Plural form tends to be the most popular organization form in retail and service networks compared to purely franchised or purely company-owned systems. In the first part, this paper exposes the evolution of researchers’ state of mind from the way of thinking which considers franchising and ownership as substitutable organizational forms to theories which analyze the utilization of both franchise and company arrangements. The paper describes the main attempts to explain theoretically the superiority of plural forms. In the second part, the paper discusses the hypothesis which says that there is a relationship between the organizational form of the chain and its efficiency score. It is demonstrated through the application of a data envelopment analysis method on French hotel chains that plural form networks are in average more efficient than strictly franchised and wholly owned chains. The Kruskal–Wallis test which is a distribution-free rank-order statistic is used to statistically verify this relationship. The result does not permit the rejection of the null hypothesis regarding whether an organizational form is more efficient than another one. Hence, this paper opens prospects for researches aiming at testing the organizational form effect on different samples and with other methods.

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Plural forms versus franchise and company-owned systems: A DEA approach of hotel chain performance

Very few papers have been written about plural forms in store networks. But today, many store chains have both franchise and company-owned arrangements. Actually, this has been the case for more than twenty years. After a review of the literature devoted to the choice between franchise and company-owned systems, Bradach's research and his model of plural forms are described. This model was based on a study of five American fast food companies. Research conducted in France in the hotel and catering, bakery, and cosmetics industries, is then described. The advantages and drawbacks of plural forms are defined as they appear in the results of a survey among managers of twenty-one companies managing thirty-five chains. A model of the evolution of store chain organization is then shown. This model takes into account various strategic and managerial considerations met by store chains during their life cycle. Finally, chains and networks are compared, and the results and research perspectives, discussed.

Plural forms in store networks: a model for store network evolution

The growth and performance of franchise systems: Company versus franchisee ownership

An economic-finance perspective with defer ence to legal constraints and marketing objec tives is used in this paper to analyze perfor mance and ownership shares in franchised businesses. Pursuant to this line of thinking, the franchise system is regarded as a portfolio of operating units which is adjusted in response to changing costs and revenue opportunities (Mark land and Furst, 1974). When coupled with the "life cycle" argument of franchise development (Anderson, 1984; Crandall, 1970; Hunt, 1973 and 1977; Lillis, Narayana and Gilman, 1976; Oxfeldt and Kelly, 1968), franchisee-owned outlets are the vehicle for marketing and distributing the product at the beginning fran chise, when the franchisor faces the constraint of limited capital and managerial resources. If the maturation of the organization increases the availability of capital and managerial resources, the franchisor shifts towards profitability and managerial control. Then, franchisors appropri ate the outlets which exhibit superior perfor mance and franchise the rest, completing the life cycle. To test this proposition we check for superior performance among company-owned outlets relative to franchisee-owned outlets. If the profits per establishment of franchisor-owned are consistently greater than franchisee-owned outlets, this supports the hypothesis of "skimming" or, at least, adjusting the portfolio of operating units to maximize company-owned performance. Unfortunately, U.S. Department of Commerce franchising data do not report profits. A proxy is sales per establishment. Using sales data, Anderson (1984) found no comprehensive performance differential favor ing company-owned establishments from 1969-1980, but did determine that some fran chised business activities did exhibit behavior consistent with "skimming". O'Hara and Thomas (1986a), using sales data for an expanded 1969-1984 sample and accounting for certain institutional changes, examined 22 franchised business activities and found most to exhibit superior company-owned performance on a year-to-year basis. Significantly better growth in sales per establishment for franchisors was found for 8 of 14 business areas tested.

The Effects of Ownership and Investment upon the Performance of Franchise Systems

Methods and examples of model validation : an annotated bibliography

Franchising, one of the most dynamic forms of modern business, is rapidly becoming oversaturated with competitors. The phenomenal growth in franchising has created a need for the development of more sophisticated methods for evaluating franchising opportunities. This paper proposes a two-stage conceptual model; composed of a probabilistic capital budgeting criterion for determining the value and risk of individual franchises, and a 0-1 integer programming criterion for optimizing the resultant portfolio of discrete alternative franchises. The conceptual model is validated using actual data provided by a United States-based cable television franchisor.

https://link.springer.com/content/pdf/10.1057%2Fjors.1974.44.pdf

A Conceptual Model for Analysing Discrete Alternative Franchising Portfolios: Design and Validation

The purpose of this article is to provide additional commentary and suggestions concerning the implementation question. We seek to do so from a micro-analytical viewpoint, rather than the macro-analytical viewpoint adopted in many of the previous, broadly based studies. Thus, while we recognize the importance, value and research credibility of large sample surveys, we feel that there is much to be gained from an introspective analysis involving a single corporation. Thus, we will attempt to analyze the implementation question in terms of a subjective taxonomy applied to two case studies within a single corporation. It is hoped that the interested reader may be able to associate with these case studies in a more intimate fashion than might be possible in a more general broad-based survey.

Robert E. Markland

Papers

A Conceptual Model for Analysing Discrete Alternative Franchising Portfolios: Design and Validation

A Subjective Taxonomy for Evaluating the Stages of Management Science Research