Expansion Through Multiple Unit Franchising : Australian Franchisors Reveal their Motivations

Abstract

In this article we explore strategic reasons justifying the recent emergence of multiple unit franchising arrangements within Australia from the perspective of the franchisor. Extending resource contraints, efficiency and agency rationales explaining organisational choice, the present study suggests that franchisors encourage franchisee subsystem development as it affords strategic, operational and performance advantages. Dimensions including agency cost minimization, system wide uniformity, franchise system brand value, reward strategies, and subsystem unit (geographical) proximity and intra-system competition, were found to be important. Less important elements included ownership redirection, system adaptability, local market innovation and franchisee opportunism motives. Given the exploratory nature of this research, in-depth interviews with 23 franchisors were used to collect data. The preliminary research evidence has important implications for franchising theorists and practitioners and, in addition, provides a platform on which future research can be developed to further understand multiple unit franchising arrangements.