OPTIMIZING THE KNOWLEDGE ASSETS OF FRANCHISE ORGANIZATIONS: SYSTEMIC BENEFITS OF KNOWLEDGE SHARING BETWEEN FRANCHISORS AND FRANCHISEES

This study focuses on the dynamics of franchising as a business model. It is argued that a successful franchisee/franchisor relationship depends largely upon the collection, dissemination and exchange of both explicit and tacit knowledge. However, by their nature, franchise relationships are characterized by asymmetrical control since franchise contracts generally assign more power to the franchisor than the franchisees, thereby leaving franchisees open to potential exploitation by the franchisor (Croonen, 2010; Davies et al, 2011). Also, if franchisees lack confidence in their franchisor and franchise system, it may lead to negative franchisee behaviour, such as non-compliance with franchise regulations, or even exiting the franchise system entirely (Davies et al., 2011). This in turn, could lead to diminished system sales, and ultimately stagnation of that franchise system’s growth and profitability.

Therefore, franchisors and franchisees stand to benefit from an environment of mutual trust, since they both form the ‘two wheels of the same bicycle’ (Michael and Combs, 2008). Hence, one of the fulcrums of the study is the seminal work of Cumberland and Githens (2012), which articulated five major barriers to the sharing of tacit knowledge within franchise organisations; these being: Trust, Maturation, Communication, Competition and Culture.

Data was collected from national and international franchisors and franchisees by several methods over four years. The research instruments were: (a) a questionnaire consisting of thirty-six groups of questions to 54 franchisors who were members of the British Franchise Association (BFA); (b) a questionnaire consisting of thirty-six groups of questions to 77 franchisees who were also members of the BFA; (c) three focus groups (one with franchisees within an international franchise where the author themselves was a franchisee; the second with participants at a UK franchise fair; and the third with six questionnaire respondents who wanted to engage further in the research); (d) five individual interviews with two franchisors and three franchisees formed the major component of (e) the two supplementary case studies. Both case studies were knowledge rich service companies. Also, additionally the author given their position within their own franchise network, was able to be reflexive about the context in which knowledge is obtained and the extent to which it is shared in franchise organisations. Where appropriate iterative statistics were calculated to see to what extent the rich findings from this research can be generalised to the wider population of franchisors and franchisees.

Twenty-three outcomes have been derived from this research from which five important conclusions have been drawn. The first contribution makes a direct connection between franchisor and franchisee perspectives to the concept of franchisor power and control; while the second contribution addresses the duality of intra-system competition. The third contribution is on the systemic sharing of tacit knowledge, while the last two are theoretical contributions addressing the barriers to the sharing of tacit knowledge.

The author believes that these contributions and other research outcomes have helped create a deeper understanding of how knowledge can be managed and shared between franchisors and franchisees, as well as amongst the various franchisees themselves, for the benefit of the whole franchise community.

The managerial contribution concerns how franchise businesses can facilitate their growth and profitability through the better identification, harnessing and management of system-wide knowledge.