Abstract

The focus of this study is the effectiveness of franchise systems’ strategic behavior. The last decade, the numbers of franchise systems and establishments have been growing rapidly. An important strategic attribute of a franchise system is its “degree of hardness” reflecting the system’s focus on maintaining uniformity of the units of the franchise system versus allowing for local adaptation. We argue that soft franchise systems are relatively successful in local adaptation, and hard systems in exploitation and strategic adaptation. As a result, we expect that, depending on environmental circumstances, hard and soft franchise systems will perform differently. An indicator of this performance is the development of the system’s size, measured by the number of outlets. Theoretical arguments from both the selection and adaptation perspective lead to a number of testable hypotheses.

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