The influence of franchisees’ trust and perceptions of control on their behavior. A promising relationship or doomed to fail?

A promising relationship or doomed to fail?

The influence of franchisees’ trust and

perceptions of control on their behavior.

Amber Voors

S3202747

a.voors@student.rug.nl

June 22, 2020

Supervisor: Dr. K. Bijlsma-Frankema

Co-assessor: Dr. E.P.M. Croonen

Master of Science (MSc) Business Administration

Small Business & Entrepreneurship

Faculty of Economics and Business

University of Groningen

The Netherlands

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ABSTRACT

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TABLE OF CONTENT

2.3 Relation between trust and control ... 9

2.4 Behavior of franchisees ... 10 3. METHODS ... 12 3.1 Research design ... 12 3.2 Data collection ... 12 3.3 Data analysis... 13 3.4 Quality criteria ... 14 3.4.1 Construct validity ... 14 3.4.2 Internal validity ... 14 3.4.3 External validity ... 15 3.4.4 Reliability ... 15 4. RESULTS ... 16 4.1 Data description ... 16

4.1.1 General information about the interviewees ... 16

4.1.2 Expectations at the start of the franchise relation: fulfilled and unfulfilled ... 16

4.1.3 Relationship with fellow franchisees ... 17

4.1.4 Relationship with the franchisor ... 18

4.1.5 Changes in past 10 years ... 20

4.1.6 E-commerce ... 20

4.2 Data analysis... 21

4.2.1 Why is control by franchisor sometimes perceived as beneficial, and sometimes as detrimental to the self and/or the firm?... 21

4.2.2 Why do franchisees trust their franchisor and how did trust emerge initially? ... 22

4.2.3 Do franchisees deal differently with the level of trust they perceive? ... 24

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5. CONCLUSION AND DISCUSSION ... 27

5.1 Conclusion ... 27

5.2 Theoretical implications ... 29

5.3 Managerial implications ... 29

5.3 Research limitations and suggestions for future research ... 30

6. REFERENCES ... 31

7. APPENDIX ... 34

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1. INTRODUCTION

This Master Thesis is focused on franchising as a relevant part of the Master of Science (MSc) Small Business and Entrepreneurship in Business Administration. There is an phenomenal growth of franchising in the world, causing a major focus on franchising in academic literature over the past three decades (Welsh et al., 2006). Franchising has become a dominant form of entrepreneurship, where a franchisor enters into contractual relationships with franchisees, mostly small business owners. The franchisees pay a fee for using the franchisor’s business format and agree to a certain set of standards that come with the franchise formula (Grunhagen & Dors, 2003). Therefore, the research topic about the business format franchising is assessed as highly relevant in the context of the MSc Small Business and Entrepreneurship.

As mentioned before, franchising is an important form of entrepreneurial businesses (Dant et al., 2011). A franchise organization has been called an “umbrella organization” (Gassenheimer et al., 1996), while franchisees are part of a system where all units are operating under the same business format. Sometimes this kind of relationship can create tensions between a franchisee and franchisor. For example, their economic motives can differ from each other, which can causes agency problems (Croonen & Broekhuizen, 2019). Agency problems emerge when the franchisees on whom the franchisor must rely, are either unwilling or incapable to effectively and fully cooperate with to achieve the desired objectives (Sitkin et al. 2020). Franchisors are focused on maximizing their systems sales, whereas franchisees’ aim is to increase their individual units’ profitability. The franchisor can use his power against the franchisees in order to protect their own interests, for example through sanctions and threats (Altinay et al., 2014).

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when one party perceives that the other party has frustrated, or is about to frustrate (Sitkin & Bies, 1993). Those parties involved can engage in different patterns of behavior, ranging from passive resistance to overt aggression. This is related to the exit, voice, loyalty and neglect (EVLN) model we use for explaining behavior of franchisees according to Rusbult et al., (1982). We also add silence as a pattern of behavior according to Morrison et al., (2003). This model is discussed in the theoretical framework, and will be elaborated on in the next chapter.

The patterns of behavior of franchisees are influenced by the level of confidence. It is necessary that a franchisee has an adequate level of confidence in the cooperative behavior of its partner (Das & Teng, 1998). Confidence comes from two kind of sources: trust and control. Bijlsma-Frankema and Costa (2007) found that trust and control are related and the authors distinguished two perspectives: substitution and complementary perspective. The substitution perspective means that trust and control are seen as inversely related. The complementarity perspective means that trust and control are seen as mutually reinforcing. An important element of trust is the expectation held by one partner that the other party will treat him just or fairly (Croonen, 2008). Trust enhances franchisees' confidence in the franchisor's competence, leading to more cooperative behavior and satisfaction in the franchise relationship (Davies et al., 2011). Some other positive consequences of trust are higher performance and compliance and fewer conflicts and exits (Croonen & Broekhuizen, 2019). For control, a controller (franchisor) will direct attention, motivate and encourage organizational members to act in the desired way to meet the organization’s objectives (Sitkin et al., 2020). The franchisees are the subject of the control action by the franchisor. Trust and control will both be researched in relationship with behavior of franchisees.

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Figure 1 - Conceptual Model

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2. LITERATURE REVIEW

This chapter gives an overview of the most important existing literature related to trust and control in franchise relationships and possible behavior of franchisees.

2.1 Trust

First of all, trust has been demonstrated to predict behavior of those who trust, so it is important for understanding behavior of franchisees in franchise relationships (Davies et al., 2011; Ding et al., 2013). Rousseau et al. (1998: p.395) define trust as: “a psychological state comprising the intention to accept vulnerability based on positive expectations of the intentions or the behavior of another”. So trust consists of two elements; positive expectations and the willingness to become vulnerable. The essence of trust is that there is a risk that behavior of your partners can harm you (Bijlsma-Frankema & Costa, 2005). This is also relevant for both partners in franchise relationships. Interactions between a franchisee and franchisor can influence their psychological state of trust. Trust is dynamic over time, it can decrease or increase. This depends on the ongoing interactions with the other partners and the context in which it occurs (Bijlsma-Frankema & Costa, 2005). If partners violate the expectations, trust will decrease, if they live up to expectations of beneficial behavior, trust will increase. So the degree of trust can vary from weak to strong. Some examples of positive consequences of trust in a relationship are open communication, perceptions of psychological safety, information sharing, and positive outcomes such as high levels of cooperation and performance (Bijlsma-Frankema & Costa, 2005). The psychological state of trust in a relationship develops and guides behavior during present and future interactions (Davies et al., 2011).

2.2 Control

Literature suggest that one partner in a relationship can change the behavior of the other partner when making use of their control (Das & Teng, 1998). Control is defined as “a process that direct organizational members to align their goals, actions, and capabilities with those of the organizations of which they are a part” (Sitkin et al., 2020, p.340; Das & Teng, 2001, p.493). There is a controller in the franchise relationship, the franchisor, who is generally in a position of authority. The controller can decide how to direct the implementation of controls toward the controlee, the franchisee. The aim of the controller is to influence and direct the controlee to achieve certain objectives.

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more emergent and evolve over time within the relationship. According to Sitkin et al. (2020), control can have three different purposes. In the next paragraphs we discuss all of these purposes.

Most authorities use organizational controls to address agency problems. These problems exist when the controller must rely on other organizational members to perform work tasks and/or achieve end-state objectives (Sitkin et al., 2020). Control can help to solve these agency problems. These problems can emerge when the organizational members on whom the franchisor must rely are incapable or unwilling to effectively and fully cooperate with them to achieve the desired objectives. Monitoring is a critical element in situations where agency problems are a main issue. Sitkin et al. (2020, p.343) define monitoring as “assessing the work of agents”. The goal of these activities is to help ensure that the objectives are accomplished.

Besides control as monitoring, control can also be used as subordination (Sitkin et al., 2020). Control can be used as mechanism that franchisors utilize to accomplish their desired goals by using their power in ways that subjugate franchisees. This perspective on control highlights the more negative implications of organizational control. Conflicts between the franchisor and franchisee are central issues in this perspective, because of disagreements on for example franchisee treatment, how rewards are distributed and the way in which the franchisor exercises control and power.

The last perspective is about control as coordination (Sitkin et al., 2020). The main goal of this perspective is to effectively direct flow of information to adapt, innovate and maintain competitive advantage. This perspective describes how franchisors evaluate what information is necessary for their franchisees, to obtain the desired performance objectives. According to Long et al. (2015) , literature research on this purpose of control is less developed than theories about monitoring and agency-based considerations. For that reason, we will not discuss this perspective in too much detail.

Finally, many scholars distinguish between formal and informal controls (Bijlsma-Frankema & Costa, 2007). Formal control emphasizes the establishment and utilization of formal procedures, rules and policies to monitor and reward desirable performance. Informal or social control emphasizes the regulatory power of organizational culture, norms, values, and the internalization of goals to encourage desirable outcomes (Bijlsma-Frankema & Costa, 2007).

2.3 Relation between trust and control

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perspectives can be distinguished: the substitution perspective and the complementary perspective (Bijlsma-Frankema & Costa, 2007).

The first perspective is called the substitution view: trust and control are seen as inversely related, that is, high trust allows for limited formal control and low trust requires formal control (Bijlsma-Frankema & Costa, 2007). Trust motivates for cooperation, increases information exchange and reduces uncertainty. For that reason, the higher the level of trust in a relationship, the lower the costs of monitoring and other control mechanisms will be. So the trust and control variables are considered to be alternative routes for achieving stable relationships.

The second perspective is the complementarity view: trust and control are seen as mutually reinforcing and both contribute to the level of cooperation needed in a relationship (Bijlsma-Frankema & Costa, 2007). The research of Bijlsma-Frankema and Costa (2007) showed that formal control mechanisms can increase the level of trust to an extent that clear measures and objective rules help to institute a “track record” for people to base their assessments and evaluations of others. They mentioned the following example: “within interfirm collaborations legal regulation of interorganizational relationships is an important precondition for trust as it makes them more predictable”. So when there is more formal control within a relationship, this is a good precondition for trust, because behavior of partners is more predictable. Some authors who subscribe the complementarity perspective argue that trust on its own is a fragile governance mechanism, so formalization of control will help to ensure continuity of successful interorganizational collaboration (Dodgson, 1993; Bijlsma-Frankema & Costa, 2007).

2.4 Behavior of franchisees

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not include remaining silent, but in this research that is also a possibility of behavior. Remaining silent means that franchisees don’t share their ideas, opinions, and concerns with the franchisor. A reason that is frequently mentioned for remaining silent are the fears of franchisees that they will be treated worse than before by the franchisor, with consequences as damaging valued relationships. This can make sense when the franchisees fear that the franchisor will react negatively to their voice and may react further by taking steps that haves consequences for the relationship between the franchisee and franchisor, like breaking up the relationship (Morrison et al., 2003).

These responses differ along dimensions of constructiveness versus destructiveness and activity versus passivity. For the first dimension; voice, loyalty and silence are constructive responses in which the franchisees try to revive or maintain satisfactory relationship conditions. Exit and neglect are more destructive. The constructiveness and destructiveness is defined in terms of impact on the franchisee-franchisor relationship, not in terms of its broader functional value. An example could be that when a franchisee’s exit might be constructive for that franchisee or his/her organization, but destructive in that it dissolves the franchisee-franchisor relationship. So as in the example, we assume the second part, that exit is an example of destructiveness for the franchisee-franchisor relationship. For the second dimension; exit and voice are active mechanisms through which franchisees attempt to deal with dissatisfaction. Loyalty, neglect and silence are more passive. Passive and active refer to the impact of the behavior on a problem and not to the character of the behavior itself (Rusbult et al., 1988). An example that Rusbult et al. (1982) mention is: “a neglectful response such as destructive criticism may be overtly active, but it is passive and destructive in regard to the future of the current relationship”.

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3. METHODS

3.1 Research design

As mentioned earlier, it’s unknown what the influence of trust and control is on the behavior of franchisees. This is not discussed in the literature yet and according to Van Aaken et al. (2012, p. 5): “theory development is needed when the business phenomenon has not yet been addressed in academic literature”. During theory development, a case study could be a useful research method (Van Aken et al. 2012). A case study focuses on finding answers to “how” and “why” questions. It is for that reason that I conducted a case study. According to Gerring (2004), a case study is defined as: “an intensive study of a single unit with an aim to generalize across a larger set of units”. Initially one specific formula was used, but because of the COVID-19 virus two formulas were chosen out of necessity. In this situation it was not possible to find eight franchisees from one formula. The main research topic is based on franchise relationships, so we selected two franchise formulas, the second formula dataset enabling secondary analysis on interviews conducted in the past . Since the names of the formulas remain anonymous, we distinguish by calling them formula A and formula B.

3.2 Data collection

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questions were asked when necessary, to better understand the answer given by the interviewee. Follow up questions concerned: (i) an explanation of the answer (e.g. why did this happen), (ii) an example (e.g. can you give me an example of that?), (iii) the sequence of events (e.g. when did this happen in the timeline?). A complete overview of the interview questions can be found in the appendix, section 7.1. Summarizing, we conducted three interviews with formula A. Due to Corona, we could not add more interviews in this formula. In addition, a secondary analysis of five interviews already conducted in 2003 in another formula are used to answer the research questions. These five franchisees are part of the same formula, which is called formula B. The interviews lasted between 60 and 100 minutes.

3.3 Data analysis

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1) Why is control by franchisor sometimes perceived as beneficial, and sometimes as detrimental to the self and/or the firm?

2) Why do franchisees trust their franchisor and how did trust emerge initially? 3) Do franchisees deal differently with the level of trust they perceive?

4) Is beneficial/detrimental control perceived as related to trust and if so, how?

5) How does E-commerce influence the level of control and the level of trust in the franchisor?

3.4 Quality criteria

According to Yin (1994, p.32): “you can judge the quality of any given research design according to certain logical tests”. Therefore, there are four tests which are used to assess the quality of any empirical research: construct validity, internal validity, external validity and reliability. As van Aken et al. (2012) mentioned in their research: “the more the instruments and processes of a study meet the criteria of these tests, the less reason is there to question the results of the study”. This section will discuss each of these tests and how each test will be used to increase the quality of this study.

3.4.1 Construct validity

Construct validity is defined as “establishing correct operational measures for the concepts being studied” (Yin, 1994, p.34). This refers to the extent to which the measuring instrument actually measures what it is intended to measure. The instrument should only cover the concept and this has to be done completely. Nondirective interviewing is proposed to promote the valid measurement of concepts and their meaning in the perspective of respondents.

3.4.2 Internal validity

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3.4.3 External validity

External validity is defined as “establishing the domain to which a study’s findings can be generalized” (Yin, 1994, p.36). This can be increased by increasing the number of objects that are studied (van Aken et al., 2012). But this study is qualitative, so the number of objects are limited, so this cannot guarantee the generalizability.

3.4.4 Reliability

The main aim of reliability is that when another researcher will conduct the same research and follow the exact same procedures, he/she would end up with the same findings and conclusions (Yin, 1994). The best way to achieve this is to make as many steps as operational as possible. Therefore, the methodology is as accurately and in detail as possible. If you are with two or more researchers, you can calculate the interrater reliability on the interpretations of the data. However, this research was conducted by one researcher, so that is not possible.

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4. RESULTS

This chapter will present the newly gained information from the interviews and compare them with the findings of existing literature. As mentioned earlier, all the data is coded, so we can easily find the most important information and make comparisons between interviewees. Those answers that are not regarded as valuable information to this specific research have been left out. We will start with the data description, where we will summarize all the findings for each theme. Afterwards, we will analyze the data and make comparisons with the existing literature.

4.1 Data description

4.1.1 General information about the interviewees

There is a difference in the experience with franchise relationship between all franchisees. Some of them are franchisee for more than 20 years and some of them just started. Most of them have one location, but some have two and are still looking for a third location. About the formal function of the franchisees, three interviewees have no experience of being a member of the franchise board. Besides, two interviewees are currently on the franchise board and three other interviewees have had a past on the board.

4.1.2 Expectations at the start of the franchise relation: fulfilled and unfulfilled

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4.1.2.1 Success factors and failure factors for financial success

We asked the interviewees what they saw as success factors and failure factors for their financial success of their store. Most of the interviewees of both formulas said the formula itself is a factor for success. The formula is well organized and has a good image that plays a role in achieving good financial success. Besides, keeping costs down was also mentioned; “control the costs carefully, because this will keep you profitable". Finally, the correct positioning in the market is important. What do the people in your area want and you have to make sure you have it. Interviewees of formula B added another success factor, namely the range of products that is offered. It contains many luxury products that other formulas do not offer and the products are very innovative; they respond to the latest trends.

Then we discuss the failure factors. The interviewees of both formulas mentioned the increasing mandatory investments. For example, technology is becoming increasingly important and as a franchisee you are obliged to invest in this. Then there were mentioned some different failure factors by interviewees. So is in formula A the online channel seen as a failure factor. As a result, franchisees are missing money as it is not currently being bought in their store. Another failure factor for formula A is that there are too many promotions. You are then left with trade that becomes obsolete, which you can do nothing with. This means you will also miss money. Promotions are determined through the head office and you must stick to them as a store. Finally, they mention the dependence on the franchisor as a failure factor. If you as a franchisee and franchisor do not get along well, one party will be disadvantaged. No account will be taken of each other and each goes for his own success. This can lead to financial hassle, so you will run less profit. Although this was something far-fetched. The last failure factor only depending on formula B is the declining sales prices. That process of declining prices has been started once and you can’t go back. Customers are used to these prices and when you increase them again they will probably go to the competitor. So prices cannot go up anymore.

4.1.3 Relationship with fellow franchisees

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franchisees. A factor for success mentioned by an interviewee of formula A is the forwarding of customers to each other, but it was stated that this influence is nil. The interviewees were more outspoken about the failure factors. The most outspoken factor in formula A was the damage to the image of the formula by a fellow franchisee. An example of this is that a fellow franchisee is negative in the news and that this negative image rubs off to other fees. Another failure factor according to an interviewee of formula A is the unfair dealing of a fellow franchisee: “we have a financial package with all the franchisees and the franchisor, that is distributed in a certain way, in which someone can commit fraud or someone does not obey the rules". In the end, there is less to distribute among the franchisees. So a franchisee can disadvantage all other franchisees, should this occur.

4.1.3.1 Level of trust in fellow franchisees

Besides, we asked about the level of trust in fellow franchisees. The majority of franchisees trust their fellow franchisees. One reason for this is that together you form a collective group towards the franchisor: "because you've just been together for a long time. You talk about things at meetings, so I have confidence in that”. Only one interviewee of formula A said that a reason for distrust in a fellow franchisee is about passing on confidential information from the franchisee association to the franchisor, against agreements not to inform the franchisor. This interviewee said that you avoid such fellow franchisees, because what you say to them, they can pass it on to the franchisor. Finally, we asked questions about how to deal with negative behaviors of other franchisees. Most of the interviews say they have not experienced unpleasant things: “I think that franchisees have no problems with each other, it is all about the relationship with the franchisor”.

4.1.4 Relationship with the franchisor

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that they sometimes feel limitations due to the contract. This concerns the layout of the store, the amount of goods to be ordered and the duration of the promotions.

4.1.4.1 Rule following of franchisees

We also asked questions about in what way the franchisor is monitoring the rule following of franchisees. Seven out of eight interviewees mentioned that there is an operational manager who occasionally comes to check how things are going and monitors rule following. The data indicate it varies per location of the store how often this person visits, for both formulas. Most interviewees indicate that they do not mind the control of the operational manager. However, the manager should not interfere too much with the franchisees, as they find this person is not a true entrepreneur. One franchisee said that he does not experience control from the franchisor: "If your store is just running well, they really won't check whether you have properly organized your store. But if you don't make your sales, they will see how everything is organized etc.". Finally, two franchisees mentioned the system audit. The head office can monitor everything via the computer systems and cash register. It turns out that there are no major consequences for a franchisee when deviating from the rules. It does of course depend on the size of the deviation, because this will be different in the case of fraud, for example. Some interviewees of both formulas said: “for example, putting promotions differently in the store, I never get in trouble with that”. Namely, rules are passed on from the franchisor regarding the design of the store in terms of promotions, how and where they should be. This is not checked from the head office and there are therefore no consequences.

4.1.4.2 Level of trust in franchisor

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the franchisor and the franchisees is experienced as very tense and unpleasant. In formula B, the interviewees said that the relationship with the franchisor is less tense. In general, the interviewees are satisfied with this relationship. The franchisor has become harder, but this has often been requested by franchisees. The franchisor takes stricter action to propagate the formula as a whole. As a result, customers will also recognize the store faster if they come to another location. Previously, the stores all looked different, so it didn't seem like it belonged to the same formula. One interviewee said: “in any case, people are open to criticism from our side, the guidance is good and the formula is well put together”. Besides: “there is a good set-up in terms of organization, franchise board and franchise association and that is also very important”.

4.1.5 Changes in past 10 years

Almost all interviewees indicated that in the last ten years there has been a change from soft franchising to more hard franchising. First, the franchisor was very flexible in enforcing the rules set out in the contract. They left the franchisees free and there was hardly any contact between these two parties. Most interviewees indicate that this has now changed. The franchisor becomes stricter, in order to keep power with the franchisor rather than the franchisees. Interviewees of formula B say that they do not mind this, they fully understand it and often even asked for it themselves. The interviewees of formula A don’t like this: "the relationship with the franchisor has become less pleasant". However, they do indicate that the franchiser's tightening has not affected the company's financial success. One interviewee of formula A indicate that this change from soft- to hard franchising has actually decreased his confidence in the franchisor; mistrust has increased even more. This was caused by the fact that the franchisor now looks even more at his own interests, instead of those of the franchisees. Two interviewees of formula A indicate that this has actually changed their behavior towards the franchisor. They have become even more suspicious and check things an extra time: “I may be more wary”.

4.1.6 E-commerce

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interviewees how the profits from online sales are now distributed between the franchisees and also the franchisor. They indicate that online does take away customers who would normally visit their store. They think they should be compensated for this. However, they also indicate that it is difficult to calculate how much money they are missing, but there must be a way to allocate the profits more clearly. The interviewees said that the online channel therefore does not contribute positively to the financial success of the franchisees. All interviewees say that online has had a negative impact on the relationship with the franchisor. It is an annoying topic in the discussions between both parties, as there is disagreement about the distribution of money. The positive thing about e-commerce is that it provides additional advertising opportunities, so that consumers are more likely to qualify with the brand; for example via Facebook etc. The head office wants the franchisees to help pay for the web shop, while the franchisees do not really want to have the entire web shop: "that is, of course, a stumbling point".

4.2 Data analysis

In order to analyze the data, analytical questions are used in order to find out the ‘why’ behind the answers the interviewees gave. In this part we will compare the data from the interviews with the theories in existing literature. We will start by answering all analytical questions.

4.2.1 Why is control by franchisor sometimes perceived as beneficial, and sometimes as

detrimental to the self and/or the firm?

In table 1, we provide an overview of the ways in which the franchisor controls the franchisees.

Table 1: An overview of the ways in which the franchisor controls the franchisees.

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who comes to check the franchisees. Most interviewees say they are fine with this as long as this person does not interfere too much with everything. The majority believe that these managers have no real understanding of entrepreneurship. Because of this, the franchisees prefer that these managers don’t tell them how it really works. They just want to do their own thing that they support themselves. Another form of control are the computer systems and cash register that are monitored by the franchisor. Here too, the franchisees do not seem to have any real problems with this, because they choose a formula themselves and logically there is control involved.

The negative feelings of the franchisees to control can be explained by the self-determination theory (STD). In existing literature, there are several theories about social psychology, but one of the most popular is the STD of Deci and Ryan (2011). This theory focused on the influences of social environments on values, attitudes, motivations, and behaviors. They made a distinction between intrinsic and extrinsic motivation. Intrinsic motivation is from inside, a person find something interesting and derives spontaneous satisfaction from the activity itself. Extrinsic motivation, in contrast, is an external stimuli that ensures a person is motivated, such as a reward for achieving goals. Deci and Ryan (2011) stated that intrinsic motivation often provides better outcomes and that it is possible to increase this intrinsic motivation when responding to three basic psychological needs. The first one is autonomy where franchisees have the freedom to fill in an activity at their own discretion. The second one is the sense of competence which is the trust that a franchisee must have in it’s own ability. The last one is the need to belong where a franchisee must have trust in the environment and the ability to express him- or herself to others and not be afraid to make mistakes. Autonomy is described as self-determination; a person must be free to be allowed and able to make their own choices. The used computer systems and cash register, contract and managers that control the franchisees can reduce the feeling of autonomy. Subsequently, a lesser sense of autonomy will lead to less motivation. So in the end, when there is more control, the franchisees experience less autonomy and therefore the intrinsic motivation will decrease.

4.2.2 Why do franchisees trust their franchisor and how did trust emerge initially?

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Table 2: An overview of trust related questions in combination with franchisee’s behavior.

First, the data shows that there is a big difference in the level of trust in the franchisor.

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franchisees form a collective. The franchisees try to take action to solve problems and suggesting solutions to the franchisor.

The interviewees of formula B have more trust in the franchisor; here the level of trust varies between moderate to high. In general, it is stated that the franchisor will not abuse the franchisees, so that gives a bit of confidence. In addition, it is part of AHOLD, allowing franchisees to assume that things like logistics, automation etc. are properly regulated. The interviewees who indicate a moderate level of trust are more critical of the extent to which the franchisor offers help to the franchisees. It is often difficult to get in touch with the franchisor and sometimes they would like to get a little more help. In addition, it has sometimes happened in the past that the franchisor makes agreements and subsequently does not comply with them. This can also damage their level of trust. The interviewees' behavior also varies. Most franchisees with a high level of trust in the franchisor often choose for "voice". Voice describes that you try to improve conditions through discussing problems with the franchisor (Rusbult et al., 1982). Franchisees with a high level of trust in the franchisor may use voice to make good things better. This is possible, because there is a lot of trust between the franchisees and franchisor, there is a good relationship, so they dare to say what they think. Besides, the franchisees with a moderate level of trust choose mostly for “loyalty” or “silence”. Also "exit" has been considered by one, should certain things get worse.

4.2.3 Do franchisees deal differently with the level of trust they perceive?

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example through the franchise association. This attempt to get more openness probably comes from the mistrust of the franchisees in the franchisor.

In formula B, the level of trust in the franchisor variate from moderate to high. Three interviewees indicate that they express their opinion either through the franchise association or through the operations manager. This is a behavior associated with "voice" and is mostly chosen when there is a high level of trust. However, often the franchisor does nothing with this opinion of the franchisees. One interviewee says that when things get worse, that he/she disagrees with what the head office is doing more and more, he/she actually wants to leave the formula. This behavior is an example of "exit". Another interviewee with a moderate level of trust, clearly states that he/she really does not intend to opt for an "exit". There are no better alternatives and no formula is not an option. This person chooses "silence" as no clear opinion or problem is passed on to the franchisor. In addition, two interviewees with a moderate to high level of trust, also show behaviors that belong to "loyalty". They are hardly involved in the choices made by the head office, but they are not concerned with this either. You only rent a formula, so everything else, like marketing and purchase, is simply arranged by the franchisor. These interviewees understand that the franchisor cannot take into account all wishes and opinions of each individual franchisee.

4.2.4 Is beneficial/detrimental control perceived as related to trust and if so, how?

According to existing literature about the substitution view on the trust and control relationship; when there is a higher level of trust, relatively less control is performed (Bijlsma-Frankema & Costa, 2007). The majority of the interviewees mentioned that they trust their fellow franchisees. All franchisees form a collective against the franchisor, and this creates a sense of togetherness between franchisees. Besides, none of the interviewees said something about any form of mutual control between franchisees. This means that there is a high level of trust and a low level of control. These results show that it is consistent with the substitution view on trust and control, because high trust allows for limited control (Bijlsma-Frankema & Costa, 2007).

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operational manager will also check this. The results of this study are therefore consistent with the literature on the substitution view on the trust and control relationship (Bijlsma-Frankema & Costa, 2007). Besides to that, we can add something for formula A. From the perspective of the franchisees of formula A, we have found a kind of similar substitution relationship between trust and control. We have found that franchisees mistrust of the franchisor promotes their search after collective control through the franchise association. As stated above, the interviewees try to create more openness from the franchisor by using the franchise association. This attempt to get more openness probably stems from mistrust. Overall, we could say that when there is less trust in the franchisor from the franchisees, the control from the franchisees will increase.

4.2.5 How does e-commerce influence the level of control and the level of trust in the franchisor?

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5. CONCLUSION AND DISCUSSION

The data analysis gave information about the influence of trust and control on the behavior of franchisees. This chapter gives a brief summary of the findings, the main research question will be answered and we will present the theoretical and managerial implications and the limitations of this study. As mentioned earlier, the main research question is: “How do trust and the evaluative perceptions of control of franchisees influence their behavioral reactions to control in franchise networks and why do they react as they do?”. To give an answer to this question, we will first give an short overview of the answers on the analytical questions as discussed in the chapter before.

5.1 Conclusion

First of all, we researched a new perspective of control, since we looked at the perspective of the franchisees and that has rarely happened (Sitkin et al., 2020). We have found that control is generally perceived as positive, only a small proportion of interviewees, one from formula A and one from formula B, experience it as negative. The negative feelings to control can be explained by self-determination theory (Deci & Ryan, 2011). This theory is related to three basic psychological needs; autonomy, the sense of competence and the need to belong, of which the need for autonomy is important for this research. The need for autonomy implies that a person prefers to be free to be allowed and able to make their own choices. Two franchisees of formula A and B experienced less autonomy and therefore developed negative evaluations of some control modes (Deci & Ryan, 2011). The control mode that we mean here is mainly the contract. In general, everyone is relatively positive about the operational manager and the computer systems and cash register.

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franchisees in the collective still try to mobilize collective counter control against the control of the franchisor. When the franchisees have a moderate level of trust in the franchisor, they mostly choose for “loyalty” or “silence”. This is also a passive way of responding, so these franchisees probably like the way it is now. They don't really share their own opinions and are simply loyal to the way the franchisor acts.

Third, we found that trust and control are related and this was consistent with the literature on the substitution view on trust and control (Bijlsma-Frankema & Costa, 2007). When the level of trust is higher, a lower degree of control by the franchisor is experienced. Therefore, we can say that some support has emerged for the substitution relationship between trust and control. In addition, we found a kind of similar substitution relationship between trust and control from the perspective of franchisees of formula A. This means that the more mistrust there is, the more collective counter control franchisees try to exercise over the franchisor. There is mainly mistrust in the franchisor and the franchisees try to perform more control against the franchisor through the franchise association. However, in this study, the franchise association of formula A has not yet achieved real success in exerting more control over the franchisor and thereby creating more transparency.

Finally, the data analysis shows that the rise of e-commerce has reduced the level of trust in the franchisor. E-commerce has resulted in more conflicting interests between the franchisor and franchisees. Both parties have different interests, since the franchisor wants the online web store to grow, but the franchisees do not want this. According to Sitkin and Bies (1993), this is an typical example for why conflicts arise; “this is a process that begins when one party perceives that the other party has frustrated, or is about to frustrate”. The point of frustration in this situation is that the franchisor continues to push online, but actually knows that the franchisees do not like this. Because of these conflicting interests, the franchisees experience that the franchisor is not acting correctly. The franchisor does not actually meet the expectations that the franchisees have; namely that online also contributes positively to the financial success of franchisees. And if one partner damages the expectations, the level of trust in that partner will decrease (Bijlsma-Frankema & Costa, 2007).

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influence the behavior of franchisees, but trust is more likely to determine behavior than control. Most of the behavior of franchisees that emerged from the data can be deduced from the level of trust that exists in the franchisor. For example, many behaviors originated from the lack of openness and transparency of the franchisor and this has to do with the level of trust in the franchisor. We also found that control is not perceived as negative by many franchisees of both formulas. However, in both formulas, there was an interviewee who experienced control through the contract as negative. If this is experienced as negative, this can be explained by the lack of autonomy. About the relationship between trust and behavior, we can say that there is a difference in behavior depending on the level of trust. When there is mistrust, franchisees often choose "voice" or remain "silent". At an moderate level of trust, franchisees often choose to be "silent" or "loyal”. If there is a high level of trust in the franchisor, franchisees often choose "voice".

5.2 Theoretical implications

The influence of trust and control on the behavior of franchisees, viewed from the perspective of the franchisees, is a relatively new issue in the franchise literature. Based on new insights from three interviews and a secondary analysis of five interviews, this research is the first to present a preliminary understanding on the influences of trust and control on the behavior of franchisees from the point of view of the franchisees. Therefore, our study contributes to filling the existing research gap, because we now have a better understanding from the perceptions of franchisees and how this affect the behavior they display.

5.3 Managerial implications

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agreements in the contract regarding the distribution of the profit from online sales. As a result, if franchisees will receive their share of the profit, they can be expected to be more supportive of the entire e-commerce and fewer conflicts between the franchisees and the franchisor will rise as a consequence.

5.3 Research limitations and suggestions for future research

Although the knowledge of each interviewee was very relevant and valuable, the fact remains that all the data is based on only eight respondents. Three interviews were conducted specifically for this study, but the other five interviews were only analyzed secondary. Because these five interviews were previously conducted with a different research objective, it was sometimes difficult to place them within this research framework. This highlights the room for improvement regarding the external validity, i.e., the generalizability of the results (Yin, 2009).

Another limitation is based on the internal validity of this research, because this research is only based on two different kind of formulas. To increase the internal validity, future research can include franchisees and franchisors from more than two franchise formulas and different industries. In addition to that, future research, both quantitative and qualitative, should aim at finding and testing whether situational variables show moderating or mediating effects. These situational variables could be the industry and franchisee or franchisor characteristics for example. This is because this study did not look at the effects that these variables could have.

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7. APPENDIX

7.1 Overview interview questions

Part I: General

The following questions are about your entrepreneurship in formula X.

1) Can you tell us something about yourself and your franchise activities in Formula X? a) How long have you been a franchisee with formula X?

b) How many stores are there of formula X? How did that develop?

c) Do you also have other stores? With other formulas or without a formula? How did that develop? d) Do you have a position within the franchise council and/or franchise association of formula X?

2) Why did you choose to become a franchisee at formula X at the time?

3) What were your main expectations when you started? Did these expectations come true?

4) In your opinion, what are the main success factors for the financial success of your franchise location (s) in formula X? Per factor: why important?

5) In your opinion, what are the main threats to the financial success of your franchise location (s) in formula X? Per factor: why important?

Part II: Relationships with other franchisees of formula X

The following questions are about your relationships with fellow franchisees within formula X.

6) How important are your relationships with fellow franchisees from formula X? Why are they important or not?

a) Can fellow franchisees positively influence the financial success of your location (s)? On what points? Per point: How do they do that? What do you think of that? How do you handle that? b) Can fellow franchisees negatively affect the financial success of your location (s)? On what points? Per point: How do they do that? What do you think of that? How do you handle that? 7) Do you trust your fellow formula X franchisees? If so, how did that come about? If not, why not?

a) If you indicate that you have little/no confidence: Would you call this mistrust?

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8) Finally: If you were in charge, what would you change in the relationship with your fellow franchisees? Why?

Part III: Relationship with the franchisor

The following questions are about your relationship with the franchisor.

General relationship

9) How would you describe the relationship with the franchisor? Why? 10) How important is the relationship with the franchisor to you? Why?

a) Does the franchisor have a lot of positive influence on your location? How? Per point: what do you think about that?

b) Does the franchisor have a lot of negative influence on your location? How? Per point: what do you think about that?

c) How do you deal with the less pleasant influence of the franchisor? Why?

d) Do you also influence the way in which the franchisor operates? How? Do you ever work with other franchisees to get things done at the franchisor?

Rules (control) from the franchisor

Franchisors use different tools to monitor their formula. The following questions are about the rules from the franchisor and how you deal with them.

11) How is your franchise activity monitored by the franchisor? What do you think of that? Positive sides/negative sides?

a) How do you deal with the negative sides of this? Why?

12) You most likely have a franchise contract. How do you experience this contract? Why? a) Are there many franchisor rules to follow?

b) Are there rules that help you in your business operations? How? Examples?

c) Are there any rules that you find disturbing? Why do you find this disturbing? Examples? How do you deal with this?

d) What happens if you deviate from the rules or agreements? Do you agree with that? If not, how do you deal with that?

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The following questions are about your trust in the franchisor.

13) Would you say that you trust the franchisor? a) If so: How did that trust emerge?

i. Does trust also help you in your business? b) If not, would you call that mistrust?

i. How did the low trust/mistrust emerge?

ii. How do you deal with the franchisor given your low trust/mistrust? 14) Do you think the franchisor trusts you? Where do you notice that?

a) Do people from the head office (the franchisor) ever point out ways to improve your business? How do you react? Why?

b) And vice versa, if you saw opportunities for improving the franchisor's business, would you tell them?

15) You have talked about how you deal with unpleasant things in the relationship with the franchisor. Have you ever thought about reacting differently? Why didn't you do that?

a) Have you ever thought about giving up your franchise ownership as a result of your relationship with the franchisor?

16) Finally: If you were in charge, what would you change in the relationship with the franchisor? Why?

Part IV: Changes in the last ten years

The following questions are about the changes in the last ten years.

17) Has much changed in the relationship with the franchisor in the past ten years? Which of these have been important changes for you?

a) Which of these changes have positively influenced the success of your location (s)?

b) Have there also been changes that have been less positive for your business operations? Why? How did you deal with these changes?

18) Have these changes affected your trust in the franchisor? How did that happen? 19) Has this changed your behavior towards the franchisor? How? Why?

Part V: E-commerce

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20) What is your opinion on the formula X web shop? Do you see it as an opportunity or more as a burden? 21) Does the web shop influence the success of your location (s) positively or negatively? This is again about financial success.

22) Has the establishment of the web shop also changed the relationship with fellow franchisees? And with the franchisor?

23) Do you have trust in the way the franchisor handles the web shop and arranges everything? If so, why? If not, why? Would you also call this mistrust?

24) Finally: If you were in charge, would you change things regarding the web shop?

These were my questions.