Trust and control in franchising systems: How does Formal
Franchisee Representation affect franchisees’ trust-control
perceptions?
Simone Rondaan S3857778 21 June 2020
Word count: 12902 (Introduction till Future research) Word count: 15910 (Title page till appendix B)
First supervisor: dr. E.P.M. Croonen
Second Supervisor: dr. K.M. Bijlsma-Frankema
Master Thesis
2 Abstract
3
Table of content
1. Introduction ... 4
2. Theoretical background ... 6
2.1 Trust... 8
2.1.1 Formal Franchisee Representation ... 9
2.1.2 FAC management framework ... 10
2.2 Control ... 11 2.3 Trust-Control nexus ... 11 2.4 Behavior ... 12 3. Method ... 13 3.1 Data collection ... 13 3.2 Data analysis ... 14
4. Results – Description of the general data ... 14
4.1 General information ... 15
4.1.1 Fulfilled and unfulfilled expectations ... 16
4.1.2 Financial success and failure factors... 17
4.1.3 Changes in the past decade ... 17
4.1.4 Conclusion ... 18
5. Results – Description and analysis of the data ... 18
5.1 Control configurations from the headquarters ... 19
5.1.1 Control configurations ... 19
5.1.2 Perceived control ... 21
5.1.3 Conclusion ... 22
5.2 Trust due to the Individual Franchisee association ... 22
5.2.1 Trust in franchisor ... 23
5.2.2 Trust among franchisees ... 24
5.2.3 IndFa of DailyGoods ... 25
5.2.4 Trust in the franchisor because of the IndFa ... 26
5.2.5 Trust among franchisees because of the IndFa ... 26
5.2.6 Achieved by having an IndFa ... 27
5.2.7 The effects when there is no IndFa anymore ... 27
5.2.8 What an IndFa can do to increase cognitive trust ... 28
5.2.9 Conclusion ... 29
5.3 The effect of perceived control and trust in the franchisor and among franchisees ... 29
5.3.1 Perceived control and the effect on trust in the franchisor (and vice versa)... 30
5.3.2 Perceived control and the effect on trust among franchisees (and vice versa) ... 31
5.4 Control perceptions and trust perceptions of the franchisees ... 31
5.4.1 EVLN typology ... 31
6. Conclusion, discussion and directions for future research ... 32
6.1 Conclusion ... 33
6.2 Discussion ... 33
4
1. Introduction
Franchising is an important form of entrepreneurial wealth creation in many countries (Dant, Grunhagen & Windsperger, 2011). The franchisor owns a ‘business format’ and the franchisees pay for the right to use this format (Cumberland, 2015). Business format franchising is the process of licensing the rights and obligation to copy an unique retail positioning (i.e. business format) that serves a need for a viable customer segment whereby the franchisors typically offer franchisees back-office support such as marketing and human resources. (Kaufman & Eroglu, 1999). All franchisees and also the company-owed units are part of the franchise system where they all use the same core business format elements. These core elements, like name and logo, must be enforced across all franchisees without exceptions since they are deemed indispensable for the system’s survival (Kaufman and Eroglu, 1999).
Franchisors and franchisees do not always have the same economical motives and therefore there are areas of tension in the franchise relationship (Winsor, Manolis, Kaufmann 2012; Pizanti and Lerner, 2003). These motives can differ from franchisor to franchisees, but also between the franchisees. Franchisor revenue is principally generated through franchise fees, royalties on gross sales, and the sale of goods and services to the franchisees (Caves & Murphy, 1976). Franchise royalties are typically based upon gross sales figures, whereas franchisee profitability is greatly influenced by operating costs (Davies et al., 2011). Another difference is that the franchisor is not responsible for the day-to-day management of the franchisees and therefore their focus is more on the system level. Also the franchisor wants to protect his own business format and as a result, the franchisors are often a dominant party in the collaboration (Croonen, 2010; Davies et al., 2011). These mixed motives can create control and trust problems because franchisees are more focused on their individual results and their own profitability, while franchisors usually strive for a maximum sales for its franchised and company-owned units (Combs & Ketchen, 2003). Therefore, franchisors face the need to implement effective mechanisms to control franchisees’ behavior (Paik & Choi, 2007).
5 Among the matters addressed in studying trust, the relation with control is one of the most controversial and this has led to several alternative notions regarding the relation between the trust-control nexus (Costa & Bijlsma-Frankema, 2007; Long & Sitkin, 2018).
The franchise system is typically characterized by the franchisor who has more control than the franchisees (Quinn, 1999). Excessive autonomy by the franchisees can damage the control position of the franchisor and this can lead to serious systematic damage in the franchise system due to loss of corporate identity and / or dilution of brand value. However, misuse of control by the franchisor leads to an unstable relationship and trust can affect the dynamism of this relationship (Dant & Gundlach, 1997; Pizanti & Lerner, 2003).
The presence of trust is considered a critical factor in the relational exchange (not specific for franchise system) because an action by a party (intentional or not) is likely to have an impact on the other exchange partner (Nooteboom, 2002). In our study, we focus on trust between the franchisees and the franchisees' trust in the franchisor. A challenge that arises for a franchisor is to build and maintain franchisee’s trust in the organization of franchise system, so that this system can continue to function effectively (‘franchise system trust’), Croonen, 2010). Franchise system trust therefore relates to the trust that the franchisees have in the effective functioning of the system as a whole because good procedures and rules have been established and observed. Another reason why trust of the franchisees is important for the franchising system is because the contracts necessary for the cooperation are unbalanced in favor of the franchisor (Storholm & Scheuning, 1994). Therefore, the franchisor is often the dominant partner, and that dominance could make franchisees feel more vulnerable (Croonen, 2010; Davies et al., 2011). The willingness to become vulnerable to the actions of the franchisors associates trust with the risk that the behaviors of the franchisors can harm the franchisees. Thus, without a certain level of trust, it will be difficult for franchisees to accept control in relation to outcome measurements, to follow specified behavior patterns, or to share values (Costa & Bijlsma-Frankema, 2007).
6 Franchisee Association (IndFas). These associations arise from the franchisees themselves and they can help in managing the inherent tensions that exist between cooperation and conflict in franchise relationships.
Despite the importance of FACs (Croonen & Bleeker, 2019) and IndFas (Lawrence & Kaufmann, 2011) for effective network management, no one has investigated how associations actually function within a franchise system, except Lawrence & Kaufmann (2011). Lawrence & Kaufmann (2011) looked at why some IndFas endure while others fail, but they do not consider the effect that an IndFa has on the trust-control perception of the franchisees within a franchise system.
The objective for this study is to bring the discussion around the trust-control nexus a step further by identifying how Formal Franchisee Representation affects the franchisees’ perceptions of the trust-control nexus in their franchise systems. Qualitative research often studies phenomena in the environments in which they naturally occur and uses social actors meanings to understand the phenomena (Denzin & Lincoln, 1994). Through a qualitative research it is possible to gain insight about how the social experience is created (Gephart, 2004). During this research, insights were sought that reveal how broad concepts and theories operate in particular cases. This approach is distinct from that of quantitative research using the hypothetical-deductive model that uncovers important relationships among variables and tests general propositions.
2. Theoretical background
7 organizational context, because it contains both inter-organizational and intra-organizational elements (Croonen & Cumberland, 2017). First, every franchise relationship involves a long-term and contractual inter-organizational relationship with the franchisor. Second, franchise relationship is similar to a hierarchical intra-organizational relationship because the franchisor imposes contractual obligations on all franchisees in the system, such as following the business format. But in addition, franchisees are also part of a franchise system with units that operate under the same business format and all have the same presentation to others. To conclude, there is a relationship between the franchisor and the franchisee, but also between the franchisees themselves and that is why this study looks at both relationships.
Since trust is critical to mutual profitability within franchise systems, franchisors have an economic interest in maintaining franchisees' trust in them (Davies et al., 2011). Johnson and Grayson (2005) mention that affective trust is more about the emotional involvement and de relationship between both parties and a cognitive trust arises from an accumulated knowledge that allows one to make predictions, with some level of confidence. A way of increasing trust is franchise networks is a Formal Franchisee Representation (FRR) (Croonen & Bleeker, 2019). Following the cognition-based view, we expect that franchisees become members of a FFR with expectations of future economic results, because the FFR must represent the interests of the franchisees and for that reason a FFR will contribute to cognitive-based trust. This study examines whether the FFR increases trust in the franchisor, but also if the FFR has an effect on the trust of the franchisees among themselves.
When looking at franchise systems, there are control activities from the franchisor to the franchisees, such as having a contract and having a region manager (Mellewigt, Ehrmann, & Decker, 2011). These control configurations affect the degree of control the franchisor has over the operations in the franchise system, and the degree of control affects the franchisees' perception of control. Several studies say that in the case of high standardization and therefore more control by the franchisor, a FFR can have an effect on the control experience of the franchisees (see Cochet & Ehrmann 2006; Croonen, 2010 on FACs as a form of FFR). The reason for this effect is that franchisees want to have a ‘voice’ to make sure their interests are taken into account during the changes in the franchise system (Croonen, 2010).
8 Based on the above, a conceptual model has been formed and below the model, an explanation is given of the terms that have not yet been further explained or that deserve additional explanation.
Figure 1. Conceptual model
2.1 Trust
Trust is defined as a psychological state in which individuals trust another person or organization with the idea that it will act in the interest of that person (Long & Sitkin, 2018). Trust plays a role in the franchise system, because the franchisees being controlled must relinquish some of their personal control and autonomy to the franchisor who direct their business. This study focuses on cognitive trust by looking at concrete and functional tasks of the FFR that influence the trust perception of the franchisees in the franchise system. In this study, we call the composition of various trust actions ‘trust configurations’.
When we look at trust in a franchise system, Croonen (2017) makes a distinction between three types of trust, namely personal level, team level and organizational level. The first term refers to a franchisee's trust in the franchisor's representatives. Croonen (2017) makes in this type of trust another distinction between top management or the CEO and the franchise manager (boundary spanner). These two different functions have different responsibilities within the franchise system and this also creates different expectations for the franchisees. The franchisees expect that the CEO will formulate and implement the overall strategy of the franchise system and that the franchise manager will visit regularly to provide them with support and advice. The second term is ‘team level’ and refers to trust in the fellow franchisees in the same franchise system. The last term refers to the franchisee's trust in the franchise
Trust configurations §5.2.3
Actions affection cognitive trust
- Formal Franchisee Representation
Control configurations §5.1.1
Actions affecting control
- Output control - Behavior control
Franchisees’ perceived control §5.1.2
Level of control
- Enabling - Constraining
Franchisees’ trust in franchisor §5.2.4
Level of trust
- Low or high - Distrust
Franchisees’ behavior §5.4
i.e. constructive or destructive
Trust among franchisees §5.2.5
Level of trust
9 organization and the franchise system and this is at the ‘organizational level’. An overview plus an additional explanation of these different levels is given in Table 2.1.
Level of trust Description Personal level Top management
trust
A franchisee’s trust in the top managers of the franchisor’s organization.
Boundary spanner trust
A franchisee’s trust in specific contact persons (‘boundary spanners’) at the franchisor’s organization.
Team level Peer trust A franchisee’s trust in its fellow franchisees (‘peers’) in the franchise system.
Organizational level
Franchise system trust
A franchisee’s trust in the franchisor’s organization and the franchise system.
Table 2.1 – Different levels of trust in a franchise system
2.1.1 Formal Franchisee Representation
It is important to know that almost all franchisee based organizations have some sort of franchisee association (Lawrence & Kaufmann, 2011). A distinction can be made between those drawn up by the franchisor and also financed and supported by that party (often referred to as Franchisee Advisory Councils - or FACs) and to franchisee created and supported structures (often referred to as Independent Franchisee Associations - or IndFas). Between the FAC and the IndFa you have several associations that can contain aspects of both (Lawrence & Kaufmann, 2011). Some associations are formed by the franchisor but are completely independent and others can be independently created but the franchisor may control the agenda of the meetings.
FACs form an important managerial instrument for franchisors to create and/or maintain franchisees’ trust in their franchise system (Dandridge & Falbe, 1994; Croonen & Bleeker, 2019). The FAC is a way in which franchisees become involved in the franchisor's decision-making process, and that involvement increases the trust perception of the franchisees. The involvement is encouraged by the fact that the franchisees give advice to the franchisor and in some cases they can cast their vote. The core roles that a FAC has is a supporting, partnering, representing and a monitoring role (Cumberland, 2015).
10 The main difference of the associations is that the FAC originates from the franchisor and the IndFa originates from the franchisees, but ultimately they have the same goal: to represent the interests of the franchisees. In this study, all organizations that represent the interests of the franchisees are referred to as Formal Franchisee Representation (FFR).
2.1.2 FAC management framework
For this research, the model of Croonen and Bleeker (2019) is used because they looked also at trust within a franchise system. Their model is about the FAC but when we look at the purpose of a FFR, the principles of the model can also be applied, because the goal of the FAC and IndFa is the same.
Croonen and Bleeker (2019) designed the fair FAC management framework. This framework differentiates seven core principles from the fairness literature that affect franchisees’ perceptions regarding the fairness of the management of their FACs, and will ultimately affect franchisees’ franchise system trust (Croonen, 2010). If we look at fairness, this consists of three dimensions. The first one is distributive fairness and this is about the perceived fairness of decision outcomes. For franchisees this is typically related to financial outcomes. The second fairness dimension is procedural fairness and this is about the franchisees’ perceived fairness of their franchisors’ decision-making processes. It refers to the principles, procedures, and governance mechanisms that have been used to make the decision. The last dimension is interactional fairness and refers to the way in which a decision-maker is behaving towards affected individuals. The seven core principles mainly concern procedural fairness. Procedural fairness might to some extent reduce negative effects of unfavorable decision outcomes when a decision-making process is considered fair (Cohen-Charash & Spector, 2001). Based on the three dimensions Croonen and Bleeker (2019) created seven core principles: 1. The consistency principle: This principle states that the procedures of a FAC should be
consistent across all the franchisees and also consistent over time. Bylaws with clear clauses can contribute to improving consistency within a FAC.
2. The bias-suppression principle: This principle states that the personal self-interest of the franchisor and its delegates should be prevented from operating the FAC. Self-interest is about the individual actions and behaviors that provoke positive personal benefits.
11 4. The correctability principle: This principle is about the possibility to correct decisions once there is new relevant information. It is not only important to make it possible to adjust the current situation, but also to reverse it when this is considered unfair by the FAC.
5. The representativeness principle: This principle is about how well and accurately the decision of the FAC reflects the opinion of the franchisees. The FAC must take into account all the needs and opinions of all franchisees in the case of binding or non-binding advice. 6. The ethicality principle: This principle states that the FAC should be compatible with
fundamental moral and ethical values of franchisees.
7. The interactional principle: This principle is about respect towards the FAC members.
2.2 Control
Control has been viewed as a process that regulates behaviors of organizational members in favor of the achievement of organizational goals (Costa & Bijlsma-Frankema, 2007). These control configurations must ensure that the desired goals of people or companies are achieved. Therefore, franchisors face the need to implement effective mechanisms to control franchisees’ behavior, which include a formal contract and a monitoring system (Felstead, 1993). However, not all unforeseen events can be described in a contract and as a result, franchisors often feel that franchise contracts offer insufficient means of control over franchisees’ behaviors (Cochet & Garg, 2008). The control configurations that franchisors use to constrain the behavior and ambition of the franchisors can be seen as a threat of autonomy by the franchisor (Paik & Choi, 2007). If disputes arise regarding policies concerning the franchisee's ability to act autonomously, the franchisor's integrity is called into question, compromising trust in the franchisor.
Control can be divided into output control and behavior control (Long & Sitkin, 2018). While behavioral control focuses on the control processes required for task execution, output control focuses on the final results. While control helps managers in motivating subordinate performance, exercising control generally means that subordinates lose aspects of their autonomy and feel more vulnerable. And in this way, trust in the managers (cf. franchisor) is compromised, because their sense of self-determination and the perception that the manager serves their interests (Costa & Bijlsma-Frankema, 2007).
2.3 Trust-Control nexus
12 substitution perspective and the complementarity perspective (Bijlsma-Frankema & Costa, 2005). The substitution perspective indicates that more formal control results in less trust and vice versa. When trust is low, there are more control configurations such as detailed contract documentation, more frequent board meetings, etc. The other perspective examines the complementary relationship between control and trust. This is about trust and control being combined in a way to enhance or emphasize the qualities of each other. For example, it appears that formal control configurations can increase trust by giving people objective rules and clear measures on which to base their assessments and evaluations of others. Despite the many studies, empirical research has not yielded decisive support for one stance over another (Bachmann, Knights & Sydow, 2001). There are just as many studies that say they are complementary than studies that say they are substitutes (Bachman et al. 2001; Bijlsma-Frankema & Costa, 2005).
As mentioned before, is important to have a good balance between control and trust within an organization or organizational network (Bijlsma-Frankema & Costa, 2005). The reason for this is that members may behave differently because they have a higher commitment, performance and motivation and they also experience higher cooperation. Because the balance they know which results they have to achieve and how they can benefit from these achieved results.
2.4 Behavior
Franchisees can react in different ways when there are changes within the franchise system. Some react constructively, such as adopting change or sharing their considerations. But another way of reacting can be destructive, such as neglecting, fighting against changes or leaving the franchise organization (Croonen & Brand, 2015). One way to indicate the behavior in problem situations in different relationships is the so-called 'exit-, voice-, loyalty- or neglect-perspective', also known as EVLN typology (Hirschman, 1970). The EVLN identifies four different ways how employees respond to dissatisfaction and these ways are presented in Table 2.2. For this study the EVLN literature has been used to indicate the behavior of franchisees on the effects of control and trust within the franchise system.
Exit Leaving the organization, transferring to another work department, unit, or in this case franchisor. Voice Recommending ways to improve the conflict situation rather than to escape from an objectionable
state of affairs.
Loyalty Respond to dissatisfaction by patiently waiting. The group that falls under loyalty can suffer in silence for days, confident that things will soon get better.
Neglect When nothing is done about the situation. This is different from loyalty, because the franchisees do nothing to improve this realization.
13
3. Method
This research is part of a larger research project that aims to contribute to an in-dept understanding of the perspective of franchisees in order to ultimately be able to advise on shaping the franchise system. The final research is led by two supervisors, a total of six researchers and six case studies. Each researcher has his own focus, which creates the possibility of delving deeper into the history and current developments of each topic. The goal was to conduct an interview with five people who trust and five people how have less trust in the franchise system, but unfortunately this was not possible due to the covid-19 virus. That is why seven interviews and one pilot interview were used. The pilot interview was very close to the final interview and the answers of this respondent were also in line with the other respondents. For that reason, these respondents have been merged. As result, seven respondents to this study came from one chain of network and one respondent came from a different chain of network.
3.1 Data collection
We studied the effect of an IndFa as type of FFR on the trust perception of the franchisees, focusing on the fairness theory. The first chain of network was founded 95 years ago. In the 50s it became one of the first franchisors in the Netherlands and to this day it is still one of the largest franchisors in The Netherlands. The other chain of network was founded 60 years ago. To ensure the anonymity of the respondents in this study, we call the two companies that participated ‘DailyGoods’. DailyGoods had several owners over the past 10 years, including investment companies. Within the company, there is an IndFa, because there is an association set up by the franchisees.
14 3.2 Data analysis
For the interviews the topic-guide methodology of Kvale (1996) is used. This methodology aims to get long answers by posing short, nondirective questions. Each topic was approached in a non-directive way to discover the perspectives of the interviewees. The interview was divided into different topics and each topic was introduced in a nondirective way. This is done by asking a question at the start of the topic (e.g., Within the FFR , are there many different groups?). After the introductory question for the topic, the interviewer used the wording of the interviewee to subsequently formulate follow-up questions. The interviewer repeated what was said and then asked for (1) an explanation for the answer (e.g., Why do you feel this way? Why did this happen?), (2) an example or a situation where the answer has occurred, or (3) the sequence of these events (e.g., At what time did this happen? What happened next?). When in the conversations new information no longer emerged based on this way of asking questions, more direct question were asked. These more direct questions were formulated based on the previous interviews and the questions were asked to check the information from the previous interviews. The interviews lasted approximately 60 to 70 minutes and the interview scheme used is set out in Appendix A. The interviews that were conducted were recorded and transcribed literally and placed in a qualitative data matrix.
The article by Lee (1991) is used to analyze the data. Lee proposes a three-level model in which meaning-giving by franchisees is validated and then gradually and systematically transformed into theoretical understandings. Following this model, the first phase is about understanding and comparing the data of the individual respondents by using the transcriptions. These data have been processed in a data matrix, so that a clear overview was created. Subsequently, terms that are important in the respondent's answer were searched for and these were also placed in the data matrix. The second phase was to reread the data and use interpretation of the researcher and think about the overlapping concepts useful for comparing the different answers. In the third phase, the data from the second phase was compared with theoretical ideas and insights. In this step, results have emerged that respondents were not even aware of and scientific explanations will be described.
4. Results – Description of the general data
15 4.1 General information
All the respondents first gained experience within the company and then chose to become a franchisee. The respondents all have one or more locations in the north of The Netherlands. Most respondents became franchisee because their parents did too. They all have at least four years of experience as franchisee and two respondents have also worked at the headquarters of DailyGoods. Table 4.1 provides an overview of the answers from the eight respondents and an explanation of these answers is provided after the table. To guarantee the anonymity of the respondents, the codes SEE1, SEE2, ... SEE8 have been used.
How long franchisee Number of units Fulfilled (+) and unfulfilled (-) expectations Success (+) and failure (-) factors IndFa representative SEE1 Franchisee for
20 years now. Before that worked at DailyGoods. 2 + Environment involvement + Own brand - Communication from franchisor No
SEE2 Franchisee for 33 years. Before that worked at DailyGoods.
3 + Financial expectations + Own brand + (Healthy) Food. - Internet - Communication of franchisor No, but participant of working groups.
SEE3 Franchisee for 15 year. Before that worked at DailyGoods. 4 + Environment involvement + Food + Fashion - Internet - Industry overlap No
SEE4 Franchisee for 13 year. Before that worked at DailyGoods.
2 + Optimize current chain
of network
+ Food + Fashion
No
SEE5 Franchisee for 24 year. Before that worked at DailyGoods.
1 + Optimize current chain
of network/location + Product range - Internet - Competition supermarkets - Debt position Yes
SEE6 Franchisee for 12 year. Before that worked at DailyGoods.
1 + Optimize current chain
of network/location + Own brand - Commercial spirit of franchisor - Internationalize - Internet No
SEE7 Franchisee for 19 year. Before that worked at DailyGoods.
2 Not very much. + Appearance of
the store - Competition from comparable retailers
16
- Empty buildings in the city
SEE8 Franchisee for 4 year. Before that worked at DailyGoods. 1 + Financial expectations + More involved in decision-making - Financial expectations (is getting less and less)
+ Quality of the staff
- Deep actions from headquarters
No
Table 4.1 – General information about franchisees
In the article by Bijlsma-Frankema and Costa (2005) it appears that when expectations are violated, trust will decrease and if trusted others live up to expectations of beneficial behavior trust will increase. The company's success and failure factors could have an impact on whether or not franchisees' expectations are met. For that reason, the expectations of the franchisors and the success and failure factors are discussed more specifically. Finally, trust is important when a changing situation occurs. Croonen (2010) describes that during change processes, franchisees are often obliged to invest financially and / or adjust their trade practices without any guarantee that it will lead to anything positive. That is why it is important that franchisees trust the franchisor during these situations. For that reason we conclude this chapter with a description of the changes of DailyGoods and how the respondents experienced these changes.
4.1.1 Fulfilled and unfulfilled expectations
17 4.1.2 Financial success and failure factors
Three respondents indicated that the franchise system own brand ensures financial success (SEE1, SEE2, SEE6). “Everyone knows the brand and the brand is so unique in everything we do.” (SEE6). Also adding a catering facility to the store resulted in financial success, because this increased the number of people in the store (SEE2, SEE3, SEE4). In addition to the two most frequently mentioned successes, fashion was mentioned by two respondents (SEE2, SEE3) as an interesting revenue model, because this category ensures the higher and major peaks in turnover. Healthy food (SEE2), diversity of the product range (SEE5), appearance of the store (SEE7), and the personal qualities of the staff (SEE7) were appointed once by one respondent.
Besides the success factors, the respondents also mentioned failure factors. Four respondents indicated that the internet is a failure factor (SEE2, SEE3, SEE5, SEE6). “You can order it at the website of the headquarters. But the rules for us are still unclear” (SEE2). This is in line with the answer of two respondents who indicated that communication from headquarters is not clear and there was a time when the headquarters would not listen to the franchisees (SEE1, SEE2). “There was a common interest but yet another view” (SEE1). Two respondents see competition as an important threat (SEE5, SEE7). “It is important to properly combine food and non-food, and supermarkets are also improving this” (SEE5). The failure factors that have been named once are the high debt of the franchisor (SEE5), the franchisor loses the commercial spirit (SEE6), globalization of the company (SEE6), the sharp sales actions causing low margins (SEE8), and the attractiveness of the center.
4.1.3 Changes in the past decade
18 Four respondents indicate that they perceive the recent acquisitions as negative (SEE3, SEE4, SEE6, SEE7). These respondents say that this has caused many financial problems and also uncertainty. Another respondent indicated that s/he used to get rich in this sector, but that is no longer the case because of the low margins on the products (SEE8). This situation creates a relationship with the headquarters that is under pressure. The answer that this respondent gives to the question how this situation is dealt with, is that the IndFa tries to make a good arrangement with the headquarters. The rapid growth of DailyGoods is also experienced as negative, because the stock management is therefore incorrect (SEE7).
4.1.4 Conclusion
The expectations of all respondents were met at DailyGoods. Various answers have been given about the financial success, but the own brand and catering facilities are the most frequently mentioned. The answers to the failure factors also differ, but the internet is most often mentioned. When we look at the change in recent times, it appears that the takeover of DailyGoods by third parties plays a role in almost everyone. Three respondents perceive this as positive, because new ideas arise and it creates positivity. However, four respondents indicate that they experience this as negative, because it causes financial problems and uncertainty.
5. Results – Description and analysis of the data
To describe the data related to the conceptual model in a structured manner, it is decided to formulate six analytical questions which are presented in Figure 5.1. After Figure 5.1, the analytical questions are discussed in separate sections. The answers to the questions were based on the answers of the respondents and were supplemented with literature related to the subject.
1 Trust configurations §5.2.3
Actions affection cognitive trust
- Formal Franchisee Representation
Control configurations §5.1.1
Actions affecting control
- Output control - Behavior control
Franchisees’ perceived control §5.1.2
Level of control
- Enabling - Constraining
Franchisees’ behavior §5.4
i.e. constructive or destructive
Trust among franchisees §5.2.5 Level of trust
- Low or high - Distrust
Franchisees’ trust in franchisor §5.2.4
Level of trust - Low or high - Distrust 2 + 3 4 5 6
19 5.1 Control configurations from the headquarters
This section is about the first part of the model, namely the control configurations and the franchisees perceived control. The analytical question associated with this topic is: 1. What control configurations are there within DailyGoods and how do the franchisees perceive this? 5.1.1 Control configurations
The control from the headquarters is done by means of a contract, regional manager, and automated systems. Table 5.1 provides an overview of the positive and negative
perceived contract rules.
Seven respondents perceive the contract as positive and one respondent did not answer this question. It is indicated that the contract is not a strangulation contract and that the contract is often amended by the IndFa before the rules become mandatory or discussed (SEE6). Four respondents indicate that the contract gives them certainty that the headquarters must continue to supply (SEE1, SEE2, SEE3, SEE6). It is also indicated by one respondent that the contract originated from the IndFa and that the franchisees have quite a lot of influence on the headquarters (SEE2). Another respondent says: “It is a very old-fashioned contract and the advantage is that our IndFa is really deep in the contract. As a result, the headquarters just make their decisions.” (SEE2). When asked whether the respondents also perceive the rules of the contract as negative, three respondents indicate that they experience the fixed range of products as negative (SEE2, SEE6 and SEE8) and one respondent indicates that the contract must be adapted to the environment (SEE1).
Five respondents indicate that they never deviated from the contract during their franchise period (SEE2, SEE3, SEE4, SEE5, SEE8). They indicate that they have consciously chosen to be a franchisee and then you should follow the contract. And if every franchisee follows the contract, they also form a whole. They also experience the contract as positive so they would not know why they would deviate from it. The contract also gives respondents more certainty, because they know that all franchisees must follow the rules, but also that the headquarters cannot just make a decision. “They must first discuss the changes with the IndFa” (SEE5).
20 then he can say you are wrong. But if I explain why I did it that way and explain my arguments, then I can leave it in that way” (SEE7).
Second, the regional manager is also a way of controlling from headquarters. This person checks whether the rules are followed from the headquarter, such as correctly organizing the store and offering the right products (behavior control) and the same regional manager also checks whether the goals that have been set are being achieved (output control). No respondent has anything negative to say about the regional manager. Some only indicate that this person changes often and that s/he sometimes has little knowledge, but in general the relationship is good (SEE7, SEE8). It is said that the regional manager is coming by and checking them but also give tips (SEE3). Three respondents indicate that if the rules are followed for a longer period of time, this control will decrease (SEE2, SEE3, SEE8). The degree of control is also related to the relationship with the regional manager: "Often it is also about the relationship with your regional manager. If this is good then you have less control. And if something is wrong, the contract is there. That is fine. There is a good base" (SEE3).
Finally, the automated systems are also a way of control by the headquarters. One respondent says that the headquarters can see what they have delivered the franchisees, but the headquarters does not know what the personnel costs have been and what the rent of the property is (SEE7). Because of this, the franchisor sometimes make goals that the franchisees have to achieve that are not realistic or are not based on the correct figures. Another respondent gives more information about this: “The system is really and fully automated, so this is sometimes dangerous” (SEE6). There are order systems with fixed numbers, which gives the headquarters more control, because they know exactly which numbers of products go to which franchisees. It is not possible to order less if the franchisees are classified in a module.
Positively and negatively perceived contract rules 1. Contract
Positive Negative
SEE1 It is respected by the franchisor. SEE2 SEE6 SEE8
The fixed range of products.
SEE2 Very old-fashioned contract and the advantage is that the IndFa is really deep in the contract.
SEE1 Must be adapted to the environment.
SEE3 We need it. Also for the rules and clarity. SEE4 It contains things that are important to
us, also for our profitability. SEE5 The contract is rock solid. SEE6 It is not a strangulation contract. SEE7 Certainty that the headquarters must
21
2. Regional manager
Positive Negative
All
SEE’s Everyone is positive about the regional manager.
SEE7 SEE8
This person changes often. SEE7
SEE8
Sometimes has little knowledge. 3. Automated order systems
Positive Negative
SEE7 Only figures from the sales and not from the costs. Results in not realistic goals based on not complete data.
SEE6 Not possible to order less if the franchisees are classified in a module.
Table 5.1 – Control configurations
5.1.2 Perceived control
The contract is perceived as positive and this is partly because the IndFa has had a major influence on this. This contract protects the franchisees, because the franchisor cannot just make decisions. This enables the franchisees to take a stronger position against the franchisor. There is also no negative opinion about the regional manager. However, there is less control when there is a good relationship with this person and when the rules are fulfilled for a longer period of time.
When control blocks franchisees in their activities, this control is perceived as constraining and this is the case with the automated systems. These systems allow the headquarters to keep more control over stock management, but this does mean less flexibility for the franchisees. As a result, some franchisees get too much stock and some too little and this gives them less control over their own supplies.
The negative response of the franchisees to control can be explained by means of the self-determination theory (STD). Various articles by Ryan and Deci (ef. 2000) are the basis of the STD and one of the most popular articles about the STD is the article from Gagné & Deci (2005). A distinction is made between intrinsic and extrinsic motivation. The article of Gagné & Deci (2005) shows that intrinsic motivation often provides better outcomes. It is possible to increase intrinsic motivation when responding to three basic psychological needs:
1. Autonomy: The franchisees are given the freedom to fill in an activity at their own discretion.
2. Sense of competence: The trust that a franchisee must have in his own ability.
22 Gagné & Deci (2005) describe autonomy as self-determination. A person must be free to be able and allowed to make own choices. Aspects like a system that controls a franchisee and a regional manager who checks whether the rules are being followed, reduce the feelings of autonomy, and decreasing the sense of autonomy results in less motivation. The results show that the franchisees do not experience the regional manager as annoying, but there is talk of a way to have less control within the franchise system. This shows that they still strive in a way for more autonomy for themselves. The franchisees also try to get some autonomy back by the IndFa, because they can collectively propose something to the franchisor and this gives the franchisees more power. The IndFa has also been closely involved in creating the contract and they are also well aware of this contract. As a result, the franchisor cannot just make decisions and the IndFa and therefore also the franchisees take a piece of control back.
5.1.3 Conclusion
To come back to the first part of question one, we can say that there are three ways of controlling namely, a contract, the regional manager, and automated systems. The answer of the second part of the analytical question is that the franchisees experience the control configurations as constraining when this blocks them and when they have to give up their autonomy. The franchisees want to keep some control within the franchise system and this can be done by building a good relationship with the region manager and adhering to the rules. The IndFa also plays a role in keeping control, because they can ensure that things are presented collectively to the franchisor and because they have had a major impact on the contract.
5.2 Trust due to the Individual Franchisee association
23 5.2.1 Trust in franchisor
Seven respondents indicate that they have trust in the headquarters, because they generally follow the contract (SEE8 has not answered this question). The franchisor is obliged to continue to supply and they also follow this rule (SEE1). Another respondent indicates that there is trust because s/he is now aware of the developments and the headquarters (SEE3). “If I have trust, that motivates me again and I take it a step harder. Everyone at the headquarters does their best” (SEE5). A respondent indicated that trust in the headquarters has increase the past two years, because there is more transparency and the quality of certain people at the headquarters is getting better (SEE6). A respondent says that trust is increasing more and more (SEE7). When asked how this came, the respondent replied: “Also by those working groups that are working for us. And indicating what goes right and wrong. But we need those working groups and the IndFa for that” (SEE7).
Four respondents indicate that there is a lot of ambiguity from the headquarters through the different directions they want to go (SEE1, SEE2, SEE6, SEE7). Two respondents say that there is still trust, but that this trust has diminished because there have recently been acquisitions of the franchise format (SEE1, SEE2). Two respondents indicate that there has sometimes been distrust (SEE3, SEE7). The examples that are mentioned are about transparency about purchase prices from the headquarters and discounts that apply for a longer period of time, without mentioning new purchase prices and these aspects mainly have financial consequences for the franchisees. When there is distrust, two respondents say that they go to the regional manager or the IndFa, so that clarity can be given to them (SEE3, SEE7). In Table 5.2 the behaviors of the franchisor that promote or diminish trust in the franchisees are described.
When asked whether the franchisor has trust in the franchisees, six respondents indicate that they have this feeling (SEE1, SEE2, SEE3 … SEE 6). Three respondents say that the headquarters simply let the respondents do their thing. (SEE3, SEE4, SEE6).“The fact that I can just do my thing can also be disinterested of the headquarter. Are they interested in me? I trust the headquarter, but I think they trust me more.” (SEE6). No one indicated that franchisor had no trust in the franchisees.
Behaviors of the franchisor
Promote trust in franchisor Diminish trust in franchisor All
SEE’s Following the contract. - Always suppling.
SEE1 SEE2 SEE6 SEE7
No clear direction.
SEE1 Always suppling. SEE1
SEE2
24
SEE3 Communication about developments at the headquarters.
SEE3 Transparency about purchase prices.
SEE6 Transparent. SEE7 Period of actions and discounts.
SEE7 Quality of certain people at the headquarters is getting better. SEE7 Working groups.
Table 5.2 - Behaviors of franchisor that promote or diminish trust in franchisees
5.2.2 Trust among franchisees
Each respondent indicated that there is complete trust between the franchisees and that there is no control between the franchisees. Three respondents (SEE2, SEE4, SEE6) indicated that there is trust because they communicate with each other in a personal way and two respondents (SEE1, SEE4) indicated that trust should grow. “I trust other franchisees blindly. It is a very close-knit club. You will of course also grow in that” (SEE1). Another respondent says: "When decisions are made, this is done unanimously. So that gives strength. We have had a lot with the headquarters for the past 10 years, so this actually brought us together. This has made us stronger, created trust and we needed each other” (SEE2). It was also stated that the franchisees are in the same situation and that they are standing behind each other, that they radiate as an unit together by the IndFa and that this has increased trust (SEE8).
Four respondents indicate that they have more trust in one franchisee than another (SEE4, SEE5, SEE6, SEE7). This may be because they are located closer together, it is a large group so you cannot trust everyone, because they have followed a study together, and that one colleague deals more than other colleagues. Two respondents indicate that they trust the franchisees among themselves, but that they not always have the same amount of trust in the IndFa (SEE4, SEE6). They wonder whether the IndFa represent the interests of the franchisees. “Because there are different DNAs and different people with different characters. Is it still the case that the board defends my interests.” (SEE6). Another respondent gives a similar answer, namely: “We do not always agree with the board, but generally between the franchisees we do” (SEE4). Among the eight respondents, no one has de feeling of distrust another franchisee. In Table 5.3 the behavior of the franchisees that promote or diminish trust among franchisees are described.
Behaviors of other franchisees
Promote trust among franchisees Diminish trust among franchisees SEE2
SEE4 SEE6
Communication.
- In a personal way with other franchisees.
SEE4 SEE5 SEE6 SEE7
More trust in on franchisee than others. - Location.
- Large group. - Studied together.
- Deals more than other franchisees. SEE1
SEE4
Trust should grow.
- History with the headquarters.
SEE4 SEE6
25
SEE8 - Same situation. - Do they represent the interest of the
franchisees? SEE8 IndFa.
- The board also consists of franchisees.
- Important in crisis time. - radiate as a unit together.
Table 5.3 - Behaviors of other franchisees that promote or diminish trust in franchisees
It is now clear what the current trust in the franchisor and among the franchisees is. The following sections will look specifically at IndFa and trust. There are two analytical question associated with this topic namely: 2. What can a Formal Franchise Representation do to increase cognitive trust within a franchise system? And 3. In what way does the IndFa affect trust of the franchisees in the franchisor and trust among franchisees?
5.2.3 IndFa of DailyGoods
The interviews showed that the franchisees of DailyGoods are obliged to be affiliated with the IndFa. In addition to the franchisees who are on the board, a number of lawyers sit on the faculty board as well. This IndFa has the role of communicate between the franchisees and headquarters, and representing the interests of the franchisees.
Six respondents indicate that the positive aspect of having an IndFa is collectivity (SEE1, SEE2, SEE3, SEE4, SEE5 and SEE7). Words such as solidarity, unity, together we are strong and we are a club come back several times by several respondents. It is also indicated that the IndFa takes the work out off your hands when it comes to things that have to do with the law and that there is a clear core. “There must be a core that knows what has been going on and IndFa have this experience, which is good” (SEE7).
26 they are more aware of the decisions that are being taken, and can therefore make their own interests count more heavily. In addition, there are fewer and fewer franchisees with one or two stores and more franchisees with multiple stores” (SEE7). Table 5.4 presents the results of the positive and negative aspects of having an IndFa.
Positively and negatively aspects of having an IndFa
Positive Negative
SEE1 Solidarity. SEE1
SEE7
Power with a franchisee.
- Because a franchisee can have more stores and therefore more power. - Fewer and fewer franchisees with one
or two stores and more franchisees with multiple stores.
SEE2 Unity. SEE6
SEE7
Represent the interests of the franchisees.
SEE3 Together we are strong. SEE3 Obligation to be a member.
SEE4 We are a club.
SEE5 Takes the work off your hands when it comes to things that have to do with the law and that there is.
SEE7 There is a clear core with a lot of knowledge.
Table 5.4 – Positive and negative aspects of having an IndFa
5.2.4 Trust in the franchisor because of the IndFa
Of the eight respondents, six respondents say they have more trust in franchisor because of the IndFa. The first reason they give is that collective choices are made and that they are stronger together (SEE1, SEE2, SEE3, SEE4, SEE5 and SEE7). The IndFa ensures that the rules are followed and that the franchisor cannot simply make choices without consultation with the IndFa. This shows that there is more trust because there is control and this is in line with the complementarity perspective of Bijlsma-Frankema & Costa (2005). However, because of trust in the IndFa, the lack of trust in the franchisor may be perceived as less important, because the IndFa can provide effective counter-control.
One respondent indicates that they do not currently have any trust, because they do not represent the interests of the franchisees. This respondent indicates that s/he does have more trust because there is an IndFa. S/he adds the answer with: "The word ‘more’ is an important one. Because of the IndFa, I have trust. No. But ‘more’ trust. That is an essential addition” (SEE6).
5.2.5 Trust among franchisees because of the IndFa
27 through the fire for you. The IndFa brings all franchisees together.” (SEE6). The respondents' answers show that they have already gone through a lot together and that, together with the IndFa, they have accomplished many things, and because of this they trust each other. Only one respondent indicated this and all other respondents did not. However, if we look at the following paragraphs, it turns out that the IndFa is an important element for all the franchisees.
5.2.6 Achieved by having an IndFa
Three respondents give the same answer to the question what the IndFa has already done for them, namely: very much (SEE1, SEE3, SEE4). They say that the franchisees still have a good contract with a good revenue model because of the IndFa. The IndFa provides more communication between the franchisees and the franchisor (SEE1). In addition, the franchisees and the franchisor can go through one door again through the consultations that the IndFa has had with the headquarters (SEE5). Lastly, the IndFa has ensured that there is more freedom when it comes to ordering products (SEE8).
One respondent indicates that a lot has changed recently within the franchise system, and this had to be done first and then new things can be looked at again. An example are the working groups that have just been set up (SEE2). It also mentioned by one respondent that there should be less family feeling and that it may be wise to switch to a professional IndFa (SEE5). “The interests are so big. So maybe we should just have a daily management with chairman and secretary. But on the other hand, do you really want to change this? The board are still entrepreneurs. This is an ongoing discussion” (SEE5). There are enough meetings, say two respondents, but often no choice is given at the meeting itself. The decision has already been made and the project is already in the final phase (SEE6, SEE7).
5.2.7 The effects when there is no IndFa anymore
28 will do its own thing and make its own agreements with the headquarters. The big players get more power at the headquarters and this is to the disadvantage of the smaller players” (SEE4). 5.2.8 What an IndFa can do to increase cognitive trust
If the IndFa does not represent the interests of the franchisees, there will be less trust in the IndFa. Another important point is that the multi-unit franchisees have more power within the IndFa and this, again, may affect the fact that the IndFa must represent the interests of all franchisees. The points that are mentioned here about how an IndFa should function are also reflected in the seven core principles of Croonen and Bleeker (2019). To give a complete picture of the IndFa in this study, all core principles are discussed and the most important elements are mentioned in Table 5.5. Appendix B shows the extended Fair FAC management model including the specific principles for this case study.
1) The consistency principle
It is clear what the purpose of the IndFa is and how decisions are made. One point that also falls under the statutes of the IndFa is that franchisees are obliged to be members of the association. There are scheduled meetings, only these meetings are often in the same location that is not around for some franchisees and therefore they do not attend these meetings. The franchisor does not play a role in the IndFa. The IndFa is financed by the members themselves, because they pay a contribution for this.
2) The bias-suppression principle
There are meetings where only the members of the IndFa are present. The results indicate that multi-unit franchisees have more power to push through their own interests at IndFa. It also appears that members within the IndFa have more power, because they are closer to the decisions that are taken.
3) The accuracy principle
It appears that the members of the IndFa have been on the board for a long time and that they have a great deal of experience. Because of this experience, they are well aware of the contract that exists and there is also a board that knows how to compete with the franchisor in unstable periods. The board substantiates everything with figures and statistics. In times of lawsuits against the franchisor, the IndFa was better informed than the franchisor.
4) The correctability principle
The results indicate that the IndFa can update statutes with rules when they are not working or outdated. Often the IndFa has already fully sorted out the rules and incorporated them into the contract when these rules become mandatory. The adjustment of the contract is done in consultation with the headquarters.
5) The
representativeness principle
29
6) The ethicality principle
It turns out that IndFa never acted strange. From the book that has been read and the articles on the internet, it appears that the franchisor sometimes had arguments that turned out to be untrue.
7) The interactional principle
The results show that almost all respondents say that they cannot live without the IndFa and that they would not have liked to be in their shoes. Also, nothing is said about tensions between the franchisees and the board.
Table 5.5 – Most important principles
5.2.9 Conclusion
To come back to the second question, we can say that it is important that the IndFa represents the interest of the franchisees and that there are no franchisees who have more power over the IndFa. These points are part of the fair FAC management framework and, as stated in the article by Croonen and Bleeker (2019), the principles mentioned in the FAC management framework should be used to create more trust of the franchisees in the IndFa. This can subsequently create more trust in the franchise network.
The third question is about how the IndFa affect trust of the franchisees in the franchisor and the trust among franchisees. The respondents indicate that there is more trust in the franchisor when IndFa is involved. The franchisees feel that the IndFa protects them against the actions from the headquarters, because there is a good contract that the IndFa knows very well. This is in line with the complementarity perspective of Bijlsma-Frankema & Costa (2005), because there is more trust when there is more control. However, because of trust in the IndFa, the lack of trust in the franchisor may be perceived as less important, because the IndFa can provide effective counter-control.
It appears that the IndFa does not directly leads to more trust among franchisees (only one respondent indicates this). Therefore, we cannot be sure that the IndFa increase trust at the level of 'team level trust' (Croonen, 2017). However, the IndFa is an important party for all franchisees because it ensures collectivity and in unstable periods the IndFa is well aware of the developments. Without the IndFa the franchisees will stand alone and therefore, the franchisor can have more power and control and impose rules on the franchisees that they disagree with. It can be said that the IndFa is an important element in the franchise system for the franchisees.
30 addition to these variables, it is also interesting to look at the relationship between the variables control configurations and trust configurations. The questions that goes with this part can be reasoned in two directions: 4. What is the effect of the franchisees perceived control on the level of trust in the franchisor? And what is the effect of the level of trust in the franchisor and the perceived control of the franchisees?
5.3.1 Perceived control and the effect on trust in the franchisor (and vice versa)
As mentioned before, the contract that has been drawn up is largely determined by the IndFa and through the contract, the IdFa has created counter-control. This creates more trust in the franchisor. The contract does not contain things that are unreasonable or that they really disagree with. The regional manager checks whether the rules are followed from the headquarters (behavior control and output control), but this person does not immediately increase trust in the franchisor. However, when a good relationship has been built up with this regional manager and when more trust has been built up by meeting the requirements from the headquarters for a longer period, the control of the regional manager becomes less. Therefore, control is lower when the trust in the franchisees is higher and this is in line with the substitution perspective (Bijlsma-Frankema & Costa, 2005). Finally, the automated system is perceived as negative, because this constraint the franchisees in their flexibility and control of their own stock. There is not immediately less trust due to the automated systems, but not being transparent about the purchase prices does cause distrust among the franchisees.
31 5.3.2 Perceived control and the effect on trust among franchisees (and vice versa)
In addition to the effect of perceived control and trust in the franchisor, this section looks at the effect of perceived control and trust among franchisees. The questions that goes with this part can also be reasoned in two directions: 5. What is the effect of the franchisees’ perceived control on the level of trust among franchisees? And how is this relationship when we look at trust among franchisees and the control that the franchisor exercises?
There is complete trust in the franchisees and no control between the franchisees. Due to the control configurations of the franchisor, all franchisees must follow the same rules and there are no inequalities. It is important that there is a contract, because without that contract the franchisees have no trust because they are then 'alone' in the franchise system.
It turns out that the franchisees fully trust each other and that they also trust the IndFa. That trust is created by what they experienced together, like the acquisitions. In addition to the trust they have in each other, they also feel stronger together. As previously noted, if they disagree with certain choices, they first go to the IndFa and in this way they can jointly make a position. When control measures are taken from the franchisor, the IndFa will consider whether these measures are reasonable. So the trust among the franchisees and trust in the IndFa reduces the chance of unexpected control measures.
5.4 Control perceptions and trust perceptions of the franchisees
The last question brings the two variables control perception and trust perception together. The question related to this paragraph is: 6. What is the effect of control perceptions and trust perceptions on the behavior of franchisees?
5.4.1 EVLN typology
The franchisees' behavior will be explained based on the so-called 'exit-, voice-, loyalty- or neglect-perspective' (EVLN) typology (Hirschman, 1970). SEE8 has not answered this question and is therefore not included in Table 5.6.
32 also trust in the IndFa. All respondents indicate that when actions are taken by the franchisor, the franchisees contact the IndFa in order to reach a joint position. It turns out that almost all respondents have trust in franchisees, the IndFA and also in the franchisor. They perceive the control configurations as positive, and this can be explained by the fact that the IndFa played a major role in creating the contract. What draws attention is that they generally have trust and that they perceive the control configurations as moderate or good. This results in the same behavior by everyone, namely ‘voice’.
Table 5.6 – Overview of trust, perceived control and behavior
6. Conclusion, discussion and directions for future research
The concepts of trust and control have received a lot of attention in recent years and various articles show that the dynamics of control and trust are fundamental and important elements for organizational life (Bachmann, 2001; Frankema & Costa, 2005; Costa & Bijlsma-Frankema, 2007). The mixed motives in a franchise system can create control and trust problems because franchisees are more focused on their individual results and their own profitability, while franchisors usually strive for a maximum sales for its franchised and company-owned units (Combs & Ketchen, 2003). A challenge that arises for a franchisor is to build and maintain franchisee's trust in the organization of franchise system, so that this system can continue to function effectively (‘franchise system trust’, Croonen, 2010). Research shows that an IndFa has a positive influence on the franchise system (Lawrence & Kaufmann, 2011). Despite the importance of FFR (Cumberland, 2015; Croonen & Bleeker, 2019 for the FAC and and Lawrence & Kaufmann, 2011 for the IndFas) for effective network management, no one has investigated how associations actually function within a franchise system. The objective for this study was to bring the discussion around the trust-control nexus a step further by identifying How Formal Franchisee Representation affects the franchisees’ perceptions of the trust-control nexus in their franchise system.
Trust in franchisor
Trust in the franchisees
Trust in IndFa Perceived control
Franchisees’ behavior
SEE1 Moderate High Yes Good Voice
SEE2 Moderate High Yes Good Voice
SEE3 Moderate High Yes Good Voice
SEE4 High High Moderate Good Voice
SEE5 High High Yes Good Voice
SEE6 Moderate High Moderate Moderate Voice
33 6.1 Conclusion
Control activities are perceived as negative when this impedes franchisers in their activities and this negative thought can be explained by the lack of autonomy. Trust in the FFR is created when the FFR meets the elements of the Fair FAC management framework. In addition, control and trust both have an effect on the behavior of the franchisees. The behavior they exhibit when they have trust and positive perceive the control configurations is ‘voice’. Finally, we found that trust and control show a complementary perspective. We take a closer look at the complementary perspective and the Fair FAC management framework, because these results supplement current literature.
First of all, it can be concluded that a Formal Franchisee Representation (FFR) indeed form an important element in franchise systems, as discussed by Croonen and Bleeker (2019). The FFR ensures that the franchisees can form a team and jointly form a front against the franchisor. An addition to the article of Croonen and Bleeker (2019) is that there is more trust within a franchise system when there is counter-control created by the FFR. The franchisees feel that the FFR protects them against the actions from the headquarters, because there is a good contract that the FFR knows very well. The FFR ensures that there is more control on the side of the franchisees. So there is more trust in the franchise system when there is counter-control. This is in line with the complementarity perspective of Bijlsma-Frankema & Costa (2005) because there is more trust when there is more control. However, because of trust in the IndFa, the lack of trust in the franchisor may be perceived as less important, because the IndFa can provide effective counter-control.
As also indicated in the article of Croonen and Bleeker (2019), a FFR provides more trust in franchise systems, but the FFR must adhere to the seven core principles that have been identified in the fair FAC management framework. However, an important part of this framework that has an influence on trust of the franchisees, is to represent the interests of the franchisees and that there are no franchisees who have more power within the franchise system because they have multiple stores. But there is a complex situation, because before trust in the FFR arises, it is important to gain trust among the franchisees. The FRR must represent the interests of the franchisees and this is only possible if the franchisees also have trust in each other.
6.2 Discussion
