Combined effects of franchise management strategies and employee service performance on customer loyalty: a multilevel perspective

Abstract

Although franchisee performance is likely to be influenced by franchisors’ management strategies, little is known about whether and how franchisors’ strategies affect franchisee employees’ performance. This study examines the combined effects of three franchisor management strategies, namely innovative culture, support services and autonomy on service performance of the franchisee store employees and the loyalty of their customers. Data were collected from a total of 38 employees and 679 customers of 25 franchisee stores. The study employs multilevel analysis on a nested data-set created by matching customer data with employee data for each store. The results reveal that customer loyalty of a franchisee store is positively influenced by the service performance of its employees and the support services received by the employees of the store from its franchisor. On the other hand, it has been found that franchisor management strategy such as innovative culture and autonomy negatively influence customer loyalty of the franchisee store. The paper discusses relevant theoretical and managerial implications of the findings.

Keywords:

• Franchise business
• employee service performance
• innovative culture
• support services
• autonomy
• customer loyalty

Notes

1. Variety of task refers to the number of different operations a job entails and sets some upper limit on the amount of autonomy that can be exercised in a given job (Dodd & Ganster, 1996). Consequently, high variety of task-oriented franchisee connotes that the franchisee performs numerous operations as part of its business.