A literature review of franchisee performance: Insights for further research

Abstract

Scholars have conducted franchisee performance research for decades; however, understanding the antecedents and outcomes of franchisee performance is still limited. This study will review and discuss the determinants of franchisee performance in different contexts, using findings from reliable studies from 2013 to March2021, conducted in various countries but predominantly based in developed countries with well-structured franchise systems. This study appears to be the first review of scientific articles from franchisee performance presented in international research. By applying a systematic literature review process on research journals, forty papers are retrieved to meet the research objectives. The findings revealed that four factors affect franchisee performance: franchisor-related factors, franchise-related factors, relationship factors, and external environments. The literature review found that franchisor resources and franchisee entrepreneurial orientation are among the most critical variables to enhance franchisee performance. This study identifies uncertainties and limitations in the existing research. This study suggests a future research roadmap, including potential studies on franchisee performance such as market orientation, the impact of franchisors<apos;>strategies on franchisee entrepreneurial orientation and market orientation, environmental dynamism in emerging contexts.

Keywords:

• franchisee performance
• franchising
• literature review
• franchising literature gap

PUBLIC INTEREST STATEMENT

Factors that affect franchisee performance have been discussed by academic scholars these recent years. Franchisee performance is critical for the franchise system<apos;>s success because of the franchisors<apos;> intangible resources, the franchisees<apos;> intangible resources, external environmental factors, and relational variables. This research examines relevant antecedents of franchisee performance from 2013 to 2020. It involves reviewing numerous research publications in the Scopus database, highlighting factors that affect franchisee performance from different contexts and regions. This research hopes to bring insightful information on franchisee performance and suggest further research areas, especially on franchisees internal resources such as strategic orientation (entrepreneurial orientation, market orientation, learning orientation) and intellectual capital.

1. Introduction

Franchising is a popular and effective method of conducting and expanding business operations. When aiming to grow, a company starts a franchise process by issuing licenses to independent franchisees, granting them the right to conduct business operations under the franchisor<apos;>s brand name (Chaudey & Fadairo, 2010). It facilitates growth by increasing stores, production units, and other outlets for selling products or services (Baena & Cervino, 2012). Due to its benefits, companies now use franchising to expand across international borders, creating a trend in international franchising, which has become increasingly popular in recent decades (Dant et al., 2011). Numerous factors influence the success of franchising, including the efficiency and dedication with which the franchisee conducts the business operations and communication between the franchisor and franchisee (Nijmeijer et al., 2014). The number of business organizations opting for international franchising is increasing rapidly, demonstrating the improved success rate of franchising operations over recent years. 01 of the reasons for that success is the strategic approach established by franchisees and the advent of globalization, which has provided new opportunities for businesses and increase the ability to operate across national borders (Alon et al., 2012; Kerdpitak & Jermsittiparsert, 2019). Franchising is a popular method of entering international markets because it mitigates risk through partnerships with local franchisees.

During recent decades, several reviews of franchisee performance literature have been conducted, such as Watson et al. (2020); Watson et al. (2019); Yi et al. (2019); however, despite the importance of the franchisee role in the franchise management system, there is no literature review of the antecedents of franchisee performance. Franchisees<apos;> success is not guaranteed by franchise licenses even though that licensing organization has a complex structure and high reputation (Welsh et al., 2011). In franchising literature, franchisees are considered entrepreneurs who invest financial resources in developing a business under an existing corporate/brand name (Alpeza, 2012). Recently, systematic review research on how making franchising work from Nijmeijer et al. (2014) showed the five clusters for outcomes of franchising such as ownership structure, business format design, contract design, the behavior of franchisor and the franchisee and their interaction, and the age and size of the systems and its units. However, there were also has limitations, such as disregarded the influence of general economic and commercial factors within countries and industries and focused on general franchise system performance. This paper reviews the existing literature on franchisee performance, covering the approaches, leading issues, and antecedents of franchisee performance, with three aims:

1. To review studies on franchisee performance and provide an overview of principal research issues;

2. To identify and structure the key factors determining franchisee performance;

3. To give direction for further research.

2. Methodology

A narrative or formal review is a summary based on an analysis of a particular research topic that provides the background, overview. It identifies the limitations and directions for further research. Meanwhile, a systematic review focuses strictly on a precise methodology and selection criteria to define the research questions. The advantages of using systematic reviews are that the quality of research papers is precisely determined and evaluated, bias elements can be minimized, and increase good replicability. Furthermore, some scholars agree that systematic reviews have been rapidly growing and replacing traditional narrative reviews as they are better (Pae, 2015). Although the formal narrative review is an evidence-based approach, this approach does not help provide scientific evidence.

Additionally, a meta-analysis is a type of quantitative systematic literature review that involves statistical analysis of multiple research studies, which further shows similar research designs (Akhter et al., 2019). Strong evidence indicates that systematic review helps researchers synthesize and critically appraise several studies in a specific context (Akhter et al., 2019). Furthermore, a systematic review is more suitable for this research than a meta-analysis to avoid the incomplete set of studies and lack internal, external, construct, and statistical validity (Stone & Rosopa, 2017).

Therefore, this research employed a systematic quantitative approach to map and review the antecedents of franchisee performance. The systematic process applied in this approach accentuates the literature research, elicitation, and integration, which is coherent and rational in the reporting. The Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) flowchart is suggested to indicate the number of studies included and excluded at different stages of the literature search. This practice, however, is not ordinary in a traditional literature review. PRISMA also serves as a checklist for showing an example of good reporting and presenting the rationale to include the articles in the study, which is recommended as a resource for the systematic review being conducted Moher, Liberati, et al., (2009a).

Alongside, a systematic quantitative review is helpful for mapping relevant data concerning the landscape and circumscription of knowledge through identifying and enumerating what is known to other researchers and thus, aiding to shed light on the gaps from the reviewed scientific papers (Pickering & Byrne, 2014). Further, a systematic review is expansive because it synthesizes a substantial and diverse accumulation of integrative research from different settings (Snilstveit et al., 2012).

2.1. Review process

To begin with, the first step of the review process involves defining the study objectives and purposes, which have been detailed in the previous section. The review protocol incorporates the literature search on reliable databases using appropriate keywords and terms and applying pre-determined screening criteria based on the outlined objectives. Several databases were selected based on their reliability in producing scholarly articles such as Scopus and Web of Science. The search terms were used to identify relevant articles from the two databases with the Boolean operator “AND” to find records containing all terms that the operator had separated. Several inclusion criteria were applied to ensure this systematic review<apos;>s best requirements and quality, such as research papers published in the English language and peer-reviewed journals.

Further, introductory search terms were used in the title, abstract, or keywords (indexed and author<apos;>s keywords). Most importantly, the timeframe applied in the search was only from 2013 to March 2021 to obtain more recent data. Additional filters were also used to restrict the social science discipline<apos;>s inquiry, especially in business management. In addition, non-journal publications such as books reviews, conference papers, book chapters, or thesis were not included in the research databases; these were identified as exclusion criteria for this review. Every database was searched using the term “franchisee performance” OR a combination of terms: “franchisee satisfaction,” “franchisee outcome.”

As of March 2021, the literature search from the two publishers resulted in 180 research papers in the Scopus database and 241 research papers from the Web of Science. Areas of studies such as franchisor performances, franchise performance were also not included in this study. The 421 articles obtained based on the abstracts and introduction were conducted throughout screening and review to select suitable papers for the research topic. Next, the authors removed articles that duplicate in two databases, leading to 275 research papers being eliminated. The third step was articles screened by two authors to ensure these 146 articles meet the research requirements and eligibility. Finally, a total of 40 articles that met the inclusion criteria were included in this review. figure 1 illustrates the review process in detail.

Figure 1. The process of literature review (adapted from 2009. Moher, Liberati, et al., (2009a)

2.2. Categorization

To begin with study evaluation, researchers created a spreadsheet file with appropriate categories and subgroups at the column level to populate and retrieve inputs from the articles. The table includes information on the authors, the journals, and the years of publication, variables that impact franchisee performance, empirical findings, theoretical frameworks, research setting, respondents, and data analysis technique. The chosen papers were classified into those that addressed franchisor-related factors, franchise-related factors, the external environment, and relationship variables—additionally, examination of the utilized measure aided in identifying a category of franchisee performance measuring scales. The discussion of articles<apos;> underlying ideas and their relationship with various constructs was grouped in a single column to facilitate critical examination. The classification method was iterative and was changed in light of review study outcomes. The appropriateness of this review was guaranteed by using a systematic search strategy and numerous rounds of coding and classification.

3. Some common attributes of the selected articles

3.1. Distribution by publishing trend

figure 2 presents the number of articles published on franchisee performance each year from 2013 to March 2021. From the Scopus databases, the starting point for publication trend has been taken as 1985, with the first article on channel member satisfaction was published that year. As depicted in figure 2, only a few papers on franchisee performance were published from 2013–2016. From 2017 onwards, the number of publications increased, accounting for 67.5% of forty papers in franchisee research.

Figure 2. Trends of franchisee performance research.Source: Scopus database

The top ten most cited articles are presented in Table 1 and 2. According to the Scopus database, the results show that the most cited article, with 53 citations, was research from Altinay, Brookes, , et al. (2014), which focused on relational factors such as franchisee trust and franchisee satisfaction. The majority of the top ten articles are focus on the relationship between franchisor and franchisee (accounted for 45% of total research), franchise strategies (approx. for 41%), and franchise resources and capabilities (approx. for 10%). Only one paper of top-cited research focused on franchisee entrepreneurial orientation from Chien (2014) on a couple—owned franchise outlets. The theories that applied most in top-cited articles were Resources–Based View Theory which applied four research articles, and Agency Theory, used in three research articles.

Table 1. Industries investigated

Industries investigated	Number of papers	Authors
Multiple industries	25	Adeiza et al.,(2018); Altinay, Brookes et al., (2014); Antia et al. (2017); Basset and Perrigot (2020); Beldi and Karmeni (2019); Boulay et al. (2020); Calderon-Monge and Huerta-Zavala (2014); Colla et al. (2020); Crosno and Tong (2018);) James R.; Scott K., Rajiv P. (2016); Cumberland et al. (2015); Felício et al. (2014a); Gorovaia (2019); Grace et al. (2020); Ishak et al. (2018); Jirásek et al. (2020); King et al. (2013); Lafontaine et al. (2019); López-Fernández and López-Bayón (2018); Nada Mumdziev (2013); Parker et al. (2019); Patel et al. (2018); Quach, Weaven, Thaichon, Baker, et al. (2020); Watson et al. (2020); Weaven et al. (2014)
Food and beverages industries	08	Yi et al. (2019); Brand et al. (2018); Chiou and Droge (2015); Kim and Bae (2018); Lee (2017);Colla et al. (2019), Ackermann (2019); Kalargyrou et al. (2018)
Convenient stores	01	Chien (2014)
Pharmacy	01	Ramaseshan et al. (2018)
Logistic Services	01	Coo (2018)
Education	01	Sanny et al. (2017)
Restaurant chains & Second-hand good dealers	01	Antia et al. (2017)
Convenience stores & restaurant chain	01	Wu (2015)
Unknown	01	Dube et al. (2020)

Source: Scopus database.

Table 2. Countries investigated

Continents investigated	Countries investigated	Number of papers	Authors
European	Germany	02	Gorovaia (2019); Nada Mumdziev (2013)
	Spain	03	Calderon-Monge and Huerta-Zavala (2014); López-Fernández and López-Bayón (2018); Ramaseshan et al. (2018)
	Portugal	01	Felício et al. (2014a)
	Netherlands	01	Brand et al. (2018)
	Turkey	01	Altinay, Brookes, , et al. (2014)
	France	06	Basset and Perrigot (2020); Beldi and Karmeni (2019); Boulay et al. (2020); Colla et al. (2020), Colla et al. (2019)); Meiseberg et al. (2017)
America	The United States	06	Ackermann (2019); Antia et al. (2017); Crosno and Tong (2018); Cumberland et al. (2015); Kalargyrou et al. (2018); Lafontaine et al. (2019)
	Australia	06	Eniola (2020);)James R.; Scott K., Rajiv P. (2016); King et al. (2013); Parker et al. (2019); Quach, Weaven et al. (2020); Weaven et al. (2014)
Asia	South Korea	04	Coo (2018); Kim and Bae (2018); Lee (2017); Yi et al. (2019)
	Taiwan	03	Chien (2014); Chiou and Droge (2015); Wu (2015)
	Malaysia	01	Ishak et al. (2018)
	Indonesia	01	Sanny et al. (2017)
Africa	South Africa	01	Dube et al. (2020)
	Nigeria	01	Adeiza et al. (2017)
Mixed countries	US & Spain & UK & France	01	Watson et al. (2020)
	Austria & Germany	01	Jirásek et al. (2020)
	USA & Korea	01	Patel et al. (2018)

Source: Scopus database

3.2. Distribution of articles by industries

Table 3

Table 3. Top articles in franchisee research

Authors	Title	Journal	Theory Applied	Citations	Methodology
Altinay, L. Brookes, M. Madanoglu,M. Aktas, G.	Franchisees’ Trust In And Satisfaction With Franchise Partnerships	Journal of Business Research	Power-Dependence, International Business Social Exchange Theories	53	Empirical study Quantitative research methodology Descriptive statistics
Wu, C.	Antecedents Of Franchise Strategy And Performance	Journal of Business Research	Resource-Based View Relationship-Marketing Theory	34	Empirical study Quantitative research methodology Structural equation modeling and fuzzy set qualitative comparative analysis
Anita, K. Mani, Sudha.	Franchisor-Franchisee Bankruptcy And The Efficacy Of Franchisee Governance	Journal of Marketing Research	Agency Theory	23	Empirical study Multiple Archival Sources
Chien, S.	Franchisor Resources, Spousal Resources, Entrepreneurial Orientation, And Performance In A Couple-Owned Franchise Outlet	Management Decision	Social Support Theory Resource-Based Theory Agency Theory	19	Empirical study Quantitative research methodology Descriptive statistics
Fernandez, B. Bayon, S.	Antecedents Of Early Terminations In Franchising: Franchisor Versus Franchisee Cancelations	Small Business Economics	Agency Theory Entrepreneurship Theory	16	Empirical study Quantitative research methodology Descriptive statistics
Ghantous, N. Das, S	International Franchising And Performance: A Resource-Based Perspective	International Journal of Retail and Distribution Management	Resource-Based View Theory Dynamic Capabilities Theory	11	Empirical Study Mixed method research methodology (qualitative + quantitative)
Felicio, J. Duarte, M. Caldeirinha, V. Rodrigues, R.	Franchisee-Based Brand Equity And Performance	The Service Industries Journal	Resource-Based View Theory	10	Empirical study Quantitative research methodology Descriptive statistics
Brand, M. Cro01n, E.	Entrepreneurial Networking: A Blessing Or A Curse? Differential Effects For Low, Medium And High Performing Franchisees	Small Business Economics	Contingency Theory	9	Empirical study Quantitative research—OLS and Q.R. methodology Descriptive statistics
Weaven, S. Grace, D. Frazer, L Giddigs, J.	Processual Antecedents Of Perceived Channel Conflict In Franchising	Journal of Business Economics and Management	Relationship Marketing Theory Relational Exchange Theory Organizational Learning Theory Conflict Theory	9	Empirical study Quantitative research methodology Descriptive statistics

Source: Scopus database

reveals that the papers were distributed over ten sectors. This statistic also shows that two main sectors were examined most: multi-industry, food, and beverage industries. Only twelve articles on franchisee performance, approximately 30% focus on specific industries. Eight articles were on the food and beverage industries; one article was on the retail industry, one article on the pharmacy industry, one on the logistic services industry, and one on the education industry. In twenty-eight articles, multi-industry was investigated; approximately 70% of the articles in this review did not report any specific industry scope. Several papers focused on multi-industries stated that data analysis on multiple industries could generalized the results. This high percentage of research focus on multi-industries demonstrates that there is a gap in industry studies.

However, some authors reported that focusing on only one franchise industry can limit the results and findings in that sector Brand et al. (2018); Yi et al. (2019) and cannot universally generalize with other franchise formats and contexts. Moreover, different franchise industries have different characteristics, so the results may be lead to bias and not represent the whole franchise industry context (Kim & Bae, 2018).

3.3. Distribution of articles by countries

The country-wise study paper examination shows that the selected reports span seventeen countries (Table 4). Fourteen papers from European countries take 35% out of forty total articles, leading by France six articles. Six articles studied industries in the USA, followed by six articles for Australia. Three articles were analyzed in multiple country settings. More briefly, one article researched four countries (US, Spain, UK, and France) to compare how the entrepreneurial personality affects franchisee performance between low and high entrepreneurial contexts. One article based on performance feedback theory evaluates how athletic goals (productivity goals, marker adaptation goals, channel integration goals) affect franchisee satisfaction between franchisees in Germany and Austria. The final paper focused on USA firms and franchisees in South Korea to examine whether family-owned franchises have lower financial performance than nonfamily-owned franchisees. The figure also illustrated that the research in the franchisee area is stretching across various continents; however, Asia, especially emerging markets, has not paid much attention to franchisee performance.

3.4. Theories used in franchisee research

There are thirty theories that researchers explain the antecedents of franchisee performance in forty franchisee research papers. Agency theory and Resource-Based View theory are the most popular theories researchers used in franchising literature (Bretas & Alon, 2021). Agency theory shows a partnership between stakeholders in franchise business occurs—franchisors and franchisees. Parties in this partnership could have divergent priorities and rising agency expenses along with opportunism risk. Franchisees will behave as individual entrepreneurs and participate in opportunistic activities Brickley and Dark (1987) that enhance their unit but not the franchise framework as a whole (Hoffman et al., 2016). The Resource-Based View (RBV), Associated Organizational Ability Theory, and Resource Scarcity Theory are three theories that argue companies franchise to leverage scarce and valuable resources abroad, especially capital and managerial resources, and proliferate (Alon & McKee, 1999). The combination of two theories: Resource-Based View (RBV) theory and Expectation-Confirmation Theory, explained franchisor support services<apos;> impact on the market performance results of franchisees. RBV is a theoretical viewpoint that stresses the importance of various resource types when attempting to gain a sustainable competitive edge (Barney, 1991). It offers an explanatory structure for a business with access to or manages a particular set of local, human, material, and organizational capital (Violina & Charles, 1999).

4. Where and what has been researched

4.1. Entrepreneurial orientation

Entrepreneurial orientation in business management is an interesting research area that academic scholars have paid attention to in recent years. However, the motivation of franchisee managers has attracted less focus in franchise literature (Rosado-Serrano & Paul, 2018). With an excellent entrepreneurial focus, franchisee managers may comfortably contribute to expanding franchise opportunities in international markets. Managers may have an entrepreneurial orientation (E.O.) but lack the tools to grow the franchise business. After E.O. became a dominant term in entrepreneurial literature, researchers still paid little attention to E.O. in franchisees (Chien, 2014). E.O. corresponds to a company<apos;>s competitive strategy, focused on its unique entrepreneurial processes and attitudes, and demonstrates how businesses find and leverage potential opportunities before their rivals (Lumpkin & Dess, 1996). A study by Chien (2014) combined RBV theory with E.O. to strengthen an understanding of how a firm organizes resources to seek opportunities, drawing on data collected from the franchisees; hence the more significant the E.O. of the franchisees, the greater their competitive advantage and the higher the franchisee performance. Overall, franchisees<apos;> E.O. is suggested as an essential variable for the relationship between franchisor resources and performance. A study by Colla et al. (2020) identified the most critical E.O. dimensions for differentiating franchisees by relative efficiency. The findings suggested that competitive aggressiveness and managerial autonomy were crucial to achieving a high level of success for franchisees in France.

4.2. Entrepreneurial personalities

The topic of franchisee personalities is one of the most studied in research on franchisee performance. A study by Watson et al. (2020) emphasized the value of exploring how individual franchisee characteristics can affect unit output and reported that a proactive disposition, mediated by entrepreneurial practices, implicitly increases financial performance and relationship quality. Interestingly, franchisees with more creative personalities performed less well financially. The relationships between franchisee personality, market orientation, and success were similar in high and low entrepreneurship cultures. Although franchising encourages uniformity, and research from) Dant, Weaven, & Baker (2013) noted the trend within the franchise literature to perceive them as homogeneous, several findings indicated that franchisees are heterogeneous (Watson et al., 2020; Quach et al.,2020). The research of Quach, Weaven et al. (2020) added to the franchise literature by demonstrating the effect of the recipient<apos;>s personality on feelings of gratitude. The findings reinforced the significance of personality characteristics (extraversion, agreeableness, conscientiousness, emotional stability, openness to experience) as determinants of gratitude. They defined the degree to which the influence of personality on appreciation varies over the tenure of franchisee-franchisor relationships and how gratitude impacts relationship growth and long-term success between the franchisor and franchisee. Research by Parker et al. (2019) showed the findings—which applied to COR theory and suggested that franchisees with personal and contextual capital are more likely to show good results. Good franchise leadership lays the groundwork for driving creative job habits Curral & Marques-Quinteiro (2009), acts as a cognitive resource for strong entrepreneurship promotes personal leadership growth Ross (2014), and is positively connected to constructive work position behaviors (Marques et al., 2012). The study findings showed that self-leadership might be an essential trait requirement when hiring good franchisees. Cumberland et al. (2015) investigated five factors of entrepreneurial self-efficacy (ESE), including marketing ESE, innovation ESE, management ESE, risk-taking ESE, and financial control ESE, and their effect on franchisee performance in either a competitively intense or technologically turbulent environment. The overall composite ESE score was not significantly linked to franchisee performance, but three of ESE<apos;>s five individual dimensions (creativity, management, and financial control) were essential in enhancing franchisee performance. The success in modeling the three-way relationship indicates that highly competitive projects in volatile technological environments need leading entrepreneurs who support creativity, are good managers, and have strong financial management skills.

Lee (2017) focused on the significance of individual franchisees<apos;> personalities and traits, highlighting the positive effects of franchisees<apos;> self-leadership on knowledge-sharing and satisfaction. Lee (2017) demonstrated its importance in forecasting and selecting competitive franchises, as self-leadership is a core attribute that produces appropriate expertise in other personal skills defined in the literature. Lee (2017) also noted that recognizing personality variations and analyzing their effect on information-sharing practices are essential starting points for knowledge management. Interestingly, further research into the influence of personality and individual characteristics is critical for predicting knowledge-sharing behaviors.

A study by Felício et al. (2014a) focused on franchisees<apos;> perceptions. It analyzed the influence of brand equity on franchisee performance, showing that brand personality (including personality traits and demographic characteristics such as gender and age) significantly impacts franchisee performance. Consistent with Combs et al. (2004), the franchisees possess a deeper understanding of their local area, which helps them connect effectively with consumers, leading to the franchise<apos;>s positive growth.

Many authors investigated the franchisors<apos;> or franchisees<apos;> leadership skills, or both, and their effect on franchisee performance. Research by Coo (2018) examined factors affecting the improved performances of franchisees, leading to the sustainable management of global franchise distribution around the world. The study including four performance improvement factors in the franchise management system: “the leadership of franchisors and franchisor managers,” “smooth communication between franchisors and franchisees,” “franchisor<apos;>s education and training of franchisees” and “brand owned by franchisors.” The results showed that in global franchise distribution systems, the leadership of franchisors and franchisor managers did not cause improved franchisee business performance in the South Korean logistic industry. Further research is encouraged to highlight the role of franchisee self-leadership in franchisee non-financial and financial performance.

4.3. Franchisor resources

Many of the studies reviewed are interested in franchisor resources and their essential role in franchisee performance, exceptionally support, and brand name (Dant et al., 2011; Gillis et al., 2014). Previous studies have adopted the Resourced Based View Theory, discussing such intangible and valuable resources from the franchisor perspective (Combs et al., 2004; Mariz-Pérez & García-Álvarez, 2009; Michael & Combs, 2008). A study by Chien (2014) stated that franchisor resources appear to be most important in franchisees<apos;> firm performance. As previous studies have noted, training and brand name are considered intangible assets of the franchisor Hendrikse, G.W.J, and Windsperger,J. (2004) and play a unique role in franchisee performance. Weaven et al. (2014) found that the franchisee<apos;>s practical evaluation of the franchise partnership is more highly affected by the assistance offered by franchisors (e.g., promoting local business programs, financial assistance) than the franchisee<apos;>s trustworthiness the franchisee<apos;>s approach to contract and dispute management.

Dube et al. (2020) research used LMX theory, highlighted the relationship between leaders (franchisors) and organizational members (franchisees). It is believed that support and perceptions of equal support can improve relationships, trust, and business success for the whole network (Dube et al., 2020). Nevertheless, franchisors can share the burden of increasing business visibility and profitability with a proportionate investment of their resources (Roh & Yoon, 2009). The franchisor<apos;>s valuable resources can thus be complemented by contributions from franchisees who gain access to a proven business concept, thus improving their chances of success (Varotto & Aureliano-Silva, 2017). At the same time, franchisees rely on support, reduced start-up risk, and the promise of increased business growth (Oni, O.A., & Matiza, T., 2014). As the franchisor<apos;>s “customers,” franchisees require holistic support. For example, in addition to receiving financial and non-financial support, they also appreciate minor adjustments accommodating regional or national preferences (Hnuchek,K., Ismail,I., Haron.,H , 2013. Franchisee satisfaction on the franchisor<apos;>s service and support carries a practical component, enhancing the franchisee<apos;>s willingness to cooperate, minimize conflict, and promote the recruitment of new franchisees (Adeiza et al., 2017). Gorovaia (2019) identified the main factors affecting franchise performance: brand name; franchisees<apos;> intangible resources, including innovation capabilities and local market knowledge; exploitation assets including franchisee<apos;>s know-how advantage, quality control, and administrative capabilities; and environmental factors. Consistent with previous studies, Lafontaine et al. (2019) used census microdata and claimed that, on average, franchised firms have higher survival rates than independent firms due primarily to franchisor selection processes and the advantages of franchisor brand and market know-how. That study applied organizational support theory by exploring the interactive impact of organizational support and personal capital when forecasting results. These tools are valuable to developers, and personal constructive and positive resources are valuable for franchisee financial success. Furthermore, just as family support is critical for entrepreneurs, it also has positive associations with financial performance and citizenship (especially when confidence is high). Nevertheless, for franchisees, organizational support is critical, as expectations of organizational support are linked to better financial results and franchise citizenship.

4.4. Franchisee resources

Franchise chains are often regarded as interconnected organizational units that function collectively to achieve organizational objectives. A franchise offers more comprehensive resources and experience, critical factors in ensuring the success of an organization (Gillis et al., 2014). Moreover, it is evident that knowledge is a vital factor, and its transferability plays a vital role in the success of businesses within a particular industry. The franchising process facilitates communication and coordination between two parties and makes transferring knowledge across international borders easier. The reason is that franchisees possess a significant amount of tacit knowledge with in-depth information about local customer preferences, demands, thresholds of pricing, and competitive intelligence, all of which are critical factors in determining the expansion strategies of a business organization. This tacit knowledge is used to achieve higher levels of customer satisfaction through effective pricing and product formulation (Ater & Rigbi, 2013). For example, franchisee knowledge allows the franchisor to create popular food products among the local population in the fast-food sector. The knowledge is not easily achieved for foreign companies as it would involve a significant investment of time and financial resources to study, understand and evaluate the market of a particular country or locality (Cumberland & Githens, 2012). Ackermann (2019), research-based on an analysis of Alphabee, reported that franchisors may have both company-owned and franchisee-owned stores and may choose to assign the least desirable locations to franchisees. Thus, places with greater competition or in low-income areas were more likely to be franchised. Through a good understanding of the market or easily obtained market research, local franchisees can increase store revenues by 15%. In a study on the performance of franchise systems through the views of Resource-Based Theory and Fundamental Options Theory, franchisees’ intangible resources—which are considered as low degree of imitability such as exploration capabilities (innovation and local market knowledge) and exploitation capabilities (quality control and administrative capabilities), together with franchisor<apos;>s intangible system specific know-how and brand name improve the network performance (Gorovaia & Windsperger, 2013).

Moreover, that research also revealed that intangible exploration capabilities have a more significant effect on network efficiency than fewer supernatural exploitation capabilities. By reducing the franchisees’ incentives to invest in both exploration and exploitation capabilities, the absolute option clause decreases the positive impact of the franchisees’ intangible resources on network performance (Gorovaia & Windsperger, 2013). Gorovaia (2019)’s study was the first study that applied actual option reasoning to franchising and, specifically, to test the impact of explicit call options on the performance of franchise networks. The results demonstrate that such use—a provision allowing the franchisor to purchase franchise units after the contract period—enormously improves network efficiency due to the franchisor<apos;>s more incredible expenditure opportunities and managerial versatility. The moderating function of the fundamental choice clause in the partnership between the intangible resources of franchisors and franchisees and network efficiency enhances the positive effect of franchisors’ intangible resources on franchise system performance (Gorovaia, 2019).

4.5. Control mechanisms

Franchisors deploy various governance structures to ensure franchisees’ ongoing success, and there is no doubt that franchisors maintain a close connection to their franchisees’ ongoing operations. Yi et al. (2019) found output control to be a control mechanism vital to multi-dimensional franchisee trust. According to Jacobides and Croson (2001), monitoring in the franchising context is the gaining of information by the franchisor to regulate franchisees’ actions and encourage franchisees to follow the franchise agreement through behavioral output monitoring and outcome monitoring. The results were compatible with previous studies from Kohli and Jaworski (1990); Koza and Dant (2007). Franchisees experienced substantial job autonomy in a traditional production management scheme since they are primarily accountable for outcomes and controlled less in their regular activities (Dekker, 2004). Yi et al. (2019) supported that franchisors’ performance control is a primary antecedent of franchisee trust. There is proof of the relationship between process control and franchisee trust. Several studies believed governance was a real problem in managing franchise networks (Chiou & Droge, 2015; Kaufmann & Dant, 1998). Research by Beldi and Karmeni (2019) indicated that different control mechanisms affect franchisee efficiency: internal and behavioral control on the one side and franchisee success on the other side. However, Beldi and Karmeni (2019) identified a drawback was the lack of substantial influence on franchisee efficiency from the interaction effect of control mechanisms.

Based on Crosno and Tong's (2018) research, there was an analysis on how controlling compliance in the USA affects financial performance, which showed that outcome control and behavioral control have varying impacts on perfunctory enforcement. Additionally, they demonstrated that the duration of the partnership has a significant moderating effect on the control-enforcement relationship, with behavioral control increasing highly accomplished compliance in the early stages of franchisor-franchisee relationships and decreasing accomplished compliance in the later stages. Finally, and surprisingly, consummate enforcement reduces franchisee financial output while perfunctory compliance improves franchisee performance. Antia et al. (2017) acknowledged that significant improvements in franchisee skills and motivation call for the introduction of additional governance mechanisms to ensure franchisee success, reduce the risk of franchisee bankruptcy and reduce the likelihood of franchisor bankruptcy. Two ability-inducing mechanisms (selection and socialization) and two motivation-inducing mechanisms (incentives and monitoring) may enhance franchisee skills and motivate franchisees to improve their efficiency. Several authors argued that monitoring is an integral mechanism employed by groups to counteract opportunism or incidents of ethical hazard that can lead to diminished intrinsic motivation by Bruno (1993) or loss of autonomy and control by Brehm and Sensenig (1966). Research by) James R.; Scott K., Rajiv P. (2016) found that compliance is a significant outcome monitoring influence, particularly in the absence of explicit relational norms. More importantly, compliance is a crucial precedent of franchisee success and marketing channel relationships, mainly where strong exchange standards are used in direct franchisor-franchisee relationships.

4.6. Justice and franchisee advice networks

A study by Grace et al. (2020) provided some insight into franchisee justices by applying Justice Theory. The study revealed that solid support for distributive and interpersonal fairness, which were predictors of perceived performance, indicated that franchisee expectations of unit success are focused on their perceptions of justice. This justice was measured in how prizes are assigned to trade partners proportionate to their efforts and how they consider their support within the franchise structure characterized by politeness, respect, and integrity (Grace et al., 2020). Franchisees may see the legal franchise agreement as symbolic of an equitable, honest, and straightforward process that explicitly explains both parties’ positions, privileges, and obligations in the partnership. Although the literature offers sufficient proof of the decisiveness of the franchisor-franchisee relationship in franchisee success or failure, the output consequences of franchisee-franchisee relationships remain mostly unexplored (Meiseberg et al., 2017). Therefore, Meiseberg et al. (2017) showed how building inter-franchisee relationships could help franchisees form advice networks, boosting access to resources such as awareness of enhancing a franchisee<apos;>s competitiveness that will eventually improve franchisees’ efficiency and performance. Franchisees may prefer roles providing opportunities to develop inter-franchisee relationships. While “remote” areas of activity may appear appealing in terms of the low risk of encroachment by other chain members, it may be difficult to obtain relevant advice if needed, as contact opportunities and competent others are scarce.

4.7. Franchise ownership

Patel et al. (2018) observed that, although franchisee performance has attracted many scholars in entrepreneurial traits, control mechanisms …, how the type of franchisee ownership influences franchisee financial performance was under-explored. Based on agency theory, the findings show that family-owned franchisees produce lower financial performance than non-family-owned franchisees, highlighting the need for family-owned franchisees to close this performance gap and for franchisors to control family-owned franchisees. More importantly, in the French franchise context, the impact of family ownership on franchisee success is unfavorable, although family ownership is a widespread form of business organization worldwide (Patel et al., 2018). Calderon-Monge and Huerta-Zavala (2014) questioned how potential franchisees could understand the quality of different franchise chains, raising two principal implications. Firstly, the franchisor<apos;>s moral hazard rationale for franchising may surface in the case of conflict between company-owned establishments and franchise operations; secondly, conflicts of interest arise between franchisors and future franchisees if franchisors demand significant investments. Entrepreneurs pursuing a franchise opportunity often look to success as a signal to regain their initial investment. Boulay et al. (2020) suggested that to ensure a win-win relationship, and franchisors should not allow a franchisee to buy more than three units, as owning more units will reduce marginal revenue and income. The optimal size is between three and four franchised outlets for a mini-chain.

4.8. Environmental and behavioral uncertainty (transaction cost determinants)

Nada Mumdziev (2013) used transaction cost theory in German franchise industries and found that behavioral uncertainty impacts decision privileges to franchisees. This result implies that franchisors become more inclined to transfer decision powers to franchisees as they experience challenges in assessing franchisees’ success and monitoring their behavior. Moreover, environmental uncertainty negatively impacts the distribution of franchise decision rights when the franchisor retains a more significant influence regarding local outlet choices. In contrast, the local business environment is highly unpredictable. When franchisors see an increase in environmental uncertainty, they tend to increase their control over management decisions in the franchisee<apos;>s local market, potentially leading to a negative relationship with the franchisees’ proportion of residual decision rights. Moreover, behavioral uncertainty raises the franchisor<apos;>s opportunism threat, which occurs in the context of franchisees’ deceptive and adverse actions such as gambling, shirking, or knowledge distortion. It may lead to a negative relationship with the franchisees’ proportion of residual decision rights. Gorovaia (2019) explored the performance outcomes of franchise contract length by using two theories: transaction costs theory and resource-based theory, and found that when franchisees’ specific investments are high and environmental uncertainty is low, franchisors tend to offer more extended contracts; hence, franchisees can decide which transactional attributes are likely to result in better performance. Environmental uncertainty factors included volatility (uncertainty about future market developments) and ambiguity (lack of information) of multi-unit franchising didn<apos;>t have direct influence the decision to expand through MUF and internalize the company activities in France context (Boulay et al., 2020). Moreover, behavioral uncertainty occurs when agents seek to act in their interest; hence, franchise chains can use multiple formal and informal mechanisms to prevent opportunistic behaviors.

4.9. Employees

Ramaseshan et al. (2018) reported that little understanding exists about how franchisor management techniques impact franchisees’ success. The franchisee-level service output of employees may rely on franchisor management strategies, and the research explores the cumulative impact of three franchisor management techniques—creative ethos, support resources, and autonomy—on the quality efficiency of franchisee store workers and consumer satisfaction. The findings show that consumer satisfaction in a franchisee store is positively affected by the franchisor<apos;>s quality efficiency and the support benefits rendered by the store<apos;>s employees. Conversely, franchisor management tactics such as creative culture and autonomy adversely affect franchisee store consumer loyalty.

4.10. Relationship quality

In most studies on franchisee performance, the influence of relationship quality and relational quality between franchisor and franchisee was used to explain franchisee outcomes better and identify the influence of a good relationship between the parties on franchisee performance. Twenty studies out of forty reviewed focused on relationship quality and conflict prevention between franchisors and franchisees. Several showed the advantages of inter-relational and transactional criteria in favorably affecting franchisee attitudes (Altinay, Brookes, et al., 2014; Basset & Perrigot, 2020; Brand et al., 2018; Chiou & Droge, 2015; Felício et al., 2014b; Gorovaia, 2019; Ishak et al., 2018; Kalargyrou et al., 2018; King et al., 2013; López-Fernández & López-Bayón, 2018; Patel et al., 2018; Sanny et al., 2017; Weaven et al., 2014; Wu, 2015). A compelling brand plays a central role in the franchise network<apos;>s success. Several important variables such as information generation, knowledge dissemination, the H-factor, role clarity, franchisee satisfaction, and brand commitment can create a franchise brand champion King et al., 2013), boosting franchisee performance by increasing the intention to stay, word of mouth, and brand citizenship behavior. A research from Sanny et al. (2017) examined the education franchise context in Indonesia, has proved that the quality of relationships is an important factor in improving franchisee performance results. Felício et al. (2014b) found that franchisee firms’ success—understood in terms of franchisee happiness, financial results, and added consumer and business market equity—was positively and profoundly affected by franchisee-based brand equity. Franchisees consider brand loyalty a pivotal factor for engaging in the franchise (Felício et al., 2014b). They show a substantial degree of satisfaction with the franchisor<apos;>s partnership, the terms of the franchise deal, the financial outcomes, and their willingness to conquer rivals. They also understand that the brand brings value to both customers and the franchisee. A study by López-Bayón and López-Fernández (2016) established peer-to-peer franchisees’ structural, resource relationships, and profit and damage low, medium, and high-performance franchisors differently. Jirásek et al. (2020a) filled a gap in the franchising literature which had given little systematic attention to long-term goal formulation. Three organization roles: productivity goals—firm<apos;>s efficiency and financial performance, market adaptation goals—which help franchisee firms establish a distinctive identity emphasizing customer-centricity, and channel integration goals—related to structural and relational ties within channels, Jirásek et al., (2020b) found a positive impact of relational factors on franchisee behavior. Interestingly, consistent with other previous studies, no direct effect of service performance feedback on overall franchisee satisfaction (Jirásek et al., 2020b). Moreover, franchisees credit this success to their own efforts, not to the franchisor. Further studies would be useful to examine how individual success objectives relate to overall satisfaction.

figure 3 illustrated the summerize of franchisor perspectives, franchisee perspectives, relationship quality, and environmental factors that affect franchisee performance

Figure 3. Summarized findings.

5. Conclusions

The present literature review analyzed and categorized studies on the antecedents of franchisee performance and franchisee satisfaction and identified four categories of factors determining franchisee performance: franchisor perspectives, franchisee perspectives, relationship quality, and transaction cost determinants. Franchising is a popular mode of business expansion researched extensively in recent decades, primarily due to its growing relevance in the modern business environment (Alpeza et al., 2015). That research has shown that one of the most important benefits of franchising is the significant entrepreneurial opportunity created for franchisor and franchisee (Lola Dada , O., Watson, A., & Kirby, D., 2015). The opportunities rely on cooperation: A franchisor may extract high fees from the franchisee while offering insufficient support to facilitate the growth of the business (Ayopo Olotu & Awoseila, 2011). Conversely, the franchisee can utilize the brand name while providing poor service to customers, likely creating a negative impression of the brand name. Therefore, a holistic analysis of the implications of intangible assets from both franchisor and franchisee perspectives is essential.

Franchise partnerships are multi-dimensional and involve a critical evaluation of the relationship between franchisor and franchisee to formulate a compatible and mutual partnership that benefits both parties equally by deploying resources to develop the business. The selection of franchisees in the international market is complex. It requires the franchisor to evaluate numerous factors before granting the franchisee the right to conduct business under the brand name for a pre-decided fee (Nyberg & Wright, 2015). Such factors include resource capabilities, relationship management, and governance mode. The primary incentive for the franchisor in establishing international franchises is that most franchisees have extensive local knowledge, giving them a particular advantage through an understanding of customer demands, preferences, local governmental laws, and regulations (Gorovaia & Windsperger, 2013). Franchisors often develop models for the meticulous selection of franchisees, as granting franchising rights has several business implications, with a potential positive or negative impact on the company<apos;>s reputation if the franchisee misuses franchising rights. Franchising internationally brings numerous challenges to be resolved by both parties to ensure that they can reap the benefits of franchising through the expansion of business operations which directly influences revenue generation and profitability (Rosado-Serrano & Paul, 2018). Entrepreneurial franchisees focus on combining innovative capabilities and resources at their disposal to formulate parallel business operations to gain competitive advantage by overcoming the challenges often caused by communicational and coordination barriers in international franchising. Studies have reflected that support from the franchisor neither reduces nor diminishes the independence or innovative capabilities of the franchisee; rather, it enhances the ability of the franchisee to innovate and create. Overall, the synergistic and dynamic relationship between the parties plays a vital role in gaining a competitive advantage over rival firms (Flint-Hartle & de Bruin, 2011). The benefits of franchising are widespread, and large-scale businesses have used franchising to expand operations and achieve competitive advantage (Marc Herz, 2016). However, the franchisor and franchisee also have drawbacks to be overcome to enhance the probability of success. The clear benefits of international franchising include a lower risk of failure, a more straightforward business setup, a readymade customer portfolio, and brand recognition (Badrinarayanan et al., 2016). Conversely, the challenges to be overcome include high initial costs, especially for the franchisee, dependence on each other, and lack of independence in business operations (Salar & Salar, 2014). However, once these are overcome, the franchisee and franchisor can formulate a solid partnership for benefit from the growing global market by combining the resources and knowledge of both enterprises (Frazer et al., 2012).

Although this literature review is the first paper on franchisee performance in the franchising literature, it has some limitations. Since only articles written in English were considered, the review included a significant number of U.S. and European studies (40 studies). There may, therefore, be some bias in the main conclusions and guidelines, as papers written in other languages were not included. Another limitation is that only articles published in 2013—March 2021 are included.

6. Avenues for further research

Prior franchising research has focused on examining agency González-Benito et al. (2009); Lafontaine (1992), the strategic challenges facing franchisors in contracting with franchisees Koza and Dant (2007) and franchise ownership (Grünhagen & Mittelstaedt, 2005). Future research is encouraged to investigate the moderating effects of franchisor resources on franchisee entrepreneurial orientation and market orientations. More briefly, future research should focus on the role of franchisor support on franchisees’ innovativeness, willingness to experiment and take risks, ability to be more competitive, and understand customers, are all elements that can improve franchisee performance. No previous studies have analyzed how franchisee market orientation affects franchisee performance as market orientation can help franchisee firms achieve competitive advantage and superior business performance (Narver & Slater, 1990).

Although enhanced customer-centric service and franchisor strategies are vital in retaining customer loyalty in the franchise context, only 01 paper from Ramaseshan et al. (2018) focused on the multilevel view by collecting data from franchisee employees and consumers. Future research could analyze how franchisor management strategies, such as franchisor support, affect franchisee intellectual capital and how franchisor support boosts franchisee entrepreneurial and market orientation in the emerging franchise market.

Most research in franchisee performance is conducted in developed countries; more research on franchising in emerging markets such as Vietnam is necessary. One of the main characteristics of emerging markets is environmental dynamism when frequent customer demands, competitive environments, and asymmetric information happens. Environment Dynamism can be seen as a threat; however, agile firms can take advantage of it and generate new business approaches in emerging markets. It would be interesting to examine the effect of environmental dynamism on franchisee performance and franchisee entrepreneurial and market orientation.

However, future studies need to validate franchisee entrepreneurial orientation and market orientation in the emerging franchise context to draw more meaningful conclusions. No research has focused on franchisee market orientation and learning orientation, even though these factors are valuable investments and contribute to SMEs’ performance (Amin, 2015; Muslim Amin Ramayah Thurasamy Abdullah Mohamad Aldakhil Aznur Hafeez Kaswuri, 2016). Although the potential benefits of franchisee performance have been researched in-depth, only a few research papers examine the possible further research areas on franchisees’ internal assets, such as intellectual capital on franchisees’ subjective performance. This research has suggested that the literature neither critically evaluates specific aspects of franchising partners nor addresses the factors that may impact the franchisors or franchisees primarily because of changing rules and regulations worldwide, which significantly influence business partnerships and the operational capabilities of firms (Klick et al., 2012). Factors such as low tolerance of risk and a lack of familiarity with the local market can significantly reduce the probability of success for franchisee operations and franchise chains. Most studies have merely analyzed the relationship between the franchisors and franchisees but failed to evaluate the implications of other critical factors, such as the external environment, that might be pivotal in determining the success or failure of the franchise (Rosado-Serrano & Paul, 2018).

Numerous challenges arise as international franchising often involves cross-cultural differences, leading to communication and coordination barriers. Moreover, it has been found that employees and businesses may frequently be opposed to operating under franchisors from a particular country or culture. To overcome these challenges, franchisees and franchisors must work together on training staff and focusing only on high-quality products or services rather than judging a particular brand based on cultural prejudices.

Acknowledgements

The authors would like to give special thanks to Editors of Cogent Business & Management Journal and two autonomous reviewers for their valuable comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Thi Thao Hien Bui

Ms. Thi Thao Hien Bui is a Ph.D. student at Taylor<apos;>s Business School, Taylor<apos;>s University, Selangor, Malaysia. Her research interests are in the areas of franchising industry, organizational learning, firm performance, consumer behavior. Thi Thao Hien Bui is the corresponding author and can be contacted at: [email protected].

Dr. Manimekelai Jambulingam is a professor at Taylor<apos;>s Business School, Taylor<apos;>s University, Selangor, Malaysia. Her research interest is in entrepreneurial studies (human resource management, human ethics, business ethics, and organizational behavior).

Dr. Muslim Amin is a professor at Sunway University Business School, Sunway University, Malaysia. His research interests are in the areas of Service Quality, Customer Satisfaction, Behavioral Intentions and Quality Design and Services Management.