An Evaluation of Relational Control in International Franchise Networks in Emerging Markets

Controlling international franchise networks in emerging markets presents complex challenges due to cultural and geographical distance between franchise partners. This distance is created by the external factors in the environment of local franchisees, which is characterised by political, economic, socio-cultural and technological factors. Other challenges include corruption, lack of supporting industries and lack of supplies. The franchisee’s desire to adapt the franchisor’s business format, to his external environment creates the standardisation-adaptation tensions in a typical international franchise network. The franchise literature recognises the role and importance of relational control in combating the control challenges and overcoming the standardisation-adaptation tensions in international franchise networks. However, there has been limited research undertaken to investigate how relational control develops in emerging markets like Nigeria, where control challenges may be exacerbated. There is also an ongoing debate regarding the relationship between formal and relational control in franchise networks. This research seeks to explore how relational control develops through an investigation of international hospitality franchise networks. This study draws on resource dependence, agency, relational exchange and social exchange theories, to address identified gaps relating to the factors that influence the evolution of relational control. It also contributes to the current debate on the relationship between formal and relational control. Based on a qualitative case study approach, international fast-food and hotel organisations were used for the primary investigation. The research was conducted in three stages. The first stage explored the development of relational control in an international fast-food franchise. The second stage explored relational control further in two international hotel franchises and provided insight into variations in the development of relational control, due to differences in service offering, when compared to the fast-food sector. The third stage explored relational control in-depth in one international hotel organisation in order to verify the findings in stage two. A major contribution of this study is the identification of the role and interplay between external (political, economic, socio-cultural and technological) and internal factors (franchisees’ local knowledge, entrepreneurial tendencies, franchisors’ recognition of franchisees’ entrepreneurial tendencies and the existence of relational norms between the franchise partners) that drive adaptations within the franchise networks. The external factors drive the need for franchisors to adapt their business format, while the internal factors enhance greater adaptation within the franchise networks. A further contribution is the emergence of flexibility (inbuilt flexibilities) from the foundation of franchise relationships in the hotel sector, due to the complexity of the service offering and diversity of customer markets. The study therefore, suggests that the complexity of hospitality offering, influences the timing and extent of adaptations. This study also contributes to the ongoing debate about the complementarity of relational control, by presenting empirical evidence that suggests the development of relational control serves to complement formal control in international franchise networks in emerging markets. The impact of external and internal factors and the development of relational norms underpin the need for franchise partners to be sensitive to the dynamic environment of emerging markets. Sensitivity enables franchise partners to agree on the realities of the business environment and work together to surmount challenges. The order in which different relational norms develop, was highlighted by this study. The understanding of this order can guide international franchisors and educate them regarding the norms to prioritise and develop first in order to channel their resources effectively