Analysis of franchise performance through use of a typology: an Australian investigation

Purpose - To identify and explore the typology of franchising heterogeneity. Design/methodology/approach - Draws attention to the diversity of ways thin which franchises do business and how the stage of development of the franchise influences its operations and performance. Reviews franchise typology, discussing the creation, resource scarcity and administrative efficiency theories of franchising. Suggests that although there are divergent views on the key characteristics of classifying franchise groups, it is likely that franchise firms are heterogeneous in their profiles, which may be used to classify franchisors into groups. Reports on an Australia-wide study of franchisors in franchise systems that ranged from large retail enterprises to small educational providers. Identifies four franchise profiles and assesses the financial, growth and market performance and franchise reputation of each group within a cluster analysis. Findings - Presents performance profiles for the four franchise groups, referred to as beginners, developers, growers and matures. Confirms that franchise organizations are heterogeneous and finds that participants in the study could be grouped on the basis of their characteristic profiles. Discusses each of the groups in turn, offering a detailed insight into franchising. Observes that neither resource scarcity theory nor agency theory sufficiently explains the creation of franchising, but suggests that a combined explanation utilizing both theories is likely to be more effective. Research limitations/implications - Includes a summary of franchise studies, noting the associated franchise types or stages and the dimensions used in each study. Originality/value - Offers strong empirical evidence on franchising heterogeneity theory