Antecedents of franchisee’s trust in a
franchising organization:
The moderating role of the franchisee’s
self-efficacy and peer trust
Master Thesis
MSc BA Small Business & Entrepreneurship
Student: Delyan Delchev S3045331
Date: January 22, 2017
Supervisor: Dr. E.P.M. Croonen
Co-assessor: Dr. T.L.J. Broekhuizen
Word count: 12 066
Abstract
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Table of content
1. Introduction 2
2. Theoretical Background 6
2.1 Defining trust 6
2.2 The importance of trust 7
2.3 Antecedents of an organizational trust 8
2.3.1 Strategic positioning 8
2.3.2 Operational management 10
2.3.3 Franchisee management 11
2.3.4 Serving culture 12
2.4 Self-efficacy as a moderator 13
2.5 Peer trust as a moderator 15
2.6 Conceptual model 17 3. Methodology 18 3.1. Data collection 18 3.2. Analysis 18 3.3. Measurements 19 3.3.1 Dependent variable 19 3.3.2 Independent variables 20 3.3.3 Moderating variable 21 3.3.4 Control variables 22 4. Results 22
4.1 Descriptive statistics and correlations 22
4.2 Findings on the direct effect 24
4.3 Findings on the moderating effect 24
5. Discussion and Conclusions 27
5.1 Discussion 27
5.2 Conclusion 30
5.3 Theoretical and managerial implications 31
5.4 Limitations and further research 31
References 33
Appendix 39
Table A: Variables and statements 39
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1. Introduction
1.1 Introduction to franchising
Over the past few decades, business format franchising has become an increasingly important business strategy in different industries in various parts of the world (Gillis et al., 2012). Because of its contribution toward the development of the local economy, many countries have adapted and benefited from business format franchising. Main benefits accompanying this model are related to the creation of new workplaces and an increase in the amount of retail sales (International Trade Administration, 2016). A particular example is the United States, where franchising accounts for 15 percent of employment and 50 percent of the retail sales. Predictions are that in 2017 these figures will even increase, more precisely franchise employment will grow by 278,000 jobs and franchise sales will increase by 3.1 percent reaching $944 billion (International Trade Administration, 2016).
Franchising can be defined as a “method of distributing products or services by licensing business processes, products, services and intellectual property to investors who will operate within an established business model. At least two levels of people are involved in a franchise relationship: (1) the franchisor, who provides its trademark or trade name and a business system and (2) the franchisee, who pays an ongoing royalty and usually an initial fee for the right to do business under the franchisor's name and system” (International Trade Administration, 2016). Another definition is proposed by Webber (2013), who defines franchising as a “contractual agreement by and between two parties whereby one party (the franchisor) extents the right to the other party (the franchisee) to carry on an independent business under the trade mark or trade name or brand of the franchisor and to receive sufficient privileged know-how, derived through the franchisor‟s experience in operating such a business, throughout the term of the agreement, consisting of all components as to enable a previously inexperienced person to establish a successful business under the franchisor‟s brand”. The common aspects for both definitions is that franchising is a contractual agreement between two parties. However, Webber places more importance that franchisees are legally independent business owners operating under a franchisor‟s trade name and also that franchisees receive vital support and know-how from the franchisor, by which they manage their individual units successfully. Extracting the essence of each definition, it can be said that franchising includes a contract based on which franchisees pay a fee and royalties to the franchisor and in return they receive the right to operate under the franchisor‟s brand and also support and know-how from the franchisor.
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et al., 2012). This proposition has been supported by Combs and Ketchen (2003) who stated that franchisors typically aim to maximize their profit by growth in the unit sales, whereas franchisees are focus on their individuals unit‟s profitability. Taking into account that different motives can exist and that the franchisor has more power than the franchisees, then franchisees are exposed to risk regarded the franchisor‟s opportunistic behavior.
1.2 Trust in franchising
Given these advantages and disadvantages of the franchise business format, the development of a successful franchisee‟s business can only occur if there is a good relationship between the franchisor and the franchisees (Webber, 2013). More precisely, the franchisor has the main responsibility for managing the relationship and he/she can create good relationships by increasing a franchisee‟s trust, compliance or commitment (Davies et al., 2011; Chiou et al., 2004; Grünhagen and Dorsch, 2003). This opinion has been supported by a lot of other researchers who also stated the positive consequences of a franchisee‟s trust on different relationship outcomes. Particular examples are that a franchisee‟s trust leads to less conflicts (Spinelli and Birley, 1996) and fewer franchisee exits (Frazer et al., 2012). Furthermore, a franchisee‟s trust in the franchise organization also leads to higher performance (White, 2010), higher franchisee satisfaction (Altinay et al., 2014; Chiou et al., 2004) and higher franchisee compliance (Davies et al., 2011). Considering these consequences of a franchisee‟s trust toward the franchise organization, this research expects that knowledge on the antecedents of a franchisee trust toward the franchise organization can be very beneficial for franchisors in order to effectively manage franchise relationships.
Mayer et al. (1995) define trust as „the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party‟ (Mayer et al. 1995, p. 712).This definition identifies trust by two critical components that are – a trustor‟s willingness to be vulnerable, thus accepting a certain level of risk and a trustor‟s positive expectations regarding a trustee‟s intentions.
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importance to take into account these distinctions, because organizations are „multilevel systems‟, which means that franchisees can place trust toward different referents and to measure this trust on different bases. As a result, antecedents of trust may be different depending on the type of referent and the base of trust. Another gap in the literature is that most franchise researchers examine franchising from a franchisor‟s perspective (Michael &Combs, 2008; cf. Combset al., 2011), however relatively few researchers examine franchising from a franchisee‟s perspective (Davies et al., 2011). Considering these drawbacks, it could be stated that previous researches do not contribute significantly to the identification of the proper antecedents of a franchisee‟s trust, leaving an important knowledge gap in the franchising literature. Based on that, the purpose of this research is to narrow this gap by developing a theoretical framework on the antecedents of a franchisee‟s trust toward a franchise organization. The choice of referent of trust is the organizational trust because according to the research of Croonen (2010), for franchisees trust in the franchise organization is the most important. The explanations why franchises place more trust in the organization than in a specific franchisor‟s representatives, is because they consider as highly possible that the representatives could leave the organization, which frequently occurs in the case study of Croonen (2010).
1.3 Introduction to the model
In order to identify the antecedents of an organizational trust, this research uses a system approach proposed by Gillespie and Dietz (2009) and also further eleborated by Croonen and Brand (2013) and Croonen and Broekhuizen (forthcoming). The essence of this approach is to divide a franchise organization into its main components and then for each component to identify specific aspects that construct this component. More precisely, based on the literature the following four components of a franchise organization have been identified – strategic positioning, operational management, franchisee management and serving culture within the system. Then the relationships between a franchisee‟s perception of each of these components and a franchisee‟s trust toward the franchise organization have been tested.
Furthermore, this research proposes that self –efficacy and peer trust have a moderating effect on the relationship between a franchisee‟s perception of the four components of the franchise system (strategic position, operational management, franchisee management and serving culture) and a franchisee‟s trust in the organization.
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organization and a franchisee‟s trust in the franchise organization. The explanation is that when the franchisee believes in his/her capabilities to organize and to execute the course of action required to manage prospective situations, then he/she will need less help and support from the franchisor and as a consequence the franchisee will place less importance to the franchisor‟s ability and willingness to effectively manage the strategy, operations, other franchisees and the culture within the organization. More precisely it is expected that a franchisee‟s self-efficacy will weaken all the stated relationships. Regarding peer trust for the purpose of this research it has been defined as a franchisee trust in the competence and integrity of the other franchisees within the franchise organization. The expectations are that a franchisee will not only assess the competence and integrity of the franchisor to manage these four components of the franchise organization but he/she will also assess the competences and integrity of the other franchisees. The explanation is that a franchisee cannot reach the desired outcome individually and he/she is dependent on the other franchisees to implement the franchisor‟s business format and to create a consistent image to the outside world (Croonen et al., 2015). Based on this, this research expects that peer trust will moderate all the stated relationships. The aim of this research is to contribute to the franchise literature, more precisely by focusing on a franchisee‟s perspective and identifying the antecedents of a franchisee‟s trust toward the franchise organization. To achieve this, two research questions have been formulated. First of all, it is important to understand how a franchisee‟s perception of the four components of the franchise system (strategic position, operational management, franchisee management and serving culture) influences the franchisee‟s trust in the organization. More precisely, this research investigate the direct effect of each of the identified components of the franchise organization on the franchisee‟s trust in the organization. Therefore, the first research question is:
1. How does the franchisee’s perception of the four components of a franchise system (strategic position, operational management, franchisee management and serving culture) influence the franchisee’s trust in the organization?
Furthermore, it it also important to take into account possible factors that can moderate the stated relationships. More precisely, this research analyzed how a franchisee‟s self-efficacy and peer trust moderate the relationships between a franchisee‟s perception of the four components of the franchise system (strategic position, operational management, franchisee management and serving culture) and the franchisee‟s trust in the organization. Thus, the second research question is:
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By answering the stated questions, this research will contribute to the franchising literature and it will narrow the stated gap. Furthermore, it is expected that the results from this research will be beneficial for franchisors, giving them a new insights into how to manage their franchise system, more precisely which components of a franchise organization increase the franchisee‟s trust in the organization. Another implication is that this research investigates whether a franchisor should consider the role of a franchisee‟s self-efficacy and franchisee‟s trust in peers when creating the stated components of the franchise system.
This research has the following structure. First, a theoretical background is discussed. In this part the importance of a franchisee‟s trust toward the organization and a definition of a franchisee‟s trust are explained, also hypotheses are formulated and the conceptual model is presented. Next part is the methodology. In this part more explanations about the data collection, variables, measurements and the method of analysis of the result are given. Then, the results are presented. The paper ends with a conclusion, discussion and guidelines for a further researches.
2. Theoretical background
This section starts by defining trust, then the importance of trust and the antecedents of trust have been presented. In addition, hypotheses are formulated and a conceptual model is presented.
2.1 Defining trust
Many researchers have realized the importance of trust and tried to define it. Two of the most cited definitions are of Mayer and Davies. Mayer et al. (1995) define trust as „the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party‟. According to Davies et al. (2011) trust can be defined as „franchisee confidence in accepting a calculated level of risk with the franchisor, allowing franchisees to cope with vulnerability in their relationships with their franchisors‟. Taking a deeper look at these definitions, we can perceive that these definitions are very similar, both stated two critical components of trust, that are- a trustor‟s willingness to be vulnerable, thus accepting a level of risk and a trustor‟s positive expectations regarding a trustee‟s intentions.
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refers to a trustor‟s trust in an individual person, some examples can be trust toward organization‟s director or senior accountant (e.g. Zaheer et al., 1998; Ingenhoff and Sommer, 2010). Second, trust at the team level refers to a trustor‟s trust in a „collectivity of interdependent people pursuing a shared goal with inherently unique dynamics‟ (Fulmer and Gelfand 2012, p. 1170). Particular example in a franchise context is a franchisee‟s trust in the competence and integrity of other peers and that they together can achieve the predefined goals. Third, organizational trust is based on the image that a trustor carries of an organization as a result of the decisions and actions of this organization (Fulmer and Gelfand, 2012). These three types of referents were even further elaborated in the research of Croonen (2010) . One of the main contributions of this research is that Croonen tested which referent of trust is the most important for franchisees. According to the results, for franchisees, trust in the franchise organization is the most important. The explanations why franchisees place more trust toward the organization than in specific franchisor representatives, is because franchisees consider as highly possible that the representatives could leave the organization, which frequently occurred in the case study of Croonen (2010).
Regarding the different bases of trust, only a few franchising researchers have explicitly distinguished between a competence-based and an integrity-based trust (Davies et al., 2011). Competence-based trust refers to a trustor‟s belief that the trustee possess the expected capabilities, that allow him to perform his/her role in the relationship, whereas integrity-based trust refers to a trustor‟s belief that the trustee will behave appropriately based on good intentions (Nooteboom, 1999). Making distinction between different types of referents of trust and different bases of trust is important, because according to Zaheer et al. (1998) and Fulmer and Gelfand (2012), antecedents of trust may depend on the type of referent and base of trust. Taking into account the above considerations, the type of referent of trust in this research is organizational trust and it will be measured by both (competence and integrity) bases.
2.2 Importance of trust
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Hagedoorn et al., 1999; Ping, 1997; Ping, 1993; Leck & Saunders, 1992; Rusbult et al., 1988; Farrell, 1983). Therefore, based on the above considerations it can be stated that franchise relationships are governed by both- formal (contracts) and informal mechanisms (trust) (cf. Bradach & Eccles, 1989; Cochet & Garg, 2008; Davies et al., 2011). This proposition has been confirmed by a lot of researches who recognized the important role of mutual trust in such relationship based on interdependence (e.g. Morgan & Hunt, 1994; Zaheer et al., 1998).
Franchisee‟s trust has many positive consequences on different relationship outcomes, for example, a franchisee‟s trust leads to less conflicts (Spinelli and Birley, 1996) and fewer franchisee exits (Frazer et al., 2012). Furthermore, a franchisee‟s trust toward the organization leads to higher performance (White, 2010), higher franchisee satisfaction (Altinay et al., 2014; Chiou et al., 2004) and higher franchisee compliance (Davies et al., 2011). On the other hand, a lack of trust in the relationship between a franchisee and his/her franchisor may lead to agency problems and undesired franchisee behavior, such as a franchisee‟s refusal to comply with the system rules or a franchisee exit from the franchise organization(Davies et al., 2011). Possible consequences for the franchisor can be a decrease in the franchise organization‟s sales and a problematic franchisee recruitment.
Taking into account the consequences of a franchisee‟s trust, generating knowledge on the antecedents of a franchisee‟s trust toward a franchise organization can be very valuable for franchisors in order to effectively manage franchise relationships. This proposition has been confirmed by Michael and Combs (2008) who stated that franchisees are an important part of the creation of a successful franchise system. Based on these findings, this research expects that franchisors will have a large economic interest in creating and maintaining franchisees‟ trust toward the franchise organization.
2.3 Antecedents of a franchisee trust in a franchise organization
In order to identify antecedents of an organizational trust, this research uses a system approach proposed by Gillespie and Dietz (2009) and also further eleborated by Croonen and Brand (2013). The essence of this approach is to divide the system into its main components and then for each component to identify the aspects that construct it. In this research, a franchise system has been divided into four components and for each one specific aspects have been identified.
2.3.1 The franchise system’s strategic positioning
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into account the importance that franchisees place toward the franchise system‟s business format and that this is a franchisor‟s responsibility, this research expects that franchisees will assess the ability and willingness of their franchisors to develop a viable positioning strategy and carefully manage the strategic brand positioning over time. Furthermore, the expectations are that a franchisee‟s positive perception of the strategic positioning will increase the franchisee‟s trust toward the organization. The explanation is that, when the franchisee perceives that the franchisor is capable and willing to developed a viable positioning strategy, then the franchisee will have more faith in the future success of the system and in the achievement of organizational goals. This explanation has been based on the article of Croonen and Brand (2013).
Based on the above considerations and some additional literature, this research distinguishes the following aspects of strategic positioning (Croonen, 2006; Kaufmann & Eroglu, 1998; Sullivan & Adcock, 2002):
According to Kaufmann & Eroglu (1998), important aspect of the strategic positioning is the “product and/or service deliverables”. This aspect refers to the franchisee‟s assessment whether the franchisor is able to identify a viable competitive niche and based on this to offer a specific assortment of goods and services needed to feel this niche at a certain price level. More precisely, the franchisees will assess whether the franchise system offers its customers a valuable products or services for an attractive price.
The second aspect that has been used in this research to construct the strategic positioning is the promotion. This aspect refers to a franchisee‟s assessment whether the franchisor is able to develop promotion policies in such a way that draw the current customers‟ attention, attract new ones and also strengthen the brand name and the unique features of the business format
The final aspect is the unit appearance. This aspect refers to a franchisee‟s assessment whether the franchisor is able to create a specific designs of the units that clearly reflects the features of the business format, for example, in terms of color schemes or materials used.
H1: A franchisee’s perception of an effective franchise system’s strategic positioning has a positive influence of franchisee’s trust toward franchise organization.
2.3.2 Operational management
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franchisor has to ensure the ICT support, logistic, purchasing, training and development, quality programs (Croonen, 2006; Gillis & Combs, 2009; Morrison, 1996; Roh & Yoon, 2009; Windsperger, 2004). According to Croonen & Brand (2013) a franchisee will assess the ability and the intention of the franchisor to effectively manage the operations within the system and as a consequence this will influence the franchisee‟s trust toward the organization. This research expects that a franchisee‟s perception of an effective operational management within the organization, will increase the franchisee‟s trust in the organization. The explanation is that, when a franchisee perceives that the franchisor is capable and willing to effectively manage the operations within the franchise organization, then the franchisee will expect that possible operational problems will be eliminated, which will ensure effortless operational process and an improved performance. As a consequence, chances for reaching the desired outcomes will increase. Based on the above considerations and some additional literature, this research identify the following aspects of an operational management:
According to Kaufmann & Eroglu (1998), Roh & Yoon (2009) and Windsperger (2004) an important aspect that constructs the operational management is the purchasing conditions. This aspect refers to the specific clauses regarding purchasing from predetermined suppliers. This purchasing clauses can refer to everything from instore furniture, through ICT systems to cars. According to Kaufmann & Eroglu (1998), a franchisee will assess the conditions under which goods and/or assets are supplied. More precisely, a franchisee will assess the quantities of goods that have to be ordered and their prices.
The second aspect that has been used in this research to construct the operational management is the logistics. According to Croonen (2006) this aspect refers to the actual delivery of goods and assets in the franchisee‟s unit. Logistics encompass issues related to the expected time for delivery, possibilities for flexible delivery and the care by which the goods are delivered. It is expected that a franchisee will assess all these functions of the logistics system and as a consequence this will influence his/her trust toward the organization.
The final determinant is the quality assurance (Caldwell & Clapham, 2003; Ingenhoff & Sommer, 2010). This determinant refers to the franchisee‟s assessment of the franchisor‟s knowledge regarding the required quality standards, methods of operation and franchisor‟s intentions to perform them on a continuous basis.
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2.3.3 Franchisee management
The third component of the franchise system that has been taken into account in this research is the franchisee management. Reviewing the literature, it can be mentioned that a lot of researchers have recognized HRM practices as an important antecedent influencing the employee‟s trust toward organization (e.g.; Gould-Williams, 2003; Hodson, 2004; Whitener, 2001; Searle et al., 2011). According to Lado & Wilson (1994) HRM refers to an organizational practices and policies regarding attracting, developing, and maintaining an organization‟s human resources. The main conceptual link between HRM practices and employee‟s trust is that employees assess the quality of these HRM practices within the organization and based on this they create a perception about the organization‟s ability and integrity which ultimately influences the employee‟s trust toward the organization (Croonen & Brand, 2013). Translating this into a franchising context it is expected that the way in which a franchisor attracts, develops, and maintains his/her franchisees will influence the franchisee‟s trust toward the organization. More precisely, the expectations are that if franchisees perceives the HRM practices used from the franchisor as credible, then the franchisee will place more trust toward the organization. The explanation is that, in this way the franchisee perceives that the franchisor is concerned about the quality of the franchisees and that all franchisees are treated in an equal way, which is expected to increase the franchisee‟s trust toward the organization. Also by taking care about the quality of the franchisees, the franchisor increases the chances for reaching the desired outcomes. Based on the above considerations, these research identify the following aspects of the franchisee management:
According to Evans & Davis (2005), Snell & Dean (1992), Whitener (2001) an important aspect that constructs the franchisee management is the procedures for a franchisee selection and recruitment. More precisely, these processes include procedures for evaluating the skills, knowledge, and abilities of the prospective franchisees. According to Croonen & Brand (2013) by creating comprehensive practices regarding a franchisee selection and recruitment, the franchisor increases the franchisee‟s trust toward him and the franchise system. The explanation is that by creating an extensive recruitment and selection process the franchisor shows that he/she is concerned about the quality of the franchisees.
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that franchisor cares about them, which increase the franchisees‟ trust toward the franchisor and the organization.
The final aspect is the franchisee rewards (cf. Snell & Dean, 1992; Whitener, 2001). This aspect incorporates both financial and non-financial rewards. It is really important that all franchisees are treated in an equal way regarding the reward system. More precisely this means that the rewards have to be fair and reasonable (Snell & Dean, 1992; Whitener, 2001). According to Croonen & Brand (2013) it is expected that an equitable franchisee reward system provides franchisees with signals that the franchisor cares for its franchisees, which is expected to increase the trust toward the franchisor and the franchise system.
H3: A franchisee’s perception of an effective franchisee relationship management has a positive influence on the franchisee’s trust toward the franchise organization.
2.3.4 Serving culture
In addition to the already stated components, the culture within the organization should also be taken into account. According to Gillespie et al. (2009) organizational culture is an important component of an organization and influences employees‟ trust in the organization. The culture of an organization refers to the complex combination of values, beliefs and assumptions that underpin organizational behavior (Barney, 1986). The main role of an organizational culture is that it explains what behavior is appropriate and determines how the organizations interacts with its suppliers, customers and competitors (Louis, 1983). As a consequence, the organizational culture influences the performance of the company. Based on these findings this research identifies the culture as an important component of a franchise organization.
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a franchisee‟s assessment of a serving culture within the organization will increase the franchisee‟s trust toward the organization. The explanation is that when a franchisor puts efforts to create a supportive culture, then he/she sends signals to the franchisees, that he/she is concerned about the good relationship between the franchisees and that the franchisees together have to reach the desired outcome. As a result it is expected that the franchisee‟s trust toward the franchise organization increases.
H4: A franchisee‟s perception of a franchise system‟s serving culture has a positive influence on the franchisee‟s trust toward the franchise organization.
2.4 The moderating role of self-efficacy
Nowadays a lot of researches have recognized the influence of self-efficacy on an individual‟s psychological state, behaviour and motivation (Nair & Dovina, 2015). Moreover, an individual‟s self-efficacy defines how tasks, goals and challenges are approached (Nair & Dovina, 2015). According to Bandura (1995) self-efficacy is „the belief in one‟s capabilities to organize and to execute the course of action required to manage prospective situations‟. Translatting this to the franchise context, self-efficacy refers to an franchisee‟s belief in his or her abilities to manage prospective situations in the franchise system by mobilizing and executting the required actions by himself. This belief influences how individuals think, behave and feel. Furthermore, people with high self-efficacy are more effective and generally more successful than those with low self efficacy perceptions (Bandura, 1994).These findings have been confirmed by Marilyn & Terence (1992) who state that people who think they can perform well on a task do better than those who think they will fail. Possible explanation is that according to Live (1987), people with high levels of self-efficacy are more engage in what they do and set higher goals.
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Particular examples how a franchisee‟s self-efficacy is expected to influence the stated relationships between a franchisee‟s perception of the stated four components of the franchise organization and the franchisee‟s trust in the organization are the following:
Regarding the strategic positioning- in most franchise organizations, franchisees have room to be entrepreneurial and thus they receive freedom to adapt the strategic positioning a bit to its local market. This view has been supported by Bradach (1998) who stated that in most franchise systems, franchisees are allowed to introduce new products and services to adjust to their specific local market. Based on this, the expectations are that if a franchisee has the belief that he/she can identify the local needs and offer the right assortment of goods and services at a certain price level, then the franchisee will place less importance on the franchisor‟s ability to develop a viable positioning strategy.
H5a: A franchisee’s self-efficacy weakens the positive relationship between the franchisee’s perception of the strategic positioning of the organization and the franchisee’s trust toward the franchise organization.
Regarding the operational management- this research proposes that if a franchisee believes that he/she can effectively and efficiently manage the operations in his/her individual store, then the franchisee will place less importance on the franchisor‟s ability to provide a range of operational support services. This will reduce the strength of the relationship between the franchise system‟s operational management and the franchisee‟s trust in the organization.
H5b: A franchisee’s self-efficacy weakens the positive relationship between the franchisee’s perception of the operational management within the system and the franchisee’s trust toward the franchise organization.
Regarding the franchisee management- this research proposes that if a franchisee has high level of self-efficacy, then he/she will place less importance on the franchisor‟s ability and willingness to effectively manage other franchisees. The explanation is that, if a franchisee believes in his/her ability to manage his/her unit , then the franchisee will care less about the franchisor‟s ability to offer training and development programs and also will place less importance on the procedures for selecting and recruiting. Based on that, this research propose that a franchisee self-efficacy will reduce the strength of the relationship between a franchisor‟s ability to effectively manage the relationships with other franchisees and a franchisee‟s trust in the organization.
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Regarding the serving culture- according to Bandura (1994) when the individual has a high level of self-efficacy then he/she will be more efficient and perform better than other members of the organization. Based on these finding this research expects that a franchisee with high level of self-efficacy will place less importance on receiving help and support from other members within the franchise organization, because the other members perform less efficiently. This research expects that a franchisee‟s self-efficacy will weaken the relationship between a serving culture within the organization and a franchisee‟s trust in the organization.
H5d: A franchisee’s self-efficacy weakens the positive relationship between the franchisee’s perception of a serving culture within the organization and the franchisee’s trust toward the franchise organization.
2.5 The moderating role of peer trust
A second moderator has been identified and new analysis with this moderator has been done. The moderator that has been chosen is peer trust, which means, a franchisee‟s trust in other franchisees (peers) in the franchise system. As already stated, according to Davies et al. (2011) there are two bases of trust- competence trust and integrity trust. Based on this, for the purpose of this research, peer trust has been defined as a franchisee trust in the competence and integrity of the other franchisees within the franchise organization.
This research supposes that a franchisee‟s trust in other peers can have a moderating effect on the relationship between a franchisee‟s perception of the four elements of the franchise system (strategic positioning, operational management, franchisee management ,serving culture) and a franchisee‟s trust toward the organization. This is based on the expectations that a franchisee will not only assess the ability of the franchisor to define these four components of the franchise system but a franchisee will also assess the competences and integrity of other peers. The explanation is that a franchisee cannot reach the desired outcome individually and he/she is dependent on the other franchisees to implement the franchisor‟s business format and to create a consistent image to the outside world (Croonen et al., 2015). Based on this, this research expects that a franchisee trust toward other franchisees will moderate the stated relationships.
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that a franchisee‟s trust in peers will weaken the relationships between the stated two components of the franchise organization and the franchisee‟s trust toward organization.
H6a: A franchisee’s trust in other peers weakens the positive relationship between the franchisee’s perception of the franchise system’s strategic positioning and the franchisees trust toward the franchise organization.
H6b: A franchisee’s trust in other peers weaken the positive relationship between the franchisee’s perception of the franchise system’s operational management and the franchisee’s trust toward the franchise organization.
Regarding the third component – franchisee management – it is expected that if a franchisee perceives other franchisees as capable, then he/she will place more trust on the franchisor‟s ability to assess, develop and manage effectively other franchisees. As a consequence the franchisee will place more trust in the organization and its future success. Based on the above considerations, this research expects that peer trust will strengthen the relationship between a franchisee‟s perception of an effective franchisee management and a franchisee‟s trust in the organization.
H6c: A franchisee’s trust in other peers strengthen the positive relationship between the franchisee’s perception of the franchise organization’s HRM management and the franchisee’s trust toward the franchise organization.
Regarding the serving culture –it is expected that when a franchisee trust in the other franchisees‟ competence and integrity, this will increase the benefits of a supportive culture. This view has been supported by Schaubroeck et al. (2013) who stated that peer trust among coworkers can enhance the quality of social exchanges and thereby enable workers to acquire information support and other resources. As a result, this research expects that the relationship between a franchisee‟s perception of serving culture within the organization and a franchisee‟s trust toward the organization will be strengthen.
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2.6 Conceptual model
Based on the found literature and the above formulated hypotheses a conceptual model has been developed (see figure 1).
H1 H2 H3 H4 H5d H5c H5bH5a H6d H6c H6b H6a
Figure 1. Conceptual model A franchisee’s perception of the franchise system’s strategic positioning
A franchisee’s perception of the franchise system’s operational management
A franchisee’s perception of the franchise system’s HRM practices
A franchisee’s perception of the franchise system’s serving culture
A franchisee’s trust in franchising organization
Control variables:
- Gender of the participant - Years of experience
A franchisee’s
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3. Methodology
In this part the research approach is discussed. More precisely, the methodology part consists of three subparts. The first subpart gives information regarding the data collection, the second subpart explains the steps by which the analysis was done and the third subpart elaborates on how different variables are measured. Regarding the choice of a research approach, Van Aken et al. (2012) explain the difference between a theory development and a theory testing approaches. The first one is necessary when a business phenomenon has not yet been addressed in the academic literature or when the literature related to the phenomenon is still very exploratory in nature. The second approach is appropriate when the literature streams that are related to this phenomenon are already quite elaborated, however at the same time the business phenomenon is faced by many companies. Considering that the field of a franchisee trust has already been addressed by researchers, however the findings have been fragmented and there is still a need for franchisors to gain more knowledge on how to manage the relationships within the organization, this research chose quantitative approach as a research approach.
3.1 Data collection
Regarding the data collection this research uses an existing dataset related to a franchisee‟s trust. More precisely, only data related to the already identified antecedents of a franchisee‟s trust toward a franchise organization has been used. The format of the dataset is a questionnaire. This questionnaire has been sent out to franchisees of American convenience store chain - “Best Food”. As a result, 72 franchisees out of 83 have filled in the questionnaire. More information regarding the items used for this research can be found in table A in the appendix.
3.2 Analysis
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After implementing a factor analysis, next step was to conduct a reliability analysis. The purpose of a reliability analysis is to check whether the items composing a particular variable are compatible and reliable. For each variable Cronbach Alpha values were calculated. According to Blumberg (2005) if Cronbach Alpha is higher than 0.70 then the variable is reliable. Then, if the reliability is higher than 0.70, the average of the questions belonging to one variable are calculated and the sum variables are made.
The last step was to test the hypothesis by means of a moderated multiple regression. This has been done in four steps. Model 1 incorporates only the relationship between the dependent variable and the control variables. Then, Model 2 builds on model 1 by including the independent variables (the four components of the franchise system-strategic positioning, operational management, franchisee management and serving culture). The most comprehensive models are Model 3 and Model 4 which also include the role of potential moderators- a franchisee‟s self-efficacy and peer trust respectively.
3.3 Measurements
To measure the variables, a franchisee‟s perception regarding each item has been used. More precisely, each variable consists of two or more statements and for each statement a 1-5 Likert scale has been used where 1 is strongly disagree, 2 is disagree, 3 is no opinion, 4 is agree and 5 is strongly agree. The only exception is related to the control variables (see below).
3.3.1 Dependent variable
The choice for the dependent variable in this research is a franchisee‟s trust toward a franchise organization. As already stated, according to Davies et al. (2011) there are two bases of trust – competence and integrity and this research takes this into account when choosing the statements related to the organizational trust. To measure organizational trust four statements have been formulated. These statements are based on the article of Schilke and Cook (2015). More precisely two statements are related to the competence based trust and two statements are related to the integrity based trust. The franchisees were asked to state to what extent they agree or disagree with the following statements:
“The franchisor‟s organization can be regarded as a capable and competent organization”. ” The franchisor‟s organization is capable of meeting its responsibilities”.
“As circumstances change, this franchise organization would be ready to willing to offer assisting and support”.
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First the construct validity has been checked by means of a confirmative factor analysis. Based on the results, no underlying structure has been identified and all the items correlate with only one component. Then a reliability analysis has been implemented. The Cronbach Alpha for the four items of the franchisee‟s trust is α = 0.827, thus, the items are compatible and the scale is highly reliable. Finally a sum variable for franchisee‟s trust toward organization has been created.
3.3.2 Independent variables
The independent variables in this research are a franchisee‟s perception of the four components of a franchise organization (strategic positioning, operational management, franchisee management and serving culture). Each variable consists of two or more statements. More precisely, the franchisees were asked to state to what extent they agree or disagree with the following statements:
Statements related to the franchisee‟s perception of the franchise organization‟s strategic positioning (based on the conceptual article of Croonen and Brand, 2013)
“My franchise system offers customers valuable services for an attractive price”. “My franchise system has effective promotional activities”.
Statements related to the franchisee‟s perception of the franchise organization‟s operational management (based on the article of Croonen and Brand, 2013)
“My franchise system offers attractive purchasing agreements with suppliers of goods and business assets”.
“My franchise system ensures the timely and effective delivery of goods to the units”. “My franchise system uses high-quality information / computer technology systems”. “My franchisor understands our industry‟s quality standards and tries to meet them”. Statements related to the franchisee‟s perception of the franchisee management within the organization (based on the article of Sikora et al.,2015)
“The franchisor uses decent procedures to assess the suitability of prospective franchisees”. “The franchisor provides good training for new franchisees”.
“The franchisor provides good ongoing training for extant franchisees”.
Statements related to the franchisee‟s perception of the serving culture within the organiztion (based on the article of Cameron & Spreitzer, 2012)
“To what extent do you consider the franchise system as a collaborative”. “To what extent do you consider the franchise system as a supportive”.
“To what extent do you consider the franchise system as a relationship oriented”.
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analysis. Based on the results, for the items of each variable no underlying structure has been identified and all of them correlate with only one component. Then a reliability analysis has been implemented. For the items related to the franchisee‟s perception of a strategic positioning Cronbach‟s Alpha is 0.675. This result is lower than 0.7, however according to Lance et.al (2006) the score of 0.675 can be interpreted as reliable. Second, the Cronbach Alpha for the items related to the franchisee‟s perception of an operational management is α = 0.835, which means this scale is also reliable. Third, the Cronbach Alpha for the items related to the franchisee‟s perception of a franchisee management is α = 0.772, which means that this scale is also reliable. Lastly, the items related to the franchisee‟s perception of a serving culture have a Cronbach Alpha of α = 0.781. Finally, the average scores of the items of each variable have been calculated and sum variables have been created for a strategic positioning, operational management, relationship management and serving culture.
3.3.3 Moderating variables
First this research tested the effect of a franchisee‟s self-efficacy as a moderating variable. The statements related to this variable are based on the paper of Schwarzer and Jerusalem (1995). More precisely the statements are the following:
“It is easy for me to stick to my aims and accomplish my goals”. “I am confident that I could deal efficiently with unexpected events”. “I can solve most problems if I invest the necessary efforts”.
First the construct validity has been checked by means of a confirmative factor analysis. Based on the results, no underlying structure has been identified and all the items correlate with only one component. Then a reliability analysis has been implemented. The Cronbach Alpha for the three items of a franchisee‟s self-efficacy is α = 0.724, thus, the items are compatible and the scale is highly reliable. Finally a sum variable for franchisee‟s self-efficacy has been created.
The second moderator which has been tested in this research is peer trust. To measure peer trust, three statements have been chosen related to the competence and integrity of the franchisees in the organization. The first statement is based on the article of Cook and Wall (1980), the second statement is based on the article of Colquits et al. (2007) and the third statement is based on the article of Colquitt and Rodell (2011). More precisely, the franchisees were asked to state to what extent they agree with the following statements:
“My fellow franchisees are known to be successful at the things they try to do.” “My fellow franchisees would not knowingly do anything to hurt me.”
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Then a factor analysis has been done to check whether these three items correlate only with one factor. Based on the results, no underlying structure has been identified and all the items correlate with only one factor. Then a reliability analysis has been implemented. The Cronbach Alpha for the three items of peer trust is α = 0.813, thus, the items are compatible and the scale is highly reliable. Finally a sum variable for peer trust has been made.
3.3.4 Control variables
This research chose gender and years of experience as control variables. Regarding the first control variable Colquitt et al. (2007) distinguish that trust propensity is an antecedent of trust and that people have different propensities to trust. Taking into account that there is a difference between men and women regarding the level of trust they place toward other individuals (Croson et al., 1999), this research chose gender as a control variable. Regarding the second control variable, this research expects that years of experience can also have an influence on the extent by which individuals place trust to other people. Each variable has been measured by one statement. This research expects that regarding these variables only one item for each is sufficient because according to the paper by Croonen and Broekhuizen (forthcoming), when a variable can be easily and uniformly imagined by the respondents, then the use of only one item can be justified.
4. Results
In this part the results from the regression analysis have been presented. More precisely, information regarding the approval or rejection of the already stated hypotheses has been presented. In addition, information regarding the means, correlation and multicollienarity is presented .
4.1 Descriptive statistics and correlation
In table 1 the descriptives (means and standard deviations) are presented. As it can be seen the mean of each of the independent variables and dependent one, has a value between 4,21 and 4,42. Considering that the scale to measure each item is 1-5, then it can be said that there are not much diversification in the answers of the franchisees and that on average the franchisees were agreeing or strongly agreeing with the statements.
Mean Std. Deviation
Franchisees trust in an organization 4,38 0,54
Franchisee’s perception of Strategic Positioning 4,36 0,6 Franchisee’s perception of Operational Management 4,42 0,51 Franchisee’s perception of Franchisee Management 4,21 0,66
Franchisee’s perception of Serving Culture 4,29 0,7
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Regarding the correlation - in table 2 the correlations coefficients are presented. As it can be seen from the table, the already identified four components of the franchisee organization significantly correlate with each other. The results show that an increase in a franchisee‟s perception of a serving culture leads to an increase in a franchisee‟s perception of a good relationship management within the system (r = 0.665, p < 0.000) and correlates with a franchisee‟s perception regarding the operational management (r = 0.684, p < 0.000). Furthermore, a franchisees‟ perception of operational management and strategic positioning highly correlate with each other (r = 0.676, p < 0.000). These results indicate that the four components of a franchise organization are related in some way and it is highly possible that if a franchisee‟s has a high perception regarding one component of the franchise organization , also to has a high perception for the remaining components of the franchise system. To sum up, all the identified antecedents of a franchisee‟s trust toward a franchise organization have a positive and significant correlation with each other. After discovering this, test for multicollinearity problems has been conducted by means of Variance Inflation Factor. According to Cohen (2003) if the VIF is less than 10, then there is no multicollinearity. All the items have been tested for multicollinearity using SPSS programme, more precisely by using a collinearity diagnostics function. Based on the results, all the items have VIF score less than 5, so that in this research there is no problems related to multicollinearity.
Table 2 – Correlation coefficients
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To test the hypotheses a multiple regression analysis has been conducted. This multiple regression analysis has been conducted in four steps. Model 1 incorporates only the relationship between the dependent variable and the control variables. Then, Model 2 builds on Model 1 by including the independent variables (a franchisees‟ perception of the four components of the franchise organization-strategic positioning, operational management, franchisee management and serving culture). The most comprehensive models are Model 3 and Model 4 which also include the role of the potential moderators- a franchisee‟s self-efficacy and peer trust respectively.
4.2 Finding on direct effects
Following the findings from Model 2 it can be seen that two from the stated four components of a franchisee organization have a significant relationship with a franchisee‟s trust toward the organization. More precisely these two components are- operational management (B = 0.220, p < 0.007) and serving culture (B = 0.257, p < 0.004). Then considering the results from Model 3 and Model 4, it can be seen that again the same two components of the franchisee system (serving culture and operational management) have a significant relationship with franchisee‟s trust toward organization. These findings imply that an increase in a franchisee‟s perception of a serving culture or efficient operational management leads to an increase in a franchisee‟s trust in the organization. Thus, hypothesis 2 and hypothesis 4 have been supported. However, the franchisee‟s perceptions of the other two components of a franchise system, a strategic positioning and a franchisee relationship management, do not have a significant relationship with a franchisee‟s trust toward organization. Therefore, hypotheses 1 and 3 have been rejected.
4.3 Findings on moderating effects
According to Model 3 it can be said that, none of the stated relationships between a franchisee‟s perception of the four components of a franchise organization and a franchisee‟s trust toward the organization have been significantly influenced by a franchisee‟s self-efficacy. Thus, hypotheses 5a, 5b, 5c and 5d have been rejected.
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Table 3 - Moderated regression analysis
Dependent variable: franchisee‟s trust toward organization B,SE- Unstandardized B and Unstandardized Srt. Error
Bold figures - Correlation is significant at the 0,05 level ( two-tailed)
After gaining information that there is a positive relationship between a franchisee‟s perception of the two components of a franchise organization and a franchisee‟s trust toward the organization (Model 2) and that peer trust moderates these relationship (Model 4), then further analysis to explain how peer trust moderates the stated relationships has been done. For this purpose each relationship including the moderator has been presented in an interaction plot. First, the relationship between a franchisee‟s perception of an operational management and a franchisee‟s trust toward the
B SE B SE B SE B SE 4,766 0,235 4,790 0,174 4,755 0,176 4,787 0,163 -0,234 0,152 -0,236 0,110 -0,245 0,115 -0,265 0,102 -0,015 0,015 -0,017 0,012 -0,009 0,012 -0,009 0,011 -0,102 0,067 -0,083 0,07 -0,123 0,069 0,220 0,088 0,270 0,091 0,287 0,089 0,061 0,076 0,027 0,079 0,047 0,071 0,257 0,072 0,210 0,072 0,251 0,069 -0,066 0,059 0,004 0,078 -0,092 0,106 0,065 0,073 0,077 0,077 -0,024 0,055 -0,081 0,068
Operational management x peer trust -0,213 0,096
0,083 0,075
Serving culture x peer trust 0,228 0,11
Step and variables
0,048 0,582 0,647 0,663
Serving culture
Two-way interaction
Operational management x self-efficacy Intercept
Control variables
Gender Experience
Main effect
Strategic positioning x self-efficacy
Franchisee management x self-efficacy
Peer trust
Model 1 Model 2 Model 3 Model 4
Δ R square
Surving culture x self-efficacy
Strategic Positioni g x peer trust
Franchisee management x self-efficacy
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organization, including the role of peer-trust has been illustrated in Figure 1. Based on the results it can be stated that when there is a low level of trust between the franchisees then the more efforts the franchisor makes to create procedures for an effective operational management, the more trust franchisees will place in the franchise organization. However, if there is a high level of trust between the franchisees then the franchisors efforts to create an effective operational procedures will slightly increase the franchisees‟ trust, but almost insignificantly.
Figure1 Interaction plot operational management and peer trust
Second, the relationship between a franchisee‟s perception of a supporting culture within the organization and a franchisee‟s trust in the organization, including the moderating role of peer trust has been illustrated in Figure 2. Based on the results it can be stated that when there is a high level of trust between the franchisees then the more efforts the franchisor makes to create a serving culture within the organization, the more trust franchisees will place in the franchise organization. However, if there is a low level of trust between the franchisees then the franchisor‟s efforts to create a serving culture within the organization will not change the franchisees trust in the organization.
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5. Discussion and conclusion
This part starts with a discussion, where the research questions and the general framework have been recalled. Then in the conclusion part the answers of the research questions have been presented. Based on the conclusion part, implications the franchisors have been created. This research ends by considering possible limitations and suggestions for further researches.
5.1 Discussion
This paper aims to contribute to the franchise literature by narrowing the literature gap on the antecedents of a franchisee‟s trust in a franchise organization. To achieve this, two research questions have been formulated. The goal of the first research question was to identify which components of the franchise organization influences a franchisee‟s trust in the franchise organization and the goal of the second research question was to identify possible moderators which can modify the relationships between the identified antecedents of the franchisee‟s trust and the franchisee‟s trust in the organization.
To answer the first research question, a franchise organization has been divided into its main components, and the relationships between a franchisee‟s perception of each of these components and a franchisee‟s trust toward the franchise organization have been tested. More precisely, based on the
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literature the following four components of a franchise system have been identified – strategic
positioning, operational management, franchisee management and serving culture within the system. Regarding the strategic positioning and the franchisee management, the expectations were that a
franchisee will assess a franchisor‟s abilities to define a valuable strategic positioning and to manage the relationships with other franchisees and as a consequence this will influence the franchisee‟s trust in the organization. More precisely, the explanation is that when a franchisee perceives that the franchisor is capable and willing to developed a viable positioning strategy and to manage properly the relationships with other franchisees, then the franchisee will have more faith in the future success of the organization and as a consequence he/she will place more trust in the organization. However, for both components, no significant relationships with a franchisee‟s trust in a organization have been found. Possible explanation for these results is that these two components of a franchise organization (strategic positioning and franchisee management), can be easier determined by a franchisee before entering the franchise organization. This means that a franchisee has a preliminary opinion which is stable and even if the franchisor places more efforts regarding these two components, the franchisee‟s perception of these components will not be changed. Furthermore, a change in the strategic positioning direction or a franchisee managements is quiet difficult and expects a lot of time and efforts, and this is another explanation while franchisees have a predefined stable opinion regarding these two components.
Regarding the other two components of a franchise system (strategic positioning and serving culture), the expectations were that a franchisee will assess a franchisor‟s ability and willingness to create efficient procedures for an operational management and a culture based on help and support and as a consequence this will influence the franchisee‟s trust toward the organization. More precisely the explanation is that, when a franchisee perceives that the franchisor is capable to effectively manage the operations within the franchise organization and to create a serving culture, then the franchisee will expect that possible operational problems will be eliminated, which will ensure effortless operational process and an improved performance. As a consequence, the franchisee will consider the chances for reaching the desired outcome as higher and he/she will place more trust in the organization. Based on the results from the regression analysis, a positive significant relationship between the stated two components of the franchise system and the franchisee‟s trust in the organization have been found. To answer the second research question, the roles of a franchisee‟s self-efficacy and peer trust as a potential moderators of the relationships between a franchisee‟s perception of the stated four components of a franchise organization and the franchisee‟s trust toward the organization have been tested.
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expectations were that a franchisee‟s self-efficacy will weaken all the relationships between a franchisee‟s perceptions of the stated four components of the franchise system and a franchisee‟s trust in a franchise system. The explanations is that when a franchisee beliefs in his/her capabilities to organize and to execute the course of actions required to manage prospective situations then he/she will need less help and support from the franchisor. As a consequence the franchisee will place less importance on a franchisor‟s ability to create the stated four components. However, no significant moderating effect of the franchisee‟s self-efficacy has been found. Based on this result, it can be stated that even when a franchisee has a high self-efficacy then he/she will again assesse the franchisor‟s abilities to develop the stated four components of the franchise organization and this will affect the franchisee‟s trust toward the organization.
The second moderator that has been identified and tested is peer trust. This research defines peer trust as a franchisee‟s trust in the competence and integrity of other franchisees. Regarding the first two components of the franchise system (strategic positioning and operational management) the expectations were that peer trust will weaken the relationships between a franchisee‟s perception of these two components and a franchisee trust in an organization. The explanations is that, when a franchisee perceives other peer as capable to identify a specific local needs and to manage effectively the operations in their individual units, then a franchisee will place less importance in assessing the franchisor‟s ability to define a valuable strategic and to offer an operational support.
Regarding the other two components of the franchise system (franchisee management and serving culture) the expectations were that peer trust will strengthen the relationships between a franchisee‟s perception of the stated components and a franchisee‟s trust in a franchise system. The explanation is that if a franchisee perceives other franchisees as capable, then the franchisee will place more trust on the franchisor‟s abilities to assess, develop and manage effectively other franchisees. Furthermore, the franchisee‟s trust in the capabilities of other peers will enhance the quality of social exchanges and increase the benefits of the serving culture.
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5.2 Conclusion
Based on the results from the regression analysis, the two research questions can be answered. The first research question was: How does a franchisee’s perception of the four components of a franchise organization influence the franchisee’s trust in the organization? A franchisee‟s perception of a serving culture and an operational management positively influences the franchisee‟s trust toward the organization. However, there is no evidence that a franchisee‟s perception of the other two components- strategic positioning and franchisee relationship management, have an influence on the franchisee‟s trust in the organization. Thus, the answer to the first research question is that a franchisee‟s perception of a serving culture and an effective operational management positively influences the franchisee‟s trust in the organization.
The second research question was: How is the relationship between a franchisee’s perception of the four components of a franchise organization and a franchisee’s trust in the organization moderated by the franchisee’s self-efficacy or peer trust? No significant relationships were found with a franchisee‟s self-efficacy as a moderating variable. There is no evidence that if a franchisee believes in his/her capabilities to organize and to execute the course of action required to manage prospective situations, this will influence the relationship between a franchisee‟s perception of the four components of the franchise system and the franchisee‟s trust in the organization. However, significant results for peer trust as a moderator have been found. More precisely, peer trust moderates the relationships between a franchisee‟s perception of two components of the franchise system (operational management and serving culture) and the franchisee‟s trust in the organization. Regarding the operational management, a franchisee‟s trust in other peers weakens the relationship between an operational management and a franchisee‟s trust toward organization and also changes this relationship from positive one to negative one. Regarding the second relationship, franchisee‟s trust in peers slightly weakens the relationship between serving culture and franchisee‟s trust in organization. Therefore, the answer to the second research question is that a franchisee‟s self-efficacy does not seem to moderate stated relationships, however peer trust moderates the relationships between a franchisee‟s perception of two components of the franchise system- operational management and serving culture and a franchisee‟s trust in a franchise system.
5.3 Theoretical and managerial implications
