"Advertising Strategies in a Franchise System"
With franchised businesses, it’s often asked whether the franchisor or the franchisee should undertake promotional and brand-image advertising, when both are acting to maximize their respective profits. Studies suggest that franchisees should cooperate if the franchisor delegates the brand image and/or promotional advertising to them, although this does not necessarily improve the franchisor’s profits. Choosing an advertising arrangement that works between franchisor and franchisee depends on the margins and cost of advertising, and there are ideal conditions under which each of the three advertising models should be implemented.
Whitepaper Source: Simon Pierre Sigue, Pradeep Chintagunta: Advertising Strategies in a Franchise System, European Journal of Operational Research, September 2008
"Franchise Turnover and Failure: New Research and Perspectives"
According to literature on entrepreneurship, new venture failure rates remain high. New studies work to reconcile seemingly inconsistent data on new franchise failure rates. With 4 years of data on 800+ franchise systems and 250,000 franchise outlets based on the Uniform Franchise Offering Circular (UFOC), which is now called the Franchise Disclosure Document (FDD), studies indicate that overall franchisee turnover rates have increased. Since franchisee turnover and failure rates are important, further study is needed to resolve more ambiguities in current research and to better understand the reasons and meanings behind these turnover and failure rates.
"Market and partner selection processes in international retail franchising"
International retailers use franchising for market entry, and studies show that the franchise market and franchise partner selection processes display both strategic and opportunistic behavior. With strategic franchise partner selection, franchise firms utilize a market screening process before determining which market factors make it attractive to select a certain candidate, such as finance, business know-how, knowledge of the local area, understanding of the business and brand, and most importantly, chemistry between the franchise firm and the potential franchise partner. Opportunistic market and partner selection reverses the process, with partner selection influencing the market selection.
"Unravelling the Evidence on Franchise System Survivability"
Franchise systems, similarly to conventional small businesses, are likely to fail at relatively high rates after start-up. Although franchise systems are essentially small businesses, they must act like a medium-sized business in order to establish a training and support system and recruit franchisees for their operation. This is difficult because a relatively new franchise system does not have the income to support this kind of business growth, causing the franchise to experience magnified versions of small business growth problems.
"The Effects of New Franchisor Partnering Strategies on Franchise System Size"
This study on the actions franchises use to attract partners in order to grow their franchise hypothesizes about the influence of pricing and the franchisor’s decisions on how big to grow the franchise. The findings show that franchises that successfully grow large have the following characteristics: they provide financing for franchisees, they have a low initial investment price, they keep lowering the number of outlets they own, their low up-front fees rise over time and their royalty rates go down as the franchise matures.
Whitepaper Source: Shane Scott, Shankar Venkatesh, A. Ashwin, Management Science, Vol. 52, No. 5, May 2006, pp. 773 - 787