Making Franchising Work: A Framework Based on a Systematic Review

There is a large and fragmented literature that examines the nature of franchising. This paper aims to collect all the empirical evidence on the factors that make franchising work and to integrate this evidence in a framework. A narrative synthesis was performed of 126 peer-reviewed empirical journal articles. This review shows how the outcomes of franchising are determined by five major clusters of factors: ownership structure, business format design, contract design, behavior of the franchisor and the franchisee and their interaction, and the age and size of the system and its units. It identifies what franchisors and franchisees need to do to be successful and which evidence gaps and conflicting results remain. To yield better outcomes for both the franchisor and the franchisee, they should work on a recognizable brand name and a good working relationship; in addition, they should have suitable skills and attitudes as well as contractual exclusive territories. For further improvement of franchisee outcomes, high-quality franchisor support, decentralized decision-making, selection tools and fair contracts are essential. The effects of a high franchise proportion, active ownership, knowledge exchange and standardized operating instructions are contingent on other structural and contextual factors in the system. Conflicts and tying should be prevented. Hardly any research has been undertaken into which franchise designs are valued by customers. The authors have launched a research agenda for further research, from various theoretical perspectives, into the interactions between system elements, actors and contexts.