Do Disclosure Documents signal value to prospective franchisees? A conjoint analytic approach

Abstract

This paper presents research that investigates and identifies attributes of franchised businesses and how those attributes are perceived by potential franchisees in the early stages of the business sale process. This research adopts a view of the nature and effectiveness of the franchise disclosure document and its usefulness in the franchise sales process to prospective franchisees. We apply a signalling-theoretic perspective of the value proposition of franchise opportunities with the goal of assisting key franchising stakeholders to design effective (generic) disclosure documents, within the context of mandatory regulatory framework, so as to minimise franchisor and franchisee goal divergence, conflict and (ultimately) franchise unit and system failure. We find that much of the required material has little value to prospective franchisees.