Factors Influencing the Adoption of Plural Forms of Distribution in Vertically Contracted Marketing Networks

Abstract

The body of franchising research that deals with the choice of organisational form examines the motivational incentives that influence entrepreneurs to choose franchising expansion rather than expansion through company owned units. Although, many past conceptual, exploratory and explanatory studies advocate the benefits of hybrid organisational arrangements, in practice, few firms pursue a pure franchising strategy. While this may be partially explained by studies linking plural or chain organisations (simultaneous use of franchised and company owned units) with the promotion of standardisation and system-wide adaptability to competition, it contrasts with recent research showing that franchising strategies are an optimal method of maximising system performance. Given this apparent disparity in the literature, together with what is observed in practice, further investigation into the reasons why franchisors encourage the growth of plural governance structures is warranted. This research aims to build theory through the presentation of a set of general propositions explaining the choice of plural governance structures as a function of local market innovation, organisational learning and system-level adaptation, the maintenance of operational standards through mutual benchmarking and the provision of experienced prospective franchisees, necessary for future system growth. Overall, the qualitative findings drawn from a sample of franchisors within the retail and services industries clarified and confirmed the appropriateness of the general propositions in preparation for quantitative testing in the near future.