The most popular ways of holding wealth include tangible investments such as real estate and gold, and intangible investments such as stocks and mutual funds. Five experiments revealed a tangibility bias whereby the tangibility of an investment or tangibility cues linked to an investment provides a false sense of financial safety. When focusing on avoiding risk, investors indicated a higher willingness to sell the stocks of companies that invest in intangible versus tangible assets (Study 1). The greater perceived permanence of tangible versus intangible assets appeared to underlie the difference in market risk assessments. Respondents judged the same asset as riskier when it was framed as intangible (Study 2), and differences in perceived permanence mediated this effect. Increasing perceived permanence independently of tangibility led to lower market risk assessments of commodity futures (Study 3). Tangibility prompts that leave asset tangibility unchanged were sufficient to lower risk judgments (studies 4 and 5). The differences in market risk assessments were not due to a general preference for tangible assets (Study 4) or differences in familiarity, complexity, or understanding of the asset types (studies 2 and 5).

Relations between channel member organizations are not the only relationships of importance in channels research. Significant relationships also exist between channel members and the brands that they represent and sell. Just as in consumer brand relationships, we find that downstream agents co-create the meaning of the brand with which they form relationships. However, unlike consumer brand relationship models that often conflate brand and company, treating them as one; we find that brand relationships in a B2B setting are independent and distinct from the relationships formed between downstream agents and the owners and/or managers of the brand. These particular brand relationships are complicated by the high switching costs associated with long term investments. The findings from a four-year multi-method research project, including ethnographic and survey data, point to the salience of these brand relationships and their importance to channel management. We find that perceived stability of the corporate channel partner, as well as perceptions of overlap between the corporate identity and that of the brand, are key antecedents of the downstream channel members' relationship with the corporation.

Franchisors seek to maximize firm value by managing investments both in tangible and intangible assets and in the mix of company and franchised outlets, yet little is known about how investors respond to shifts in these strategic decisions. Our goal is to assess the impact of these decisions on shareholder value within franchise systems through panel-data models. Specifically, we provide evidence on how investors in publicly traded franchises evaluate both the ownership structure and the strategic investment emphasis between intangible assets (e.g., brand) and tangible assets (e.g., plant and property). We find that an increase in the proportion of franchised units is negatively associated both with stock returns and idiosyncratic risk. In contrast, an increase in the emphasis on strategic investments in intangible assets is positively associated both with stock returns and idiosyncratic risk. Moreover, strategic investment emphasis moderates the strength of the effect of franchise ownership structure when firms franchise internationally. Overall, this research provides a novel empirical examination of franchising economics and has managerial implications for franchised channel structure. (C) 2017 New York University. Published by Elsevier Inc. All rights reserved.

This chapter explores, from the practitioner’s perspective, factors that have led to the growth of multi-unit franchising in the US market. Informants point to both operational and financial factors driving multi-unit growth. Semi-structured interviews with multi-unit franchisees informed three main themes related to financial benefits including Law of Averages, Margin Pressure and Capital Raising Potential. Financial benefits include the ability to absorb the financial stress of low-performing units, addressing decreasing industry margins via unit consolidation and the availability of capital to fund growth. In relation to operational benefits, informants highlighted the superior Economies of Scale, Operational Expertise and Incentive Structures in driving the growth of multi-unit operations. Operational benefits include the development of a corporate infrastructure providing scale advantages, higher operating performance resulting from higher reinvestment in assets and incentive structures that mimic the franchise relationships that can incentivize unit managers. Based on the findings the authors propose fruitful avenues for future work.

Excerpt] In this chapter, we explore the relationships that channel members have with the brands and companies they represent. We draw on ethnographic research to explore two primary identity tensions observed in one prominent form of distribution franchising. We also provide some preliminary quantitative work in support of our qualitative findings. We posit that channel members seek relationship partners that reinforce one of four unique identity types and their associated values. Tensions arise between franchisees and their corporate partners when conflicting roles surrounding these two key dimensions of identity are imposed by the organization.

This lead‐in to the Special Issue of Journal of Small Business Management based on the 25th International Society of Franchising's Annual Conference held at Boston in 2011, seeks to accomplish three goals. First, we provide a three‐part historical account of the evolution of this society founded in 1986 as narrated by Jim Brown (for the 1980s decade), Bob Robicheaux (for the 1990–2000 decade), and Gérard Cliquet (for the 2001–2011 years). Second, we reminisce and recognize various notable award winners and leaders of the International Society of Franchising (ISoF) over the past 25 conferences. We must note at the very outset that ISoF has been shaped and molded by the intellectual contributions of hundreds of scholars over the past quarter century. Space limitations prohibit us from recognizing each and every member individually, but omissions should not be construed as lack of recognition of the importance of those contributions. Finally, we present short synopses of the five papers included in this Special Issue.

Conflict within interorganizational relationships has been demonstrated to impair the mechanisms by which cooperation results in mutually beneficial outcomes for partners. The focus of this research is upon the landmark legal battle that occurred within the Meineke franchise organization in the 1990sa case that includes a potentially devastating demonstration of manifest conflict encompassing overtly opportunistic behavior, contentious class-action litigation, and a demoralizing reversal of a half-billon dollar verdict. In a study spanning a 10-year period within the Meineke organization, the effects of conflict on franchisee satisfaction and compliance are revealed to be long-lasting and substantial. Using path analysis and mediation tests, we examine both the immediate and long-term impacts of manifest conflict on channel partner perceptions. We find that episodes of manifest conflict can, through the increased salience of this conflict, have long-lasting negative impacts on franchisee satisfaction with the relationship and willingness to comply with franchisor regulations, even when the original conflict was remediated in a manner that yielded highly positive outcomes to the aggrieved parties. As a result, our study provides unique and valuable insights to the understanding of franchises and other forms of interorganizational relationships.

Utilizing theories of identity this article presents findings from a qualitative study regarding the significant role independent franchisee associations play within franchise systems. The data reveal that successful franchisee associations help manage the inherent tension that exists between cooperation and conflict in franchise relationships. A distinctive adaptive organizational identity provides an association the capability necessary to reframe its relationship with the franchisor as either combative or cooperative in response to changes in a franchisor's identity. Challenging the views of both franchisor stability and the dyadic form that franchisee–franchisor relationships assume, behavioral insight is provided into the actual functioning of franchise systems and new avenues are suggested for theory building in franchising.

This article examines some of the antecedents, processes, and effects of independent franchisee associations (IndFAs) and the reactions of franchisors to their organization. Specifically, we draw on various literatures to pose propositions relating to the following research questions: (a) Are there fundamental differences between associations whose focus is based on disagreements relating to strategic actions of the franchisor and those whose focus is perceived opportunistic behavior on the part of the franchisor? (b) Does the way these IndFAs are treated by the franchisor-after inception-affect members' identification with the group and/or franchisor? (c) Does the existence of a franchisee advisory council influence the willingness of a franchisor to legitimize an IndFA? (d) How does the size of the IndFA influence identification? We then present a conceptual model and use two illustrative examples from the business literature to explore our propositions.

Models of consumer store patronage generally employ the economic theory-based assumption that, all else being equal, consumers seek to minimize travel distance. Moreover, consistent with reference-dependent theory, findings from recent experimental research conducted in a controlled lab setting suggest that holding travel distance constant, the configuration of stops along multi-stop routes may also impact store-patronage decisions. However, given the use of simplified map configurations of multi-stop routes, along with the stimulus-based nature of the laboratory exercise, the external validity of these findings are open to question. Thus, the purpose of the three experiments in the present paper is to replicate and test the external validity of the reference-dependent predictions supported in previous research. In experiment one, consumer travel preferences are examined in a memory-based field experiment with results replicating those of earlier research. In experiment two, results are again replicated, but this time in a lab setting using realistic maps. Finally, experiment three provides a test of boundary conditions for the theory-consistent results of experiments one and two.

Retail expansion in a local market offers many challenges, and given the sensitivity of survival to location mistakes, it is imperative to develop site models that incorporate realistic impediments to that expansion. Small independent businesses or local area franchisees facing limits on all forms of capital rarely can open additional units without delays. In this paper, we test the benefit of using Kaufmann, Donthu and Brooks' (2000) multi-unit site selection model that incorporates the reality of delays in the opening of new stores as well as the recognition that local retail chains can face competition from many hard to identify sources. We use data from the actual introduction of a small set of stores in a major United States metropolitan market to estimate the potential for improvement over a pure sequential expansion strategy. When compared to the sequential strategy actually used by the retailer, we estimate that performance could have been improved by 15.5% if a model that anticipated the delays in opening the stores and competition from secondary sources would have been used. (C) 2007 by The Haworth Press, Inc. All rights reserved.

The authors define the “Big Middle” as the marketspace in which the bulk of retailers compete for the majority of customers and the preponderance of expenditures occur. Therefore, it is the space in which retailers aspire to exist in their quest for increased revenues, scale economies, and profits. An enduring concept, the Big Middle appears in any economy in which large-scale retailing has developed. In general merchandise retailing in the U.S., there have been three Big Middle subperiods, each defined by a distinct branch of the general merchandising tree; driven by geographic, technological, and socioeconomic changes; and dominated by preeminent retail chains. During the variety store subperiod, the F.W. Woolworth chain dominated. In the national-chain department store subperiod, Sears Roebuck and JCPenney were the primary retailers, and in the modern discounter subperiod, Wal-Mart, Kmart, and Target have emerged as leaders. The authors argue that the development of these subperiods and the success of their major retailers have depended on the efficient and effective flow of merchandise from suppliers to customers. Optimizing this flow always has entailed harnessing current technology, given the geographic and socioeconomic realities of the time. Currently, technology facilitates a comprehensive application of supply chain management, whereas previous technology only permitted a simplified version.

We predict that in evaluating alternative equidistant trip chains (i.e., the combining of multiple destinations into a single outing), consumers will choose trip chains where destinations are more clustered (i.e., closer to each other) and further from the origin over equidistant trip chains where destinations are less clustered but closer to the origin. This prediction is based on the assumptions of diminishing marginal sensitivity and reference-point dependence postulated by reference-dependent theory. Results of the first experiment provide support for this prediction. Results of the second experiment provide evidence that trip-chain configuration affects route choice via both facets of reference-dependent theory.

In this paper we examine the changes in ownership patterns of franchise systems as they mature. We compare the predictions made by three alternative theories within the context of the fast food industry. Signaling theory predicts that franchise systems will move toward a greater reliance on franchised outlets as systems mature, while resource acquisition theory (or as it is sometimes known, ownership redirection thesis) predicts a tendency in the opposite direction. A third theoretical perspective, tapered integration or plural forms, suggests a tendency toward maintaining a steady state of mixed distribution. Results indicate that although franchisors value the benefits of the mix of ownership types and do maintain that mix over time, there is some evidence of a greater tendency to permanently convert existing franchised outlets to company-owned outlets as fast food systems mature and gain greater access to resources.

Franchise contracts typically contain two forms of payment from franchisee to franchisor: the initial franchise fee and the ongoing royalty payment. Economic analysis and empirical examination yield two different predictions about how these payments should relate to one another. In this study using system level data, we find a positive relationship between the initial franchise fee and royalty rate when controlling for average outlet sales. This is consistent with the argument that the initial franchise fee is not a vehicle for extracting the surplus downstream rents left after royalty payments. Implications for franchise research and practice are discussed, as is the importance of regulatory changes that may make sales data available through franchise disclosure requirements.

Multiunit site selection models have long ignored the impact of time delays in store openings. To determine the effect of this limitation and to identify a solution, we compare three multiunit site selection procedures. The first is a sequential procedure that selects sites and then opens them one at a time. The second is a global approach that selects all future sites in a single decision process. Third, is a proposed anticipated-delay procedure that incorporates opening delays, firm planning horizons and discount rates in determining appropriate sites for multiunit retail systems. We further compare the results of these site-selection procedures to similar procedures that incorporate leakage to unidentified competitors when seeking locations for new outlets. We make the comparisons based upon discounted revenues by using a two-party, game-like simulation. The simulation estimates revenue results under the various alternatives while allowing for reactive and preemptive competitive store openings. Our results indicate that the anticipated-delay procedure incorporating leakage produces a significantly better revenue stream than either the standard sequential or global approach procedures.

Analysis of marketing channel structure in general, and the decision to franchise in particular, has assumed that the decision maker is seeking to maximize the long-term economic value of the firm. In this article, we consider an alternative accounting-based objective function. We explore some circumstances that might lead to the use of an accounting-based objective function, including the incentive structure faced by non-owner managers, the life cycle of the firm including an impending initial public offering, and data availability considerations. A simple model of franchisor performance is developed and several scenarios of franchise system expansion examined. Decisions to open franchised or company-owned outlets are compared using the competing objective functions.

In this essay, we explore the relationship between franchising and entrepreneurship in general, and their research domains in particular. We begin by categorizing the focus of various representative definitions of entrepreneurship as: (1) traits, (2) processes, or (3) activities, and adopt the view that identifying the unique research domain of entrepreneurship is a more worthwhile endeavor than attempting to reach definitional consensus. We subsequently discuss the differences between entrepreneurship in the manufacturing and retailing contexts, and the particular features of franchising as it relates to the study of retailing entrepreneurship. Specifically, four areas are examined: the franchisor’s role in creating an innovative concept, the franchisee’s role in bringing the franchisor’s concept to new markets, the franchisee’s acceptance of risk, and the special issues surrounding the pervasive practice of multi-unit franchising. We conclude with a brief discussion of the reasons for including the study of franchising, franchisors, and franchisees as integral areas within the distinctive domain of entrepreneurship research, and similarly exhort franchising researchers to explore the implications of their work for the study of entrepreneurship.