Quality Signals and Franchising Growth

Purpose – The goal of this article is to demonstrate how signaling support services and contractual arrangements that create value for incumbent franchisees can help to create value for the whole network by attracting prospective franchisees. Design/methodology/approach- Using data from Bond’s Franchising Report the study analyses franchisors operating between 1994 and 2008 via a Generalized Method of Moments (GMM) model for an unbalanced panel of 2,474 franchisors. Findings – Training, financial assistance, sub-franchising and restrictions against passive ownership, and the use of area development agreements are found to be valuable for prospective franchisees. Experience and the number of company-owned and franchised units also attract prospective franchisees. Research implications – Our findings imply that not all value-creatin