The Rational of Plural Forms: An Empirical Study at the Chain Level

Abstract

In this article, we investigate the relative performances of company-owned outlets vs. franchised outlets using an original database consisting of 150 units of a French chain. At first glance, the financial and quality performances of company-owned units are better than franchised units. However, this result is reversed when the particular characteristics of each unit are taken into account in the analysis. Furthermore, our result suggests that if company-owned units are less efficient than franchised units, all things being equal, they respond more quickly to change imposed by the franchisor leading to higher quality performances. This result highlights the fact that if franchisees have greater incentives to maximize return on sales and quality, they are also more independent of the franchisor and could therefore impede adaptation of the chain. Thus, franchised units may represent a drawback when the franchisor wants to implement a new strategy and may explain why plural forms (i.e. franchise mix) appear to be efficient organizational choices.