, Vol. 17 No. 4/5, pp. 354-72.Sanghavi, N. (1991), "Retail franchising as a growth strategy for the 1990s", International Journal of Retail & Distribution Management, Vol. 19 No. 2, pp. 4-9.Sparks, L. (1995), "Reciprocal retail internationalisation: The Southland Corporation, Ito-Yokado, and 7-Eleven Convenience Stores", The Service Industries Journal, Vol. 15 No. 4, pp. 57-96.Whitehead, M. (1991), "International franchising – Marks & Spencer: a case study", International Journal of Retail & Distribution Management, Vol. 19 No. 2, pp. 10-12.

Anne Marie Doherty and Barry Quinn