A qualitative analysis of the formation and maintenance of the franchisee/franchisor relationship

Abstract

A number of studies have examined the franchisee/franchisor relationship to investigate how to select the correct franchisee and, subsequently, how to maintain a productive franchisee/franchisor relationship. A literature review was therefore conducted on the selection process and the maintenance of the franchisee/ franchisor relationship. The literature suggests that a set of selection criteria to increase the chance of a successful franchisee/franchisor relationship has not been clearly identified. Therefore, this study's first objectives are: 1) the selection criteria that are used by the franchisor in selecting franchisees. Specifically, how RE/MAX South Africa selects local franchisees; and 2) how the franchisor manages the relationship to ensure compliance by the franchisees who have been selected. For this study, the selection criteria identified by Nevin (1999) and Olm et al. (1988) will serve as the basis of the first part of the study. The four selection criteria categories that have been identified by Nevin (1999) include: financial capability; experience and management skill; demographic characteristics; and attitude towards business. The literature reveals that the viewpoint of the franchisee is often overlooked by researchers, and yet the need of the franchisee should be ascertained to increase the chance of a successful franchisee/franchisor relationship. The literature has indicated that if the franchisors can keep the franchisees satisfied, the opportunity of franchise success and gaining franchisee compliance is much greater. In other words, if a franchisor can attain the correct people and know exactly what they want out of a franchise relationship, this will provide the franchise with a greater chance of success. The third objective of this research is, therefore, to analyse "“ from the perspective of both franchisees and their franchisor - how the relationship between them is maintained, and ultimately how the franchisor gains compliance from the franchisees. The model of Trust and Compliance (Davies, Lassar, Manolis, Prince and Winsor, 2011), which sets out the relationship between satisfaction, conflict, trust and compliance, was used to examine the franchisee/franchisor relationship. The practices of RE/MAX South Africa served as a case study for this research. Interviews were conducted, with the CEO and five franchisees, to identify the criteria used to select franchisees and gain a holistic understanding of the process of maintaining the relationship. The interview questions were structured using the Davies et al (2011) Model of Trust and Compliance. The data analysis technique that was used to analyse the interviews was thematic analysis. The findings firstly revealed that due to the fluid and low barriers to entry within the real estate industry, RE/MAX as an organisation does not have a standardised set of selection criteria but that an in-house guideline, called the RE/MAX Formula, was vital to this selection process. Secondly, in maintaining the franchisee/franchisor relationship and referring to the four factors of the trust and compliance model (Davies et al., 2011), the following key findings were noted. Firstly, the relationship between satisfaction and trust was primarily based around reciprocation within the franchisee/franchisor relationship. Secondly, various sources of conflict were identified, and it was noted that if conflict was not dealt with adequately, there was a breakdown of trust within the relationship. Finally, the building of trust was based on transparency, accountability, goal congruency and credibility. Recommendations for franchise management and further research were made.