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Contents lists available at ScienceDirect
Journal of Business Research
journal homepage: www.elsevier.com/locate/jbusres
International franchising: A literature review and research agenda
Alexander Rosado-Serranoa,b,⁎, Justin Paula, Desislava Dikovac
aUniversity of Puerto Rico, San Juan, PR, 00931, USA
bInteramerican University of Puerto Rico, Arecibo, PR, 00614, USA
cInstitute for International Business, WU Wirtschaftsuniversität Wien, Vienna University of Economics and Business, Welthandelsplatz 1, D1, Floor 5, A-1020 Vienna,
Austria
ARTICLE INFO
Keywords:
International franchisingFranchise partnershipsFinancial performance
Partner relationship
Partnership selectionABSTRACT
Albeit scholars have conducted international franchising research for over two decades, our understanding of the
antecedents and outcomes of this particular type of internationalization is still limited. In this article, we sys-
tematically review the literature related to international franchising and create a road map of extant knowledge.
Through this review, we seek to provide a greater understanding of the use of theories, methodologies, and theemergent phenomenon of international franchise partnerships in multiple industries. Additionally, we detected
inconsistencies in paradigms that allowed us to o ffer suggestions for future research. Among the opportunities
for future research in the area of international franchising, constructs such as cultural sensitivity, institutional
distance, management motivation, network complexity and financial performance need further attention.
1. Introduction
Franchising has become a popular global format of doing business in
a number of industries. Franchising is a form of licensing whereby a
parent company, the franchiser (franchisor), grants an independent
entity, the franchisee, the right to do business in a prescribed manner
(Czinkota, Ronkainen, & Donath, 2004). Small and medium sized firms
have used this method to expand their business for over 100 years ( Dant
& Grünhagen, 2014; ITA, 2016). Researchers report that franchising has
become a popular way for domestic and international expansion of
firms from Australia ( Frazer, Merrilees, & Wright, 2007 ), Spain and
newly industrialized countries ( Alon & McKee, 1999 ) while interna-
tional franchising continues to be one of the most popular distribution
channel for U.S exports. Respectively, this business format has received
substantial academic attention.
Domestic and international franchising literatures have focused on
investigating two main questions: What are the franchising determinants?
(e.g., pro fit-seeking, market saturation, strong competition, etc.) ( Alon
& McKee, 1999; Elango, 2007; Madanoglu, Alon, & Shoham, 2017 )o r
explaining: Why domestic firms (do not) engage in international fran-
chising? (e.g., resource constraints, lack of foreign knowledge, limited
growth prospects, etc.). International franchising researchers have ex-
plored various constructs and variables through five different streams of
literature: Macro-Perspective, Micro-Perspective, Governance Mode, Fran-
chisor-Franchisee Relationship and Driving Forces . Despite some simila-
rities between domestic and international franchising literature, wefound three main signi ficant di fferences between them. The first dif-
ference is the legal context in which domestic franchising occurs. For
instance, in the United States & Australia, there are institutions such as
International Franchise Association (IFA) and Franchise Council of
Australia (FCA) that lobby on behalf of their constituents ( Atwell &
Buchan, 2014 ). Similarly, there is abundant legal & public doc-
umentation about franchise contracts and con flict resolutions. These
conditions place these countries as more stable and reliable for fran-chising because they provide the necessary regulatory framework for
resolving potential con flicts between a franchisor and a franchisee. This
scenario is di fferent when firms engage in international franchising.
Diverse legal traditions and law enforcement practices across countries,
the risk of intellectual property and trademark loss increase the level of
uncertainty in international franchising ( Kedia, Ackerman, & Justis,
1995 ). The second signi ficant di fference between domestic and inter-
national franchising concerns the level of control in the system. Do-
mestic franchisors typically aim for more control over their franchiseesthan international franchisors, which typically rely on a more colla-
borative relationship with their franchisees and allow more autonomy
(Paik & Choi, 2007 ). This trust-based relationship takes us to the third
significant di fference between domestic and international franchising.
The relatively common collaborative relationship between the inter-
national franchisor and franchisee suggests that knowledge and
learning become important components of the business model(Madanoglu
et al., 2017 ). These characteristics position international
franchising studies as an independent stream of literature, separate
https://doi.org/10.1016/j.jbusres.2017.12.049
Received 14 September 2017; Received in revised form 24 December 2017; Accepted 27 December 2017⁎Corresponding author at: University of Puerto Rico, Graduate School of Business Administration, P.O. Box 23332, San Juan, PR 00931-3332, USA.
E-mail addresses: alexander.rosado@upr.edu (A. Rosado-Serrano), justin.paul@upr.edu (J. Paul), desislava.dikova@wu.ac.at (D. Dikova).Journal of Business Research 85 (2018) 238–257
Available online 10 January 2018
0148-2963/ © 2017 Elsevier Inc. All rights reserved.
T

from both the domestic franchise literature and the broader entry-
modes literature.
International franchising involves more complex dynamics than
domestic franchising especially in respect to franchise network con-
figurations. While the key players in a franchise network are still the
franchisor and its franchisees, 21st century international franchisorsoperate within an inter-connected web of relationships, which they do
not always control such as market and institutional forces and political
constraints, among others. Internationally there is very limited adop-
tion of direct franchising due to the high monitoring costs involved. A
more common agreement is for instance master franchising, where a
third party is granted the rights to develop and monitor a particular
geographic market ( Alon, 2006). This type of contracts is very complex
and can require more local adaptation in aspects such as the calculationof royalty and franchise fees, among others ( Lafontaine & Oxley, 2004 ).
All this increases uncertainty and complicates performance evaluationin international franchising ( Buchan, 2014).
During the past two decades, there have been several review articles
of international franchising literature ( Combs, Ketchen, Shook, & Short,
2011; Combs, Ketchen, & Short, 2011; Combs, Michael, &Castrogiovanni, 2004b; Doherty & Quinn, 1999; Merrilees, 2014;
Welsh, Alon, & Falbe, 2006). For example, Combs et al. (2004b) con-
trasted agency theory and resource scarcity theory against three con-structs: franchise initiation, subsequent propensity to franchise and
franchise performance. Welsh et al. (2006) focused their review on
retail franchising in emerging markets. Combs et al. (2011) focused on
franchising antecedents, consequences, and factors moderating these
relationships. Combs et al. (2011) published another review the same
year focusing on the resource scarcity theory and agency theory toprovide directions for future research. Merrilees (2014) divided past
research into three chronological phases and provided a theoreticaloverview of the franchise literature. Albeit informative, these reviews
suffer from the same critical shortcoming: they only review a fraction of
the literature and theories applied, thus provide a valuable yet some-
what limited overview of the field. We seek to provide a more com-
prehensive and critical overview of the theories used in the area ofinternational franchising research published by 2016. Another critical
limitation of past reviews is the singular focus on franchisors' motives
for internationalization and the general lack of attention to the dy-
namics of franchise partnerships, despite their growing relevance in
international franchise practice and research. As suggested earlier, the
popularity of the collaborative type of relationships in international
franchising requires a closer and more critical attention to issues such
as the suitability of theories used to explain international franchise
dynamics and possible future research directions.Considering these shortcomings, first we draw a roadmap to sum-
marize the entire international franchising research and propose a
broader framework to guide scholars on what appears to deserve re-
search attention in international franchising. For this, we follow
Callahan (2014) 's review structure and use of the 4 Ws (What, Where,
Why and HoW). This article is the first to consolidate, review and in-
tegrate over 100 prior studies that examine di fferent aspects of inter-
national franchising. We believe our review is not only timely but ofcritical importance. It draws parallels between past studies based on the
specific international franchising topics studied, theories used, in-
dustries covered, methods applied and findings reported. Prior research
had mostly focused on international franchising and franchise part-
nerships as independent constructs. We consider them mutually in-
clusive and discuss possible future research avenues based on their
interdependence.
InFig. 1, we present the currently predominant one-dimensional
approach of international franchising research that focuses on the
franchisor perspective. We build on past research by integrating it in a
more dynamic behavioral theoretical model to address possibilities for
value creation and performance improvement of franchise systems. We
suggest that this can be achieved by introducing a two-dimensional,franchisor/franchisee
perspective. Through our detailed theoretical
discussion, we demonstrate that the most frequently used theories,Agency theory, Resource Based View and Transaction Cost, fit the
predominant practice of providing one-dimensional explanation of amultidimensional phenomenon. Our discussion of far less popular the-
ories, such as Stakeholder theory or Relationship theory, show that
further e fforts are needed in selecting theories that deal more with the
learning process in global franchise groups and address the need topresent a more dynamic picture of international franchising.
The structure of this paper is as following. The next section presents
information concerning the method used to identify the articles to be
included in our review. Later, we present a comprehensive overview ofinternational franchising research. Finally, we provide directions for
future research.
2. Review design & structure
2.1. Review design
Following prior reviews ( Canabal & White, 2008; Dikova &
Brouthers, 2016; Keupp & Gassmann, 2009; Shen, Puig, & Paul, 2017 )
we began our investigation by searching online databases such as Ebsco
Host, Jstor, Proquest, Google Scholar, Academia.edu, Research Gate.
net, Sage Journals, Science Direct, Springer Link, Taylor and Francis,
Governance mode
Antecedents
Micro-level
Macro-levelIns/g415tu/g415onal
context
Network size/
complexityGlobal
Franchise
Network
dynamicsValue
crea/g415on/
Performance
Entrepreneurial
orienta/g415onGlobal
Compe/g415/g415on
High control
Int. Franchise
mode
Low-control
Int. Franchise
mode Partner selec/g415on
Trust building
Social exchange
Co-development
Empowerment
Sa/g415sfac/g415onCultural
sensi/g415vity
Learning/
ExperienceIF propensity
Ins/g415tu/g415onal
context
Fig. 1. Model of International Franchising (IF) research.A. Rosado-Serrano et al. Journal of Business Research 85 (2018) 238–257
239

Emerald and Wiley to identify all research published on international
franchising and franchising partnerships. Our choice to review inter-
national franchising literature entailed three selection decisions: first,
we limited the review to journals that were included in the Associationof Business Schools (ABS) list, as shown in Table 1 andTable 2 . Second,
we limited the search to articles published between 1989 and 2016. Webegan from the year 1989 because the globalization that paved the way
for international franchising slowly created momentum in late 1980s
and hence we found that articles in this area published in the journals
we included in this review dates back to 1989. Third, the key words
used were international franchising, franchising partnerships, international
retail franchising, international franchise marketing, international franchisestrategy, franchise partnership, partnership selection, international fran-
chising alliances, franchising research, channel relationship & partner re-
lationship.
Overall, we identi fied and included in the review 112 articles, 93
articles focused on international franchising ( Table 1) and 19 articles
focused on international franchise partnerships ( Table 2).
The articles we reviewed were published in 44 di fferent academic
journals but five journals, the International Marketing Review, theJournal of Small Business Management, the Journal of Marketing
Channels, the International Journal of Hospitality Management and the
Journal of Services Marketing published about 30% of all of these pa-
pers. Marketing journals published 22% of the research in franchise
partnerships. Despite the predominance of marketing outlets, interna-
tional franchising research was also published in strategy and interna-
tional business (IB) journals. A systematic review method is well suited
for a critical survey of the extant research on international franchising.
Following Callahan (2014) , we thus use the 4 Ws (What, Where, Why
and HoW) to provide a better structure for this review.
2.2. Review structure
2.2.1. What do we know about international franchising?
InSection 3 titled “An overview ”, we present a general picture of
how scholars have approached international franchising research. We
discuss key predictors in international franchising and international
franchise partnerships studies.
Table 1
International Franchising Articles included in our sample.
Journals Articles References
Journal of Marketing Channels 7 Buchan, 2014; Merrilees, 2014; Dant & Grünhagen, 2014; Herndon, 2014; Ni & Alon, 2010; Ming-Sung
et al., 2007; Cheng et al., 2007
Journal of Business Venturing 7 Altinay et al., 2014a; Barthélemy, 2011; Dant & Nasr, 1998; Fladmoe-Lindquist, 1996; Lafontaine, 1999;Shane, 1996a, 1996b; Williams, 1999
Journal of Small Business Management 6 Elango, 2007; Elango & Fried, 1997; Dant et al., 2012; Mariz-Pérez & García-Álvarez, 2009; Perrigot et al.,
2013; Welsh et al., 2006
International Journal of Hospitality Management 5 Altinay, 2006; Heung et al., 2008; Alon et al., 2012; Sun & Lee, 2013; Brookes, 2014
International Marketing Review 5 Aydin & Kacker, 1990; Eroglu, 1992; Huszagh et al., 1992; Kedia et al., 1994; Quinn & Doherty, 2000;
Journal of International Management 3 Contractor & Kundu, 1998a; Ho ffman et al., 2016; Jell-Ojobor and Windsperger, 2014
Journal of Business Research 3 Doherty, 2009; Gassenheimer et al., 1996; Wu, 2015
Journal of Retailing 3 Aliouche & Schlentrich, 2011; Blut et al., 2011; Grace et al., 2013
Entrepreneurship Theory and Practice 3 Combs et al., 2011; Grewal et al., 2011; Meek et al., 2011
Journal of International Business Studies 3 Contractor & Kundu, 1998b; Erramilli et al., 2002; Sirmon & Lane, 2004
Strategic Management Journal 3 Chang & Rosenzweig, 2001; Szulanski & Jensen, 2006; Yin & Zajac, 2004
Journal of Management 3 Combs et al., 2004a; Combs et al., 2011; Combs & Ketchen, 2003
International Journal of Retail and Distribution 2 Doherty & Quinn, 1999; Forte & Carvalho, 2013
International J of Service Industry Management 2 Altinay & Wang, 2006; Doherty, 2007
Journal of International Marketing 2 Dow & Larimo, 2009; McIntyre & Huszagh, 1995
Journal of Consumer Marketing 2 Connell, 1999; Hadjimarcou & Barnes, 1998
The Service Industry Journal 2 Altinay & Miles, 2006; Baena & Cerviño, 2012
Multinational Business Review 2 Alon, 2006; Alon & McKee, 1999
Cornell Hospitality Quarterly 2 Lee, 2008; Miller, 2008
British Journal of Management 1 Skarmeas & Robson, 2008
Journal of Economics and Management Strategy 1 Kalnins, 2005
Columbia Journal of World Business 1 Walters & Toyne, 1989
Journal of Service Industry Management 1 Altinay, 2004
International Journal of Emerging Markets 1 Baena, 2012
Latin American Business Review 1 Baena & Cerviño, 2014
Asia Paci fic Journal of Management 1 Choo, 2005
European Journal of Marketing 1 Brookes & Roper, 2011
European Journal of Marketing Relationship 1 Doherty & Alexander, 2004
The International Executive 1 Kedia et al., 1995
Journal of Small Business and Enterprise Development 1 Doherty & Alexander, 2006
International J of the Economics of Business 1 Lafontaine, 2014
Journal of Economics and Management Strategy 1 Lafontaine & Oxley, 2004
Journal of Foodservice Business Research 1 Lee et al., 2010
Journal of Macromarketing 1 Alon, 2004
International Journal of Retail and Distribution
Management1 Quinn & Alexander, 2002
Management International Review 1 Burton et al., 2000
Marketing Management 1 Ryans et al., 1999
Management Science 1 Fladmoe-Lindquist & Jacque, 1995
Marketing Intelligence and Planning 1 Thompson & Stanton, 2010
International Small Business Journal 1 Paik & Choi, 2007
Journal of Global Marketing 1 Welsh, 1993
Journal of Marketing 1 Erramilli & Rao, 1993
Journal of Marketing Research 1 Kashyap et al., 2012
Journal of East West Business 1 Baena, 2009A. Rosado-Serrano et al.
Journal of Business Research 85 (2018) 238–257
240

2.2.2. Why should people need to know more about international
franchising?
Wefind that there is a need for more clarity in this field of research
and aim to uncover the untapped potential for studying international
franchising. As firms look for di fferent ways for international expansion
to leverage opportunities arising from globalization, better under-standing of this phenomenon will provide valuable insights for both
research and business practice. In Section 4 titled “Theoretical Under-
pinnings ”, we take inventory of all theories used in international fran-
chising research and present di fferent theoretical approaches used to
explain this phenomenon. We critically assess each approach to high-light the need for further attention to the theoretical underpinnings of
international franchising research.
2.2.3. Industries and methodologies in prior research (where andwhat
research has been done)
To address this question, in Section 5 we highlight the di fferent
contexts (industries) and the methods used in prior studies on inter-
national franchising to critically assess what speci fic role context has
played in past research and whether the chosen research methods havefacilitated su fficient understanding of the issues under investigation.
First, we start with Section 5.1 – Industries, where we highlight studies
for each industry. Then, in Section 5.2 – Methodologies used in prior
research, we highlight the most widely used methods in internationalfranchising studies.
2.2.4. How can this review help fill the gaps in literature and provide a
guide for future research?
InSection 6- Discussion and suggestions for future research, we
provide insights to guide future researchers in addressing literature
gaps and pursuing future research avenues that can strengthen our
understanding of international franchising. Thus, we address the re-
search question -How- systematically and scienti fically.3. An overview
The literature on international franchising dates to early 1990s.
Aydin and Kacker (1990) explored the attitudes of US franchisors to-
wards international markets. Eroglu (1992) developed a conceptual
model of the internationalization process of franchise systems. Kedia,
Ackerman, Bush, and Justis (1994) explored the determinants of in-
ternationalization of franchise operations by US Franchisors. Cheng,
Lin, Tu, and Wu (2007) describe the developmental process of inter-
national franchising systems. The authors proposed a stage model for
international franchise system development that included five stages
Stage 1: A creative business concept; Stage 2: Pre-international fran-chising –domestic franchise system development; Stage 3: Initial inter-
national franchising –experimental involvement. The third stage re-
quired a more systematic exploration of international opportunities
(i.e., active involvement stage) which bears similarity with other entry
mode and internationalization literature. Stage 4: Developed fran-
chising –active
involvement and Stage 5: Mature international fran-
chising (The final stage was the consideration of global opportunities
and long-term commitment to franchising in an international context(i.e., committed involvement stage)). Although this pattern might cor-
roborate with the findings of prior studies in the area of international
franchising, we cannot say it is a generalizable model for all the firms
that want to expand their franchise networks internationally. For ex-
ample, Pans Granier, a Spanish firm started its operation in 2010. It
ventured into first international franchising in 2013 to Miami, Florida,
United States and then expanded to Italy, Portugal and Britain by 2015
(Pans Granier, 2016 ). This case shows that the countries of geo-
graphical proximity such as Portugal & Italy were not the first option
for their expansion. The decision to expand to Miami was based on a
personal tie of this firm founder with this city ( Origen, 2016 ).
Albeit the clear majority of previous research places international
franchising as a gradual process with di fferent steps and time-periods,Table 2
Franchise Partnership articles.
Journals Articles References
Journal of Service Marketing 3 Altinay & Brookes, 2012; Brookes & Altinay, 2011; Altinay et al., 2014b
Journal of Small Business Management 2 López-Bayón & López-Fernández, 2016; Evanschitzky et al., 2016
The Service Industry Journal 2 Altinay & Okumus, 2010; Wang & Altinay, 2008
Academy of Management Review 1 Jeffries & Reed, 2000
Journal of Academy of Marketing Channels 1 Li & Dant, 1997
Journal of Business Research 1 Altinay et al., 2014a
Journal of Business Venturing 1 Davies et al., 2011
Journal of International Business Studies 1 Gerringer, 1991
Journal of International Management 1 Kedia & Lahiri, 2007
Journal of Marketing 1 Lusch & Brown, 1996
Environment and Planning A 1 Durand & Wrigley, 2009
European Journal of Marketing 1 Al-Khalifa & Peterson, 1999
International Small Business Journal 1 Falbe & Dandridge, 1992
Worldwide Hospitality and Tourism Themes 1 Vaishnav & Altinay, 2009
Tourism Management 1 Altinay et al., 2013
Table 3
Different streams of literature in international franchising.
Streams of literature Articles References
Micro-Perspective 9 Alon, 2006; Altinay & Wang, 2006; Aydin & Kacker, 1990; Eroglu, 1992; Huszagh et al., 1992; Alon, 2006; Baena & Cerviño, 2014;
Grewal et al., 2011; Fladmoe-Lindquist & Jacque, 1995
Macro- Perspective 7 Aliouche & Schlentrich, 2011; Alon, 2006; Alon & McKee, 1999; Aydin & Kacker, 1990; Baena, 2012; Eroglu, 1992; Huszagh et al.,
1992
Governance Mode 11 Aliouche & Schlentrich, 2011; Al-Khalifa & Peterson, 1999; Alon, 2006; Aydin & Kacker, 1990; Baena & Cerviño, 2012, 2014;
Brookes, 2014; Kalnins, 2005; Hadjimarcou & Barnes, 1998; Jell-Ojobor and Windsperger, 2014; Yin & Zajac, 2004
Franchisor -franchisee relationship 10 Al-Khalifa & Peterson, 1999; Altinay & Brookes, 2012; Altinay et al., 2014a, 2014b; Altinay & Okumus, 2010; Brookes & Altinay,2011; Brookes & Roper, 2011; Choo, 2005; Doherty, 2009; Kashyap et al., 2012
Driving forces 9 Alon, 2006; Altinay, 2006; Aydin & Kacker, 1990; Elango, 2007; Erramilli et al., 2002; Eroglu, 1992; Grewal et al., 2011; Huszaghet al., 1992; Fladmoe-Lindquist & Jacque, 1995A. Rosado-Serrano et al.
Journal of Business Research 85 (2018) 238–257
241

there are still many unanswered questions about the di fferent stages
and phases in international franchising. Prior research ( Elango, 2007;
Elango & Fried, 1997; Jell-Ojobor and Windsperger, 2014 ) identi fied
four di fferent perspectives of international franchising literature
(Table 3). First is the macro perspective, focused on the external en-
vironment in the host country, outside the firm control ( Aliouche &
Schlentrich, 2011; Alon, 2006; Alon & McKee, 1999; Aydin & Kacker,
1990; Baena, 2012; Eroglu, 1992; Huszagh, Huszagh, & McIntyre,
1992 ).Aliouche and Schlentrich (2011) proposed a global franchise
expansion model that underscored franchise systems' preferences for acombination of attractive markets and a stable political and economic
context such as those found in highly developed economies ( Dant &
Grünhagen, 2014 ). Important country factors to consider were the rule
of law, country stability, intellectual property (IP) protection, good GDP
growth, the consumer market size, and the potential to achieve an ac-
ceptable return on investment (ROI) ( Alon, 2006; Eroglu, 1992 ). The
second (micro-level) perspective zoomed in on the firm-speci fic factors
explaining franchisors' propensity to expand internationally. The in-
fluence of firm age, past experience, the size of the franchise system
(Alon, 2006; Altinay & Wang, 2006; Aydin & Kacker, 1990; Elango,
2007; Eroglu, 1992; Erramilli, Agarwal, & Dev, 2002; Fladmoe-
Lindquist & Jacque, 1995; Grewal, Iyer, Javalgi, & Radulovich, 2011;
Huszagh et al., 1992) and managers' desire to increase pro fits (Kedia
et al., 1994) were often examined. The third perspective focused on thegovernance mode, typically investigating the choice of company-oper-
ated (high-control) and franchisee-operated operations (low-control)
such as master franchise agreements and joint venture franchising. It is
worth noting that international franchising fails without the commit-
ment of managers, the commitment of employees in almost every de-
partment, dedicated resources, and patience. Hence, the fourth litera-
ture perspective focused on the cross-border franchisor-franchisee
relationship, which involved resolution of con flicts and management
challenges when engaging in international franchising ( Al-Khalifa &
Peterson, 1999; Altinay & Brookes, 2012; Altinay, Brookes, Madanoglu,& Aktas, 2014a, 2014b; Altinay & Okumus, 2010; Brookes & Altinay,
2011; Choo, 2005; Doherty, 2009 ). Below we provide a more detailed
account of the main findings of these di fferent literature streams. It is
important to notice that determinants discussed in Macro-level and
Micro-level research coincide with general determinants used to ex-
plain market entry but international franchise governance modes are
very speci fic to the franchise context.
3.1. Macro-level research
InTable 4 we highlight the main determinants derived from our
international franchising review. We found five macro-environmental
determinants in international franchising from a limited sample of
studies. Market conditions such as low economic growth, intense
competition, and unpredictable demand favor the establishment of
master international franchising ( Alon, 2006 ). Some studies show that
firms have a higher propensity to franchise internationally whenenvironmental uncertainty in the host country is high (i.e. high poli-
tical, economic and currency instability), in order to maintain flex-
ibility,
minimize investment risks and transaction costs, such as mon-
itoring costs, adaptation costs and switching costs ( Castrogiovanni,
Combs, & Justis, 2006; Contractor & Kundu, 1998a, 1998b; Fladmoe-Lindquist & Jacque, 1995 ). Geographic and cultural distances nega-
tively a ffect the franchisor's desired level of internationalization —a
franchisor might decide not to enter into a market that has high growth
potential due to substantial geographic or cultural distances ( Alon,
2006; Baena, 2012 ). Political, economic, and legal factors a ffect inter-
national franchising. Many legal and governmental barriers can ease or
increase risk while engaging in master franchise agreements in foreign
countries ( Alon, 2006; Buchan, 2014; Huszagh et al., 1992 ). Economic
factors such as domestic competitive pressures reduce domestic pro fits
and increase the desire to expand into international markets through
franchising ( Alon, 2006; Eroglu, 1992; Huszagh et al., 1992). Albeit
these determinants have been used by several scholars to explain in-ternational franchising phoenomena, there is limited empirical evi-
dence to support these claims.
3.2. Micro-level research
From a micro-level ( firm-level) perspective, seven articles con-
sidered the motivation of management to expand overseas a key de-
terminant in international franchising ( Alon, 2006; Aydin & Kacker,
1990; Baena & Cerviño, 2014; Eroglu, 1992; Fladmoe-Lindquist &Jacque, 1995; Grewal et al., 2011; Huszagh et al., 1992 ).Aydin and
Kacker (1990) indicated that successful domestic franchisors were re-
luctant to expand internationally when they lacked international ex-
perience and had limited financial resources. Grewal et al. (2011) found
that management capabilities and collective learning have a stronginfluence on international expansion through franchising. Reversely,
lack of experience, familiarity with the foreign market, and low risktolerance discouraged motivation to expand internationally ( Aydin &
Kacker, 1990; Eroglu, 1992 ). Similarly, international experience,
market knowledge, and growth opportunities facilitated franchisors'
decision to expand overseas ( Alon, 2006; Altinay & Wang, 2006; Aydin
& Kacker, 1990; Fladmoe-Lindquist & Jacque, 1995 ).Fladmoe-
Lindquist and Jacque (1995) indicated that general international ex-
perience created con fidence for firms to engage in international licen-
sing and franchising. Altinay and Wang (2006) considered that fran-
chisor and franchisee's prior experience could reduce the uncertaintyassociated with international franchise partnerships.
These determinants of international franchising, as shown in
Table 4, coincide with several antecedents and predictors of the High
Control governance modes such as company-owned stores and joint
ventures ( Aliouche & Schlentrich, 2011; Al-Khalifa & Peterson, 1999;
Baena & Cerviño, 2012;Kalnins, 2005; Yin & Zajac, 2004; Wu, 2015 )
and the choice of Low Control modes such as master franchising and
area development ( Aliouche & Schlentrich, 2011; Alon, 2006; Aydin &
Kacker, 1990; Baena & Cerviño, 2012, 2014; Jell-Ojobor and
Table 4
Determinants of international franchising.
Articles References
Macro- Environmental Determinants
Cultural Distance 6 Eroglu, 1992; Huszagh et al., 1992; Alon, 2006; Altinay & Wang, 2006; Baena & Cerviño, 2014; Fladmoe-Lindquist & Jacque, 1995
Political Context 4 Eroglu, 1992; Huszagh et al., 1992; Alon, 2006; Baena, 2012
Geographic Distance 4 Alon, 2006; Baena, 2012; Baena & Cerviño, 2014; Dant & Grünhagen, 2014
Economic Development 3 Eroglu, 1992; Huszagh et al., 1992; Alon, 2006
Legal Context 2 Huszagh et al., 1992; Buchan, 2014
Micro-level determinantsMotivation to Expand Overseas 7 Aydin & Kacker, 1990; Eroglu, 1992; Huszagh et al., 1992; Alon, 2006; Baena & Cerviño, 2014; Grewal et al., 2011; Fladmoe-Lindquist & Jacque, 1995
International Experience 4 Alon, 2006; Altinay & Wang, 2006; Aydin & Kacker, 1990; Fladmoe-Lindquist & Jacque, 1995A. Rosado-Serrano et al.
Journal of Business Research 85 (2018) 238–257
242

Windsperger, 2014; Yin & Zajac, 2004 ). Firms use Low Control modes
in countries when there are legal restrictions ( Baena & Cerviño, 2012 ),
unstable political markets ( Jell-Ojobor and Windsperger, 2014 )t o
name a few.
3.3. International franchise governance modes
Past research has identi fied three generic governance modes: direct
franchising, area development, and master franchising ( Alon, 2006;
Ryans, Lotz, & Kramp, 1999 ). Direct franchising involves selling a
business concept on an individual basis to franchisees in the host
country ( Baena & Cerviño, 2014 ) where franchisee manages resulting
network directly without the use of any intervening organization(Petersen & Welch, 2000 ). In area-development governance, franchisors
allow a defi ned territory to the franchisee in which they can develop
units ( Jell-Ojobor and Windsperger, 2014; Ni & Alon, 2010 ). In this
type of franchisee agreement, the franchisee is an independent com-pany licensed to establish, develop and manage individual units or
outlets, but, unlike master franchising, these are company-owned units
by the area developer rather than sub-franchised units ( Petersen &
Welch, 2000 ). Master franchising allows the franchisee to be both the
agent to the franchisor and principal to others (sub-franchisees) ( Ni &
Alon, 2010 ). Master franchise agreements are more complex than other
franchise modes of entry, because the master franchisor has the right to
operate franchise units and/or grant franchise rights to third parties
(Brookes, 2014; Brookes & Roper, 2011).
Table 5 highlights the di fferent governance (organizational) modes
and the research attention they have received in the past. We note that
there has been limited attention paid to explaining area development
and master franchising organizational modes. We identi fied three ar-
ticles examining plural modes of international franchising referring tothe coexistence of franchise outlets and company-owned outlets within
the same network ( Perrigot, López-Fernández, & Eroglu, 2013), three
on master franchising, and three on multi-unit franchising. The re-
maining five governance modes categories in international franchising
were present in two articles or less. In general, all franchise governancemodes share some similarities, for example, the amount and type of
knowledge transfer between the franchisor and the franchisee. How-
ever, di fferent franchise governance mode brings about di fferent com-
plexity that has evolved due to changes in international regulations offranchise systems across the world.
3.4. International franchise partnerships
The establishment of a franchise partnership involves a mutual and
careful evaluation between franchisors and franchisees to assess whe-
ther their partnership criteria are compatible. In the international
franchisee partner selection process, the parent firm, ideally takes into
account several factors such as governance choice, support mechan-isms, relationship management, required capabilities, and so forth(Merrilees, 2014 ). International franchisees or partners tend to possess
extensive and comprehensive local information and knowledge, such aslocal customers' preferences and national regulations ( Lee, 2008).
Working with a local partner is crucial because accessing local marketknowledge accelerates the process of integrating of the transnational
retailer within local networks and improves the bargaining position
with the local government and suppliers ( Durand & Wrigley, 2009).
Altinay and Okumus (2010) developed a three-stage model of
franchise-partner selection: initial lead, selection, and approval of a
partner. These stages tend to overlap and do not follow a simple, linear
sequence. Brookes
and Altinay (2011) provided an excellent literature
review of the selection criteria for foreign franchising partners. They
split the criteria into partner-related and task-related and discover that
partner-related criteria dominated most studies ( Altinay et al., 2014a,
2014b; Davies, Lassar, Manolis, Prince, & Winsor, 2011; Evanschitzky,Caemmerer, & Backhaus, 2016; Je ffries & Reed, 2000; López-Bayón &
López-Fernández, 2016; Vaishnav & Altinay, 2009; Wang & Altinay,2008 ). Numerous partner-related criteria refer to the quality of the
franchisee management team, their marketing skills, their financial
skills, and their local market knowledge ( Merrilees, 2014 ).Brookes and
Altinay (2011) discussed the following seven point criteria used in the
partner selection and negotiation process: ability to retain control
through ownership structure, perception of mutual value/risk, chem-
istry between individuals, similarity of organization vision/goals/va-
lues, local expertise, reputation/credibility and credit worthiness. One
of the most e fficient ways of reducing risk was to select franchisee
partners who will adopt a more system-wide perspective for their in-dividual activities and contribute to the attainment of system-wide
goals ( Altinay & Wang, 2006). Table 6 presents the di fferent approaches
in franchise partnership research.
International franchising partnerships face a particular set of chal-
lenges. Prior research suggets that cultural di fferences among partners
affect their relationship. Partners must proactively manage cultural
differences, demonstrate an awareness of and sensitivity to language
barriers, business practices, and political and legal di fferences, and
adapt accordingly to local market conditions. Cultural sensitivity, in
turn, enhances the development of a relationship of trust ( Altinay et al.,
2014b ). Trust has a positive impact on the long- term viability of the
franchise partnership as it minimizes possible con flicts ( Altinay et al.,
2014a; Altinay & Brookes, 2012 ).
Another factor that can a ffect international franchising partnerships
is relational contracting. In this type of contracting, relational normsgovern “acceptable behavior between exchange partners ”(Lusch &
Brown, 1996, p.19) and develop over time, based on social consensus ormutual understanding. Thus, relational contracting is long-term-or-
iented, reciprocal, and extends beyond mere buying and selling ( Li &
Dant, 1997 ). It establishes the basis for the development of shared,
long-term relational norms and behaviors between partners. Within a
given franchise system, franchisors generally exercise the same level of
relational contracting ( Evanschitzky et al., 2016 ). Some of the key ex-
change characteristics between partners in relational contracting in-volve flexibility, information exchange, and collegiate problem-solving
(Evanschitzky et al., 2016).
Vaishnav and Altinay (2009) used pro fitability as part of the partner
selection criteria. If international franchisors follow a poor selectionprocess and do not consider the financial strength and capabilities of
host country franchisors, they expose themselves to accepting a foreignpartner
that can a ffect the system's performance. On the other hand, if
the partner selection criteria considers the financial capabilities of the
foreign franchise partner, a capable foreign partner can bring positive
results to the franchise system. Cultural di fferences could lead to
compliances failures with local government regulations and can nega-tively a ffect local partner relationships; this in turn can strain financial
performance. Therefore, partner selection in international franchising isan indispensable component in the decision to expand the franchise
system. This process combines elements such as country selection andTable 5
Studies on governance modes in international franchising.
Organizational form Articles References
International Master
Franchising4 Alon, 2006; Brookes, 2014; Brookes &
Roper, 2011; Dant & Grünhagen, 2014
Plural forms of Entry 3 Alon, 2006; Combs et al., 2011; Perrigotet al., 2013
Master Franchising 3 Brookes & Altinay, 2011; Doherty &Quinn, 1999; Lafontaine, 2014
Multi-Unit Franchising 3 Dant & Grünhagen, 2014; Garg &Rasheed, 2003; Lafontaine, 2014
Area Development 2 Ni & Alon, 2010; Jell-Ojobor andWindsperger, 2014
Joint venture 2 Altinay, 2006; Doherty & Quinn, 1999
Direct Franchising 1 Doherty & Quinn, 1999A. Rosado-Serrano et al.
Journal of Business Research 85 (2018) 238–257
243

cultural di fferences ( Altinay & Brookes, 2012), host country managers
prior knowledge ( Altinay & Wang, 2006 ), and financial capabilities of
the foreign partner ( Sun & Lee, 2013 ). As franchisors successfully op-
timize the partner selection process, the posibility of success in inter-
national franchising increases.
4. Theoretical underppinings
Through our analysis, we identi fied different theoretical frame-
works/lenses used in international franchising research (see Table 7 ).
Of all papers we analyzed, eleven papers used agency theory, six used
transaction cost theory, and five used the resource-based view. Twenty-
three percent of the studies included in our review applied one of thethree theoretical frameworks. A small percentage of the remaining
papers apply theories such as Capability theory, Relationship theory,
Stakeholder theory and Governance mode theory, which we cover in
brief. The majority of the international franchise studies neither spe-
cifically mention any particular theoretical framework nor use sub-
jectively elements and concepts of various theories.
4.1. Agency theory
Agency Theory, also referred to as the “principal agent theory ”
(Alon, Ni, & Wang, 2012 ) suggests that an agency relationship exists
between a franchisor (the principal) and the franchisee (the agent).
Parties in this relationship may have divergent goals and agency costs
rise along with the risk of opportunism. Franchisees can act as in-
dependent entrepreneurs and engage in opportunistic behaviors(Brickley & Dark, 1987 ) that enhance their unit ( Caves & Murphy,
1976 ) but not that of the overall franchise system ( Hoffman, Munemo,
& Watson, 2016 ). Principals can reduce agency costs and opportunism
through direct observation and monitoring or through a system ofaligned incentives ( Alon, 2006). Managers (agents) of company-owned
units are less motivated to perform e fficiently than owners of franchiseunits because much of their compensation is a fixed salary ( Fladmoe-
Lindquist, 1996 ).
Agency problems arise from behavioral uncertainty, caused by po-
tential shirking and free riding especially when market conditions are
difficult to predict (e.g., generally speaking this is typical for most
foreign-market conditions) and information asymmetry is high(Doherty & Quinn, 1999 ). Agency costs are typically reduced by in-
creasing monitoring and/or creating stronger incentives for the fran-chise network partners (usually at the expense of higher monitoring
costs). Agency theory has proven particularly useful for studying fran-
chising as a business form in the international context, with research
showing that franchise companies tend to increase their proportion of
franchised outlets as they become more international ( Hoffman et al.,
2016 ). Agency theory holds that managers tend to underperform in
their duties when their salary is fixed, leading to higher monitoring
costs for firms. The general idea propelled in literature is that lower-
control governance modes may mitigate agency problems. Garg and
Rasheed (2003) argued that in the international context, master fran-
chising
addresses agency problems —such as bonding, adverse selec-
tion, information flow, shirking, ineffi cient risk-bearing, free-riding,
and quasi-rent appropriation —more e ffectively than single-unit fran-
chising does. The intuitive nature of this argument partially explains
the popularity of agency theory in the past literature, albeit it overlooks
critical issues such as the role of context (e.g. cultural and institutional
environment in the host location) and its impact on agency-cost re-
duction. Furthermore, the diversity of international context and the
receptiveness of both franchise parties to learning, cooperation and
joint-asset development can also exert and e ffect on behavioral un-
certainty and agency costs.
4.2. Resource-based view theory
Resource-based view (RBV) and the related organizational cap-
abilities theory and resource scarcity theory, argue that firms franchiseTable 6
Franchise partnership approaches in studies.
Franchise Partnership Approaches Articles References
Franchise Partner Selection 7 Altinay, 2006; Altinay & Brookes, 2012; Brookes, 2014; Brookes & Altinay, 2011; Doherty, 2007, 2009; Thompson & Stanton, 2010
Franchise Partnership 4 Altinay & Brookes, 2012; Altinay & Wang, 2006; Doherty, 2007; Grewal et al., 2011
Task-Partner Related Criteria 2 Altinay, 2006; Brookes & Altinay, 2011
Franchise Relationships 2 Davies et al., 2011; Doherty & Alexander, 2004
Partner Empowerment 1 López-Bayón & López-Fernández, 2016
Relationship Development 1 Altinay et al., 2014a
Master Franchise Partnership 1 Brookes & Altinay, 2011
Table 7
Theories used in international franchising articles.
Theory Articles References
Agency Theory 13 Garg & Rasheed, 2003; Alon et al., 2012; Fladmoe-Lindquist, 1996; Altinay & Wang, 2006; Baena & Cerviño, 2012; Baena &
Cerviño, 2014; Choo, 2005; Combs & Ketchen, 2003; Doherty & Quinn, 1999; Garg & Rasheed, 2003; Kashyap et al., 2012; Jell-Ojobor and Windsperger, 2014; Ni & Alon, 2010
Transaction Cost Theory 6 Alon, 2006; Altinay & Brookes, 2012; Baena, 2012; Baena & Cerviño, 2014; Ho ffman et al., 2016; Jell-Ojobor and Windsperger,
2014
Resource Based View 5 Alon, 2006; Fladmoe-Lindquist, 1996; Altinay & Wang, 2006; Jell-Ojobor and Windsperger, 2014; Mariz-Pérez & García-Álvarez,2009
Power Dependence Theory 3 Altinay & Brookes, 2012; Altinay et al., 2014b; Altinay et al., 2014a
Organizational Capability Theory 2 Merrilees, 2014; Jell-Ojobor and Windsperger, 2014
Stakeholder Theory 2 Altinay & Miles, 2006; Merrilees, 2014
Property Rights Theory 1 Jell-Ojobor and Windsperger, 2014
Strategy Based Theory 1 Alon, 2006
Social Exchange Theory 1 Altinay et al., 2014b
Relational Exchange Theory 1 Davies et al., 2011
Stage Model Theory 1 Ming-Sung et al., 2007
Theory of the Firm 1 Huszagh et al., 1992
Signaling Theory 1 Baena & Cerviño, 2012A. Rosado-Serrano et al.
Journal of Business Research 85 (2018) 238–257
244

to exploit rare and valuable resources abroad, to access scarce re-
sources, especially capital and managerial resources, and to expand
rapidly ( Alon & McKee, 1999 ). According to the RBV, a firm possesses a
unique set of resources, some of which form the basis of capabilities, orthe capacity to deploy resources e fficiently or e ffectively, in ways that
are often di fficult for other firms to imitate ( Hoffman et al., 2016). The
types of resources and capabilities, needed in general for successful
internationalization, include international experience, size, perfor-
mance, and technology, among others ( Erramilli & Rao, 1993). These
resources can also be the main drivers of an international franchisor'scompetitive advantage and value-creation in a host country ( Jell-
Ojobor and Windsperger, 2014 ). Resources and capabilities that create
competitive advantages are often embedded in the franchisor so codi-
fication and transfer of such assets across national borders is di fficult.
Alon (2006) examined the decision to use master franchising from
the resource-based perspective and concluded that franchisors that
were small, with obscure brand names, few resources, and little
knowledge of international operations may prefer externalizing inter-
national expansion to a master-franchisor. Fladmoe-Lindquist (1996)
developed a conceptual framework for international franchising basedon both resource-based and agency theories. This framework was
contingent on the capabilities to process information for the creation of
knowledge. These capabilities were the basis for the evolution of new
franchise strategies for an international franchisor. Jell-Ojobor and
Windsperger, 2014 use the resource- based view and organizational
capabilities theory to explain the governance mode in international
franchising and concluded that an appropriate codi fication and transfer
of know-how and assets across the firm's boundaries and between the
franchisor and its local partners, determined the competitive advantage
of the system.
Specifically, in the context of studies examining franchise govern-
ance modes, we have noticed a predominant focus on the issue of
control over the franchise network, which is not a primary concern forRBV or the other related theories. For example, master franchising
exerts less control, followed by area development, joint venture fran-
chising and wholly-owned subsidiary which has the highest control
over the network. It is naturally important to investigate the problem of
safeguarding unique resources and capabilities; however, this approach
also leads to a one-dimensional (limited) use of RBV. What remains
underexplored is the focus on the speci fic role of franchising partners
and their set of unique resources and capabilities, which can furtheradvance our knowledge on how to enhance the overall competitiveness
of the global franchise network and increase its ability to adapt locally.
4.3. Transaction cost theory
Transaction cost theory ( Williamson, 1975 ) views companies as
efficient agents who subcontract activities to external agents ( Coase,
1937 ) who are able to provide them at less cost in comparison to per-
forming in-house. It posits that firms choose to internalize or ex-
ternalize exchange relationships based primarily on costs incurred
during the exchange process ( Baena & Cerviño, 2014; Hennart, 2000 ).
Because these exchanges occur between foreign agents, country-levelandfirm-level factors can constrain the international franchise expan-
sion. The franchisor's choice of governance mode is central in this re-search, and it depends on the level of uncertainty (external and beha-
vioral) and the transaction-speci fic
investments (assets) involved.
Environmental uncertainty for example requires local responsivenessand adaptation of the franchise business model to the speci fics of the
local environment but it also reduces the ability of the franchisor to
evaluate the political, economic and sociocultural context of its op-
eration ( Jell-Ojobor and Windsperger, 2014 ). By transferring some
controlling rights to a local partner (e.g. by choosing a lower-controlfranchise governance mode), franchisors reduce some of the challenges
arising from environmental uncertainty. However, opting for a lower-
control franchise model exposes the franchisor to the other type(behavioral) uncertainty, which can lead to elevated monitoring costsand require management by introducing stimuli such as partner-em-
powerment and goal-alignment.
Baena and Cerviño (2014) found that from the country-level per-
spective, political instability discourages the willingness to enter those
markets because of the high business risk. Furthermore, they report that
firms preferred adopting a franchising model that allows the transfer of
responsibilities concerning business management to local partners;however, the transfer of management skills to partner firms in countries
that were culturally dissimilar involved higher transaction costs. Whentransaction-speci fic assets are involved in the transfer (e.g., equipment
and facilities speci fic to the partnership and the transaction), and de-
pending on the (a)symmetry between local partner and the franchisor,
the latter would choose either lower or higher-control franchise gov-
ernance modes ( Jell-Ojobor and Windsperger, 2014 ). As is the case with
Agency theory, despite the popularity of TCE its application is limitedin the context of international franchising mostly because of the focus
on cost-reduction, mitigation of agency problems and the general of
assumption of imminent opportunistic behavior by potential fran-
chisees (which we consider an exaggerated and outdated concept in
modern international business). Going beyond examination of main
constructs of the theory (behavioral and external uncertainty) to in-
clude contemporary issues in international franchising such as co-de-
velopment of franchise-network-speci fic assets, managing network dy-
namics and local market responsiveness versus the extent of desiredstandardization may be problematic as exclusive cost-optimization is
unlikely to be a key concern in any of these cases.
4.4. Other theories
The Relationship theory explains the initial partner-selection pro-
cess and contextualizes business-to-business relationships by focusing
on the importance of trust ( Doherty & Alexander, 2004). The selection
and management of distribution partners has always been important ininternational marketing literature. Franchise partners appreciate re-
lationships built on trust, communication, and mutual support rather
than on the threat of negative consequences in case of contract-breach
(Merrilees, 2014). Doherty and Alexander (2006) extend this theory
from the perspective of power and control; franchisors use a blend offranchise contract, support mechanisms, franchise partner selection,
and the franchise relationship to exert control over their international
franchise networks.
Stakeholder theory provides a benchmark reference to examine the
decision-making process in international franchising agreements
(Altinay & Miles, 2006 ). The application of this theory has been to
explore the implicit contracts that exist at the identi fication and se-
lection stages of franchising. Altinay and Miles (2006) empathize
through the stakeholder analysis the importance of managing culturalincompatibility between potential business partners and the franchisor
and throughout the entire franchising network.
The Governance mode theory explains how franchise- firms operate
in foreign markets based on the allocation of ownership and decision
rights between the franchisor and its partners ( Jell-Ojobor and
Windsperger, 2014). Among all governance modes in internationalfranchising, wholly-owned subsidiary, joint franchise venture, area
development, and master franchising have been the most widely re-
searched. Master international franchising is a unique form of govern-
ance because it involves managing agents (the master and its sub-
franchisees) at arm's length, transferring intangible and valuable assets
(namely the brand and the business format of the franchisor) to theagents, and enabling the master to possess the power and skills of a
franchisor ( Alon, 2006 ).
We
believe that the greatest limitation of most theories applied to
international franchising is the lack of clarity in explaining the com-
plex dynamics that occur in global franchise networks. Agency theory,
resource based view and transaction cost are one-dimensionalA. Rosado-Serrano et al. Journal of Business Research 85 (2018) 238–257
245

attempts to explain a multidimensional phenomenon; even if ex-
tended, they cannot present a comprehensive and dynamic picture of
international franchising. E fforts have been done in introducing other
theories, but they have come short in the operationalization of con-structs (e.g., partner-selection process using relationship theory).
Further e fforts are needed in selecting theories that deal more with the
learning process in global franchise groups rather than focusing on
cost-reduction or agency issues. In addition, we call for theory de-
velopment that adequately addresses the role of national and supra-
national institutions and global competition. Moreover, future re-
search should consider theoretical approaches that allow the
examination of a complex set of issues in international franchising
such as constraints in developing franchising relationships (e.g., cul-
tural, linguistic, institutional to name only a few), trust-building, and
franchise-system perf ormance evaluation.
5. Where and what research has been done
5.1. Industries
About 60% of the articles in our review did not report any speci fic
industry scope. This high percentage demonstrates there is a gap in
industry studies. As reported in Tables 8 , 17 articles on international
franchising compared di fferent industries. Among the single industry
studies, nine articles focused on international retail industry, nine ar-
ticles on the restaurant and food service industry, six articles on the
fashion and clothing industry, and three focused on service industries.
Sun and Lee (2013) explored the performance and expansion of U.S.
based publicly traded firms in the restaurant industry. They found that
mix-type restaurants were more likely to expand operations to inter-
national markets than full-service restaurants. Food service industry
studies focus on international system performance ( Gassenheimer,
Baucus, & Baucus, 1996; Kalnins, 2005; Ni & Alon, 2010; Sun & Lee,2013 ),flexibility and adaptation ( Lee, 2008; Paik & Choi, 2007; Yin &
Zajac, 2004 ), partner selection ( Hadjimarcou & Barnes, 1998 ), and the
role of language and culture ( Miller, 2008).
Alon et al. (2012) examined the determinants for hotel chain ex-
pansion through international franchising. They found that franchising
provides hotel companies the potential to overcome many of the cul-
tural, linguistic, technical, legal, and employment problems commonly
associated with internationalization. Hotel industry studies deal speci-
fically with cultural sensitivity and diversity ( Altinay, 2004, 2007;
Altinay & Brookes, 2012; Heung, Zhang, & Jiang, 2008 ), the possession
(or lack) of prior knowledge ( Altinay & Wang, 2006), and high capital
investment ( Alon et al., 2012 ). We note that the findings in these stu-
dies may not be generalizable to other franchise industries ( Altinay &
Brookes, 2012; Altinay & Wang, 2006 ). Franchise research in the
fashion and clothing industry is limited to studies on retail operationssuch as Marks & Spencer and Tie Rack ( Doherty & Alexander, 2006 ),
while more exclusive fashion brands like Louis Vuitton, have receivedfar less attention speci fically focusing on the importance of geographic
location choice ( Paul & Feroul, 2010 ).Burt, Dawson, and Sparks (2003) focused on the causes for failed
internationalization e fforts in the retail industry and grouped their
findings into four categories. The first category was market failure re-
lated to the risk and stability of the foreign market. The second was
competitive failure based on poorer than average market performance.The
third was operational failure due to an inability to adapt and
transfer marketing and operating routines to the foreign market. The
fourth category was business failure due to di fficulties within the home
market. Furthermore, while technology-based products (includingelectronic goods or cars) were similar across the globe, foodstu ffso r
cosmetics were directly in fluenced by national culture. Retailers, who
manage to adequately modify their product o fferings, pricing strategies,
and other marketing features to meet local speci fic requirements serve
better these markets (developed or emerging) than retailers who do not
(Walters & Toyne, 1989).
Several papers related to international franchising compared dif-
ferent industries. For instance, Altinay (2006) explored the complexity
of partner selection between USA- and UK-based franchises in 75 dif-ferent industries and reported that the franchisor employed both
partner and task related criteria to select potential franchisees. The
process was a multidimensional organizational activity that involved
human dynamics. Aliouche and Schlentrich (2011) explored how a firm
achieved market penetration and market propinquity through a mod-ified gravity model. They found that market propinquity facilitates the
flow of franchises between nations. López-Bayón and López-Fernández
(2016) explored the speci fic elements that a ffected disputes between
franchisor and franchisees through a survey of 163 di fferent franchise
chains across many industries. Their results showed that delegating
decision rights on local advertising personnel reduced early termina-
tions, while delegation of pricing increased them regardless of the size
of the franchising system.
According to Kaufmann and Dant (1999) , franchising is increasingly
popular in nontraditional US sectors such as telecommunications (e.g.,
franchise systems of National Telecommunications of Bloom field, NJ;
Voice-Tel Enterprises of Cleveland, OH), financial planning, business
consulting, and entrepreneurial advising (e.g., franchise systems of
Creative Asset Management of Iselin, NJ; International Mergers & Ac-
quisitions out of Scottsdale, AZ; American Institute of Small Business of
Minneapolis, MN), medical and dental products and services (e.g., fran-chise systems of Miracle Ear of Golden Valley, MN; Americare Dental
Centers USA of Phoenix, AZ; American Vision Centers of NY, NY), travel
and transportation services (e.g., franchise systems of Cruise Holidays
International of San Diego, CA; TPI Travel Services of Tampa, FL; Air
Brook Limousine of Rochelle Park, NJ). It is only logical to assume that
some or most of these franchise operations have internationalized. We
know much about McDonalds, Starbucks, Subway and Burger King's use
of international franchising to penetrate foreign markets. We also know
of hotel brands that have expanded into foreign markets using interna-
tional franchising (e.g., Marriot, Hilton, Best Western and Ramada).
Future studies should refocus from examining traditional franchise in-
dustries (e.g., retail, food, hospitality) to incorporate insights from the
internationalization of less traditional franchise sectors.Table 8
Industries in international franchising studies.
Industries Articles References
Comparative Industry Studies 17 Aliouche & Schlentrich, 2011; Alon, 2004; Altinay, 2006; Altinay et al., 2014a; Blut et al., 2011; Combs & Ketchen, 2003; Dant,
Grünhagen, & Windsperger, 2011; Elango, 2007; Eroglu, 1992; Grace et al., 2013; Ho ffman et al., 2016; Kashyap et al., 2012;
Kedia et al., 1994; López-Bayón & López-Fernández, 2016; Mariz-Pérez & García-Álvarez, 2009; Meek et al., 2011; Wu, 2015
Restaurant and Food Service Industry 9 Gassenheimer et al., 1996; Hadjimarcou & Barnes, 1998; Kalnins, 2005; Lee, 2008; Lee et al., 2010; Miller, 2008; Ni & Alon,2010; Paik & Choi, 2007; Sun & Lee, 2013; Yin & Zajac, 2004
International Retail 9 Doherty & Alexander, 2006; Doherty, 2007, 2009; Doherty & Quinn, 1999; Durand & Wrigley, 2009; Petersen & Welch, 2000;Quinn & Alexander, 2002; Thompson & Stanton, 2010; Welsh et al., 2006
Fashion and Clothing Industry 6 Choo, 2005; Doherty & Alexander, 2004; Doherty, 2007, 2009; Doherty & Alexander, 2006; Petersen & Welch, 2000
Service Industry 3 Brookes & Altinay, 2011; Davies et al., 2011; Fladmoe-Lindquist, 1996A. Rosado-Serrano et al.
Journal of Business Research 85 (2018) 238–257
246

5.2. Methodologies used in prior research
Eighteen articles, out of all studies reviewed, followed an empirical
analysis (quantitative research), eighteen articles followed the case
study (qualitative research) approach. Most of the authors used inter-
views (nine articles) and the rest ( five articles) chose document ana-
lysis. The case study approach was used to evaluate factors that infl u-
ence the relationship development between franchisors and franchisees
in international service franchise partnerships ( Altinay & Brookes,
2012; Brookes, 2014; Brookes & Altinay, 2011; Doherty, 2007, 2009 ).
Brookes and Altinay (2011) found that role performance, asset speci-
ficity, and cultural sensitivity in fluence relationship development in
franchise partnerships. They also found that the establishment of
franchise partnership involved a mutual and careful evaluation among
franchisors and franchisees. Vaishnav and Altinay (2009) used semi-
structured interviews to provide insight into the franchise-partner re-cruitment process. The partner selection process was described as a
multidimensional activity, which included an assessment of pro fit-
ability, brand name, operations support as decision-making criteria(Altinay & Wang, 2006; Doherty, 2007; Doherty & Alexander, 2004 ).
Doherty and Alexander (2004) concluded that franchise relationships
can be explained through the core bene fits that can be derived from a
more comprehensive marriage analogy. We believe that interviews arevaluable as they facilitate exploration, however the downside of most
qualitative studies is the limited generalizability of the findings.
Table 9 summarizes the research methods most commonly used.
Table 10 presents a summary of the methods, hypotheses, variables and
mainfindings of the quantitative articles.
Eighteen articles followed a quantitative empirical methodology.
Table 10 provides a detailed account of the methods employed, hy-
potheses tested, operationalization of variables and the reported find-
ings on international franchising. We provide a brief account of thisresearch, focused primarily on antecedents in international franchising(Alon et al., 2012; Baena, 2012; Ho ffman et al., 2016; Mariz-Pérez &
García-Álvarez, 2009; Ni & Alon, 2010 ).Baena (2012) found that
geographic distance, uncertainty avoidance, individualism, political
stability, corruption, gross domestic product, e fficiency of contract
enforcement, and nascent entrepreneurship can constrain the spread offranchising across emerging nations. The author used secondary data on
about 2836 outlets of 63 Spanish franchisor companies expanding in
emerging nations and used ordinary least squares regression. Hoffman
et al. (2016) used a sample of U.S. franchise firms and data from sec-
ondary sources to test determinants of the scope of franchise inter-
nationalization using a panel regression model. The study reported that
favorable business climate was a signi ficant predictor of the scope of
franchise operations. Alon et al. (2012) used Bayesian logistic regres-
sion to examine the decision to internationalize or not. The authorsreported that opposite to predictions, the decision to internationalizewas negatively related to firm size. Perrigot et al. (2013) also studied
the propensity to internationalize or not but used a Manova test tocompare group di fferences between purely domestic and inter-
nationalized franchise firms
originating from the USA and France. No
substantial di fferences across the two nationality firms were discovered
andfirm-ownership did not seem to stimulate internationalization.
Mariz-Pérez and García-Álvarez (2009) performed discriminant ana-
lysis to test the propensity to internationalize and found that franchisorexperience was not a signi ficant predictor but older franchisors were
more likely to expand internationally.
The methods we describe next were used less frequently in inter-
national franchising. Merrilees (2014) used a content analysis method
to review 10 speci fic articles and explore the evolution of the theory of
international franchising over a twenty-year period. Heung et al. (2008)
used mixed methodology. First, they combined two rounds of in-depth
interviews to general managers of 12 state-owned and international
franchised hotels in China. Second, they did a content analysis on the
qualitative data obtained from the interviews. Binh and Terry (2014)
used a content analysis from law journals, World Trade Organization(WTO), U.S. and Vietnamese government pages, among others. This
method showed an innovative approach of studying franchising from a
developing country. Coding analysis was used speci fically in studying
the hotel industry ( Altinay & Wang, 2006; Connell, 1999). Connell
(1999) open coded the text from open interviews, transcribed, cate-
gorized and synthesized the data. This approach enabled a comparativeanalysis of franchisers from the same industry but with di fferent in-
volvement in international franchising. Altinay and Wang (2006) also
used survey and document analysis to cross-classify variables, generate
themes and illustrate interrelationships.
6. Discussion and suggestions for future research
Following prior reviews ( Dikova & Brouthers, 2016; Paul & Benito,
2018 ) our objective was to review international franchising research
and derive an agenda for future research. Our study consolidates
knowledge in this area and highlights several ways to improve the
understanding of international franchising. We showed that a large
number of theories appear within the scope/purview of international
franchising, yet we still do not have a widely accepted theoretical fra-
mework that considers the relationship between franchise partners and
international franchise performance despite many studies examining
the link between international franchise expansion and firm perfor-
mance. The general understanding is that such international expansionyields positive performance bene fits because it allows firms to leverage
their internal resources across more markets ( Grewal et al., 2011).
Kalnins (2005) explored the performance of the franchise system based
Table 9
Widely used methods used in international franchising and partnership studies.
Method Articles References
Empirical 18 Alon et al., 2012; Altinay et al., 2014a; Altinay & Okumus, 2010; Baena, 2012; Barthélemy, 2011; Combs et al., 2004a; Dant & Nasr, 1998;
Hoffman et al., 2016; Kalnins, 2005; Lafontaine, 1999; Mariz-Pérez & García-Álvarez, 2009; Meek et al., 2011; Ni & Alon, 2010; Perrigot et al.,
2013; Petersen & Welch, 2000; Sun & Lee, 2013; Williams, 1999; Wu, 2015
Case Study 18 Altinay & Brookes, 2012; Altinay et al., 2014b; Altinay & Wang, 2006; Alon & McKee, 1999; Aliouche & Schlentrich, 2011; Brookes, 2014; Brookes& Altinay, 2011; Connell, 1999; Doherty, 2007, 2009; Doherty & Alexander, 2004, 2006 Elango, 2007; Forte & Carvalho, 2013; Hadjimarcou &Barnes, 1998; Lee, 2008; Miller, 2008; Ming-Sung et al., 2007
Interviews 9 Altinay, 2004, 2006; Altinay et al., 2014b; Altinay & Wang, 2006; Brookes & Altinay, 2011; Connell, 1999; Forte & Carvalho, 2013; Heung et al.,2008; Vaishnav & Altinay, 2009
Document Analysis 5 Altinay, 2004, 2006; Binh & Terry, 2014; Brookes & Altinay, 2011; Merrilees, 2014
Content Analysis 3 Brookes & Altinay, 2011; Heung et al., 2008; Kalnins, 2005
Mix Method 4 Altinay, 2004, 2006; Brookes & Altinay, 2011; Forte & Carvalho, 2013
Regression 4 Hoffman et al., 2016; Alon et al., 2012; Ni & Alon, 2010; Perrigot et al., 2013 .
Exploratory Study 2 Choo, 2005; Paik & Choi, 2007
Questionnaire 3 Alon et al., 2012; Altinay et al., 2014b; Lee et al., 2010
Coding Analysis 2 Altinay & Wang, 2006; Connell, 1999A. Rosado-Serrano et al.
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247

Table 10
Summary of quantitative methods and findings in international franchising studies.
Author Models &
EstimationMethodsDependent Variables Independent Variables Hypotheses Findings
Alon et al. (2012) Bayesian logisticregressionInternational Expansion (IE) is binary
FRratio = franchising fee/royalty rateDisper = US statesFexp = Years FranchisingUSscale = US unitsFranPer = franchise units/total unitsMulti = area development agreement existsH1: The greater the price bonding the hotel franchisorstipulates in its contracts, the more likely it will seekinternational franchiseesH2a: The greater the domestic geographical scope of thehotel franchisor, the more likely it will seek
international franchisees
H2b and H2c: The bigger (number of outlets) and olderthe hotel franchisor, the more likely it will seekinternational franchisees.H3: The greater the proportion of franchising in thehotel franchisor's system, the more likely it will seekinternational franchisees.H4: Hotel companies that use area development or sub-
franchisees contracts to expand are more likely to seek
international franchisees.decision to go international isnegatively related to size, whichcontradicts that more resourceshelp expansion.
Baena (2012) Ordinary leastsquares
OUTLETS = in foreign countriesFRANCHISOR = Spanish franchisors doingbusiness in each emerging country.
FRPENETR = the number of franchisors incertain emerging nations divided by the
number of franchisee outlets located in such
countriesGEODIST = kilometer distance betweenSpain and emerging country
CULTDIST = Hofstede (2001)Uncertainty avoidance = Hofstede (2001)Individualism = Hofstede (2001)Political Stability = data from IMF andTransparency International
Corruption = data from IMF andTransparency International
Lawsuit = Doing Business Index (WorldBank)
days in resolve dispute = Doing BusinessIndex (World Bank)
Cost of court fees = Doing Business Index(World Bank)
Risk aversion = Nascent EntrepreneurshipRate (NER) from GEM (GlobalEntrepreneurship Monitor)H1a: The expansion of franchising across emergingnations will be positively associated with highgeographical distance between the home and the hostcountry.H1b: The expansion of franchising across emerging
nations will be negatively associated with high
geographical distance between the home and the hostcountry.H2a: The expansion of franchising across emergingnations will be positively associated with highercultural distance between the home and the hostcountry.H2b: The expansion of franchising across emerging
nations will be negatively associated with higher
cultural distance between the home and the hostcountry.H3a: The expansion of franchising across emergingnations will be positively associated with nationalcultures possessing high uncertainty avoidance.H3b: The expansion of franchising across emergingnations will be positively associated with national
cultures possessing low uncertainty avoidance.
H4a: The expansion of franchising across emergingnations will be positively associated with nationalcultures possessing high individualism.H4b: The expansion of franchising across emergingnations will be positively associated with nationalcultures possessing low individualism.
H5a: The expansion of franchising across emerging
nations will be positively associated with countriespossessing high political stability.H5b: The expansion of franchising across emergingnations will be positively associated with countriespossessing low political stability.H6: The expansion of franchising across emergingnations will be positively associated with national
cultures possessing low transparency (high corruption).Observed variables are able to
constrain the spread of franchisingacross emerging nations
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Table 10 (continued )
Author Models &
Estimation
MethodsDependent Variables Independent Variables Hypotheses Findings
Barthélemy
(2011)One-way ANOVA Use of Franchising = number of franchiseoutlets/total outlets Local managerial inputsThreat of franchise opportunismSuccessful competitors use of franchisingChain SizeGeographic dispersionIndustry segmentsH1. There is a positive relationship between theimportance of local managerial inputs and the focalchain's use of franchising.H2. There is a negative relationship between the threatof franchisee opportunism and the focal chain's use of
franchising.
H3. There is a positive relationship between successfulcompetitors' use of franchising and the focal chain's useof franchising.H4. The relationship between local managerial inputsand the focal chain's use of franchising is more positivewhen successful competitors have a high proportion offranchised outlets.
H5. The relationship between the threat of franchisee
opportunism and the focal chain's use of franchising isless negative when successful competitors have a highproportion of franchised outlets.successful competitors' use offranchising explains variance in thefocal chain's use of franchisingbeyond what is explained by theimportance of local managerial
inputs and the threat of franchisee
opportunism
Dant and Nasr
(1998)Two-wayMANOVAFranchisees willingness to provide information tofranchisorsMeasured by:
1) Willingness2) Completeness3) Promptness4) Relevancy/usefulness5) Accuracy6) Market Information7) Directionality
Repeat versus non repeat industryAge of the relationshipLevel of competitionMulti-unit franchisingH1: Franchisees in repeat purchases industries providemore information to their franchisors than those in non-repeat industries.H2: Longer established franchisees provide more
information to their franchisors than their more recent
counterparts.H3: The level of competition faced by franchisees ispositively related to franchisees' provision ofinformation to their franchisors.H4: Multi-unit franchisees will provide moreinformation to their franchisors than their single-unit
counterparts.There is a positive relationship
between the age of the franchiserelationship and the franchisees'willingness to provide information
to franchisors.
Hoffman et al.
(2016)Panel Regression
modelFranchise expansion: (number of units planned fora particular country/urban population of country)from IFA Smartbrief
Voice and AccountabilityPolitical Stability and Absence of ViolenceGovernment E ffectivenessRegulatory QualityRule of LawControl of CorruptionCommunication infrastructure
All of this data was collected from the World
Bank's Worldwide Governance Indicatorsand the Doing Business Project.H1: A country's governance quality is positively relatedto franchise expansion into the countryH2a: Low levels of business entry regulations in a hostcountry will be positively related to franchise expansioninto the country.H2b: High levels of business entry regulations in a hostcountry will be negatively related to franchise
expansion into the county.
H3: A country's tax rate will be negatively related tofranchise expansion into the countryH4: A country's institutional communicationinfrastructure, as measured by its level of internetaccess, will be positively related to franchise expansioninto the country.H5a: According to the risk aversion hypothesis, the
2008 –09financial crisis will be negatively related to
franchise expansion into foreign markets.
H5b: According to the adaptation hypothesis, the2008 –09financial crisis will be positively related to
franchise expansion into foreign markets.Favorable political governance,country business climate areimportant predictors of foreignfirm's expansion into that country.
Kalnins (2005) Binary logit model Venture Survival.
It has three outcomes:1. If it has survived until the end of periodDevelopment Commitment Size.Two dimensions used to measure for 11countries: Commitment contracts (in $ Millions)
& Total UnitsTwo questions asked: Franchisors and franchisees
initially overestimate the potential
markets, but are willing to
negotiate contracts.
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Table 10 (continued )
Author Models &
Estimation
MethodsDependent Variables Independent Variables Hypotheses Findings
2. Level of investment still productive
3. Proportion of initial commitment at end1) Why development commitments of US fast food
franchisors tend to be so large relative to the actualnumber of units that survive?
2) Why the initial development commitment size
appears negatively related to important venture-
level outcomes?Large development commitments
are more likely the result ofoverestimation by franchisee
Mariz-Pérez and
García-Álvarez(2009)DiscriminantAnalysisESTABROAD1 = International0 = Domestic
Growth = % increase in # of outletsTY = Years FranchisingSize = Total outlets of chainYears firm did not franchiseSECTOREntry feesnumber of years started FranchisingDUR = contractual duration%FRAN = Franchise proportionH1: The lower the growth rate in the national marketand, therefore, the higher the saturation of the domesticmarket, the greater the possibility of finding the chain
adopting the decision to expand abroad.H2: Trademark value and chain reputation, measuredthrough the number of years the firm has been in
business, are expected to have a positive in fluence on
internationalization activity.H3: Trademark value and chain reputation, measuredthrough the total number of outlets of the chain, areexpected to have a positive in fluence on the decision to
internationalize activities.Franchisor expertise has nosignificant e ffect expansion
decision
Firms that had franchise for longer
periods would likely expand abroad
Ni and Alon
(2010)Semi-parametriclogistic regressionYes/No International Expansion (dichotomous)
FR ratio = Franchising fee/royalty rateLogAveTinv = Logarithm of average totalinvestment
Fexp: #of years franchisingFranper: franchise units/total unitslogUscale: log of # US unitsDomestic Saturation = 1- largest units/domestic units
Dispe: U.S States where is presentH1: The higher the level of the franchise fee to theroyalties bonding ratio, the more likely that thefranchisor will seek international franchisees.
H2: The higher the level of franchise investment that is
required, the more likely will that the franchisor willseek international franchisees.H3: The greater the franchising experience of thefranchisor, the more likely that the franchisor will seekinternational franchisees.H4: The greater the percentage of franchised outlets in
the company's system, the more likely that the
franchisor will seek international franchisees.H5: The greater the number of U.S. domestic outlets, themore likely the franchisor will seek internationalfranchisees.H6: The greater the dispersion of domestic outletsacross the United States, the more likely the franchisorwill seek international franchisees.
H7: The greater the level of saturation of the domestic
market, the more likely that the franchisor will seekinternational franchisees.Many variables are non-linear intheir e ffects
Effects of scale and investment are
curvilinear and concave
Parametric variables tend to be
linear
Perrigot et al.
(2013)Logistic regressionmodelInternationalization (INT)1 = International0 = Domestic
SIZE = Worldwide network sizeAGE = network ageDUR = contract duration (years)SEC = “not clearly de fined by author ”we
assume its sectorPCOW = percentage of company ownedoutletsH1: Brand-name recognition, as measured through thetotal number of outlets in the franchise network, exertsa positive in fluence on network internationalization.
H2a: Monitoring ability, as measured through networkage, exerts a positive in fluence on network
internationalization.H2b: Monitoring ability, as measured throughfranchising contract duration, exerts a positiveinfluence on network internationalization.
H3: The ability to transfer know-how, as measuredthrough the particular business industry (retailingversus services), exerts an in fluence on network
internationalization
H4: The percentage of company-owned outlets exerts aIntangible resources have a positive
impact on networkCompany-owned outlets have anegative impactDrivers of internationalization are
not found to be statistically
different in USA and France
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Table 10 (continued )
Author Models &
Estimation
MethodsDependent Variables Independent Variables Hypotheses Findings
significant and negative in fluence on network
internationalization.
Sun and Lee
(2013)Generalized LeastSquaresDegree of Internationalization (DOI) = dividingthe number of properties operated in foreigncountries by the total number of the firm's
properties Tobin q H: firm Tob QTobin q I: Industry Tob QROA H: Firm ROAROA I: Industry ROAFranchising = Franchising revenue/totalrevenue
RTYPE_FULL: 1 = Full serviceRTYPE_Fa: 1 = Fast foodH1: The relationship between a restaurant firm's
relative performance and degree of internationalizationis inverted U-shape, curvilinear.
H2: The degree of franchising has a positive e ffect on
the degree of a restaurant's internationalization
H3: Degree of internationalization of mixed-typerestaurants is higher than that for fast-food and/or full-service restaurants.A curvilinear, inverted, U-Shaperelationship between Tobin's q andthe degree of internationalization
(DOI) and a positive impact of
franchising on the DOI
Wu (2015) StructuralEquationModelingFranchising Strategy
Firm performanceBrand reputationRelational resourcesH1. Brand reputation a ffects franchisees' intention to
remain in the franchise system.H2. Brand reputation a ffects franchisees' performance
in the franchise system.H3. Franchisees' intention to remain in the franchisesystem positively relates to franchisees' performance.FranchisingH4. Relational resources positively a ffect franchisees'
intention to re- main in the franchise system.H4a. Franchisors' knowledge sharing positively a ffects
franchisees' intention to remain in the franchise system.
H4b. Franchisees' perceived inter- firm trust in a
franchisor positively a ffects franchisees' intention to
remain in the franchise system.
H4c. Con flict management by franchisors positively
affects franchisees' intention to remain in the franchise
system.H5. Relational resources positively a ffect franchisees'
performance.H5a. Franchisors' knowledge-sharing positively a ffects
franchisees' performance.H5b. Franchisees' perceived inter- firm trust in a
franchisor positively a ffects franchisees' performance.
H5c. Con flict management by franchisors positively
affects franchisees' performance.Knowledge sharing, trust, con flict
management, and brand reputationare key factors in reinforcing
franchisees' intention to remain and
financial performance within the
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on the amount of funds invested and concluded that size a ffected firm
survival. Sun and Lee (2013) used an empirical approach to measure
financial performance of U.S. restaurant firms and found that when a
franchise system expanded internationally, pro fits started to grow until
a certain point of expansion whereupon pro fits started to decrease.
Although informative, past research on international franchising has a
limited consideration of factors that have direct and/or indirect impact
on overall firm performance. To remedy this shortcoming and provide a
more detailed account of international franchise performance implica-tions, we propose an overarching framework ( Fig. 1 ). It integrates
current approaches to studying international franchising that focus oninternational franchise antecedents and governance modes (forms), and
in addition introduces a number of potential moderators. We speci fi-
cally highlight our two-dimensional approach, one retaining the tradi-tional focus on the franchiser and the second more contemporary ap-
proach zooming in on franchiser/franchisee dynamic interaction. A
more partnerhsip-centered research would in turn demand the con-
sideration of extended behavioral theoretical models as an alternative
to the traditional TCE/Agency theory or RBV approach.
6.1. The franchisor's perspective
Traditionally international franchise research has adopted a fran-
chisor's perspective by either focusing on the antecedents of interna-
tional franchising (IF) or the preferred international franchise govern-
ance mode. The antecedents (determinants) earlier classi fied as macro-
or micro-level, have so far received much of the research attention(Aliouche & Schlentrich, 2011; Alon & McKee, 1999; Baena, 2012 ).
Alon and McKee (1999) ,Aliouche and Schlentrich (2011) andBaena
(2012) , among others, explored the macroeconomic conditions that
determine how firms select foreign markets. At the firm level, the in-
ternational experience of managers, their market knowledge, andgrowth opportunities in fluenced the decision to expand overseas ( Alon,
2006; Altinay & Wang, 2006; Aydin & Kacker, 1990; Fladmoe-Lindquist& Jacque, 1995 ). A similar approach (e.g., distinguishing between
macro- and micro-level determinants) was applied to the second moststudied phenomenon, the governance mode in international fran-
chising. Our greatest criticism is the single-dimensional approach sug-
gesting that previously investigated IF and governance mode ante-
cedents a ffect all franchise firms in a similar manner. Below we further
elaborate on the idea of introducing complexity to the field by in-
troducing several possible boundary conditions future studies should
explore.
6.1.1. Entrepreneurial orientation
Although the issue of managers' motivation has received less at-
tention in research, we should not forget that it is, largely, motivation
that determines the success or failure of franchise adoption. When
managers have strong entrepreneurial orientation, they could easily
commit to developing franchise opportunities in foreign markets. On
occasion, managers might have entrepreneurial orientation, yet they
might not have all of the required resources to pursue international
franchising. Hadjimarcou and Barnes (1998) explored the Silver Streak
restaurant case in Mexico where this firm management did not consider
they were in a position to enter into that geographically close yet cul-
tural distant market. Silver Streak management demonstrated com-
mitment and adaptability in order succeed in this entrepreneurial
venture. Past research indicates that entrepreneurial orientation and a
mutual, balanced sense of dependence between the franchisor andfranchisee
drives the speed, scale and scope of international growth
(Combs et al., 2011; Grewal et al., 2011; Jell-Ojobor and Windsperger,
2014 ). We believe that entrepreneurial orientation is a viable positive
moderator of the relationship between established micro- and macro-
level factors and the propensity to engage in international franchising.
Entrepreneurial orientation could possibly be a critical condition for the
success or failure of the franchise system. Kaufmann and Dant (1999)suggest that franchising provides a unique and fertile setting for re-search in entrepreneurship: franchisor as entrepreneur, franchisee as
entrepreneur, and the franchise relationship as an entrepreneurial
partnership. We hope that both entrepreneurship scholars and fran-
chising scholars will increasingly see the bene fits of this intersection.
6.1.2. National institutions and institutional distance
Cultural distance ( Alon, 2006; Altinay & Wang, 2006; Baena &
Cerviño, 2014; Eroglu, 1992; Fladmoe-Lindquist & Jacque, 1995;
Huszagh et al., 1992 ) and geographic distance ( Alon, 2006; Baena,
2012; Baena & Cerviño, 2014; Dant & Grünhagen, 2014 ) have been
widely used in the past as macro-level determinants of international
franchising. For example, geographic-distance lens in internationalfranchising literature refers speci fically to the role of physical space in
decisions related to franchising expansion. Eroglu (1992) recognized
the importance of cultural distance and its in fluence on the organiza-
tion's intention to internationalize its franchise system. The findings of
this study indicated that cultural distance is often a threat to the or-
ganization's further international expansion attempts ( Altinay, 2006;
Eroglu, 1992 ). Cultural distance was also considered as a determinant
of the likelihood to engage in low-control franchising governance
modes (e.g. partnerships) but there is no consensus on its e ffects on
relationship development ( Altinay & Brookes, 2012). Altinay and Wang
(2006) explored how cultural distance in fluences prior knowledge of
the franchise partner recruitment process from a single case study.Their findings suggested that cultural di fferences and ways of doing
business in di fferent country/markets magni fied the complexity of
franchise partnerships.
We acknowledge the signi ficance of studies focusing on national
culture and geographic distance but we suggest a di fferent approach.
First, an extension of the concept of distance by introducing institu-tional distance (e.g., regulatory, political and social) and its e ffect on
perceived uncertainty by international franchisors and second, a con-sideration of institutional distance as a moderator of the relationship
between various micro- and macro-level antecedents and the propensity
of the firm to opt for a speci fic IF governance mode. The extent of
differences of law, regulations, social norms and customs around the
world cannot have the same e ffect on all firms that either consider the
internationalization of their franchise network or decide on how togovern the franchise system globally. Rather, these di fferences create
various levels of uncertainties for di fferent franchisers. For example,
they are less for those with managers with prior international experi-
ence. Therefore, institutional distance e ffects
should be considered
primarily as a moderator rather than a direct predictor of international
franchise propensity and governance mode.
6.1.3. Competition
Understanding competitors and their strategies is a di fficult task
because such information is normally not publicly available and com-
petitive signals are often distorted. Despite these limitations, con-
sideration of potential competitive moves is likely an important part of
making decisions regarding franchise internationalization and franchise
governance mode. Franchise firms often enter foreign markets due to
high levels of domestic competition. The preference for a low or high-control franchise governance mode is also likely to be a ffected by the
extent of competitive pressures in a speci fic foreign market and the
desire to establish or maintain brand positioning in that market. A
consideration of competitor actions and the potential threat they create
is therefore relevant. Thus, there is potential for developing robustmeasures of competitor actions (e.g., competitor willingness and ability
to make similar international commitments or competitive preemptive
measures in speci fic foreign markets) and examining their moderating
effect on the relationship between franchise antecedents, the extent of
internationalization of the franchise and its governance mode choice in
a speci fic international context.A. Rosado-Serrano et al. Journal of Business Research 85 (2018) 238–257
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6.1.4. Network complexity
International franchising strategy is primarily adopted as a rela-
tively fast growth strategy. A key challenge for the franchisor is the
identification of the optimum number of franchise outlets and the size
of territory assigned to a particular foreign franchisee because thisdecision is taken under conditions of imperfect information (e.g., due to
cultural and other di fferences). The downside of assigning too small a
territory to a given foreign franchisee is the inability to achieve a sa-tisfactory return, while assigning too large a territory might result in an
inability to exploit demand fully. Restructuring the original franchise
network design can be tainted by unforeseen franchisor-franchisee
conflicts ( Fock, 2001 ). Network design has clearly an e ffect on perfor-
mance and perhaps on the survival of the franchise system. However,Cox and Mason (2009) note that research has not given much attention
to the design of the franchise network and the development of methodsof restructuring that could minimize con flicts with franchisees.
Szulanski and Jensen (2006) indicate that e ffective knowledge transfer
entail rapid network growth, when the system follows a conservative
approach. There is clearly a gap in scholarly literature on how franchise
systems evolve spatially and temporally. We suggest future research to
focus on how such network dynamics a ffects both the link between
macro- and micro-level predictors of both propensities to expand in-ternationally and the choices franchise firms make regarding govern-
ance modes.
When firms expand their operations internationally, their opera-
tional performance tends to increase ( Sun & Lee, 2013; Ni & Alon,
2010 ) but so is their organizational/network complexity. It is important
for managers to consider how their decisions (which include their op-erating strategies, growth plans, number of outlets, to which countries
to expand, and partner-selection) a ffect the fundamental value of the
firm, the stock price, and its intangible value (brand name). In addition
to looking into franchise system performance in isolation or assume a
linear relationship between international franchising and performance,we suggest an approach that would allow determining the role of
franchise dispersion and complexity, as a condition for further inter-
nationalization and governance choices in the franchise system. Too
much system complexity is likely to curb further internationalization
efforts, despite a positive impact of various micro- or macro-level
antecedents of international franchising. Similarly, too much com-plexity in the franchise network would in fluence the governance
choice. Therefore, future research should investigate what speci fic
boundary conditions it would create for international franchise systems.
6.2. The franchisor/franchisee's perspective
Much of the extant international franchising literature has been
presented from the perspective of the franchisor (i.e., why would a firm
choose to organize as a franchise chain and recruit franchisee partners).
Expanding the approach to allow for a more holistic view is needed
(Dant & Grünhagen, 2014). The focus of past research is investigating
issues related to the selection of the right partner, as this is consideredkey to the future success or failure in international franchising. We
argue that this approach is rather limited. Altinay (2006) indicated that
the interactions and attempts to create a co-operative environmentamong partners cannot be established overnight or before the actual
agreement is struck. No one doubts that certain bene fits accrue to both
franchisers and franchisees such as access to a proven business conceptand system for the franchisee and access to local market opportunities
and knowledge for the franchisor ( Altinay, Brookes, & Aktas, 2013 ).
However, resolving the tension between maintaining global brand
uniformity and allowing su fficient autonomy to respond to local market
demands
is compounded in geographically dispersed and di fferentiated
markets ( Weavin & Frazer, 2007 ). There is a clear need to focus on
studying supportive and cooperative franchise environments that pro-vide the mechanisms to manage such tensions. Frazer et al. (2007)
argue that promoting a cooperative environment requires managing thepower and control in franchise relationships by zooming in on the role
of trust, satisfaction, communication and cultural sensitivity.
6.2.1. Cultural sensitivity
An emergent approach in this line of research is the focus on cul-
tural sensitivity instead of cultural di fferences, broadly suggesting that
the franchise partners should develop cultural sensitivity for the re-
lationship to flourish. Altinay et al. (2014b) indicate that cultural
sensitivity enhances the development of trust, which in turn has a po-sitive impact on the long-term viability of the franchise partnership.
High cultural sensitivity provides support to the franchise partnership.
Cultural sensitivity of franchisors is very important for relationship
development and for performance, especially in view of the cultural
differences extant between the home and the host markets ( Altinay
et al., 2014b ). Therefore, we suggest future researchers to focus more
on issues related to cultural sensitivity of both the franchisee and the
franchisor; this will reveal new insights into the likelihood of franchise
partnership adoption and its prospective success. Many of the current
issues discussed in the literature on franchise partnerships (e.g., partner
selection, trust building, social exchange, co-development, empower-
ment, satisfaction) are directly or indirectly infl uenced by the extent of
cultural sensitivity of the franchise partners. However, prior researchhas overlooked potential boundary conditions to the e ffectiveness of
such cooperation-building measures.
6.2.2. Institutional context and organizational learning
Institutional distance, re flected in the di fferences in business prac-
tices in di fferent countries, in fluences the nature of franchise relation-
ship development in international markets. For example, the role of
institutional context, and the level of international experience of the
franchise-partners are entirely overlooked in current research.
Countries where informality in the business practices is very high, a ffect
the legitimacy (and legal enforcement) of the franchise contracts, whichin turn decrease trust-building in international franchise systems.
However, the extent to which successful trust-building or co-develop-
ment is possible within geographically and internationally diverse
franchise system depends on the quality (or diversity) of the institu-
tional framework and/or the ability of the partners to facilitate co-
operation. Therefore, in addition to looking into cultural sensitivity
issues, we consider that more research on the moderating role of in-
stitutional distance and experience is necessary in order to understand
the determinants of success in international franchise partnerships.
6.3. A dynamic network view of international franchising
Franchise network governance was mostly viewed as a static
structure, whereas its dynamics remained relatively less understood.
Scholars have drawn on several focused theories to develop hypotheses
for examining international franchise expansion. For example, both
agency theory and transaction cost theory address the risks involved in
franchising, and the need for the franchiser to monitor and control its
international franchise units to prevent costs incurred by opportunism
and self-interest. The risks in international markets are perceived as
substantial due to uncertainty posed by economic, political, and cul-
tural di fferences. According to another view, the RBV, franchisors in-
itially export their competitive advantage abroad (e.g., brand name,business model). The majority of extant studies use these theories to
determine the franchise governance mode (high- or low-controlled),
however we suggest a shift in focus to the dynamic development and
evolution of the franchise system as a whole (rather than focusing onsingular and static governance-mode choices in individual foreign
markets).
Franchisors often advance their competitive advantage by com-
bining relationship-speci fic assets with franchisees and permitting the
franchise system to develop additional resources and capabilities whichneither party could develop on their own (e.g., management andA. Rosado-Serrano et al. Journal of Business Research 85 (2018) 238–257
253

operating system, support and training). We suggest that the ultimate
success of the franchise system is not solely determined by the agency/
transaction costs of the franchisor or by the resources and capabilities
transferred abroad, but by the complementary resources and cap-
abilities of potential partners in international markets (both franchisees
and other stakeholders). The dynamic evolution of the system is
therefore a complex phenomenon which requires an integration of local
institutional and industry factors, the speci fic contributions of franchise
partners and stakeholders (e.g., resources, network links etc.) and theability of the franchise system to advance the level of trust, cooperation
and empowerment (among others). A purposeful combination of social
and bureaucratic coordination mechanisms within the franchise net-
work governance would stimulate positively intellectual property
creation and exploitation. New theoretical frameworks should be con-
sidered in the future. For example, relational exchange theory can be
useful in determining how distinct forms of trust are instrumental in
developing joint intellectual property, resolving con flicts and reaching
mutual satisfaction in the international franchise system ( Davies et al.,
2011 ).
6.4. Overcoming data limitations: performance measurement
Prior studies have focused on franchise performance mostly in a
domestic context by examining for example the performance of fran-chisees vis-à-vis franchisors (e.g., Michael & Moore, 1995 ) or in-
vestigating performance e ffects of the franchisor's decision to use
franchising. There is no clear consensus among the latter group of
studies: Shane (1996b) found that franchises boost growth and enhance
the probability of survival among young franchisors, Michael (2002)
reported indirect evidence of a franchising –performance relationship
while Combs and Ketchen (1999) failed to see a clear relationship be-
tween franchising and performance. As suggested by Combs, Ketchen,
and Hoover (2004a) the limited research establishing the fran-
chising –performance relationship seems to present a gap in the litera-
ture.
One of the limitations in international franchising research is the
availability of data. Most of the franchise systems are privately owned,
which reduces the amount of publicly available information. Because of
this, the most common methodology used in international franchising
research is the case study. This is also evident from the limited number
of quantitative research, and the narrow scope of empirical investiga-
tion ( Table 10 ). Case studies provide a tool to explore a new phenom-
enon, but it also limits the relevance of the results to the observed si-tuation and firms. Franchisors are heterogeneous so perhaps
aggregating disparate firms and searching for linear relationships might
mask important insights ( Miller, 1987 ). We suggest future research to
follow a mixed methods approach. A combination of case study, in-terviews, questionnaires, and content analysis would help researchers
explore international franchising and the dynamics of IF networks. We
found a few studies that used methods such as cluster analysis
(Navarro-García, Rondán-Cataluña, & Rodríguez-Rad, 2014 ) andBayesian analysis ( Alon et al., 2012 ) which appear to provide new
avenues for analysis. Coding analysis ( Altinay & Wang, 2006; Connell,
1999 ) also can provide new opportunities to explore content analysis.
We urge future studies to address the international franchising phe-
nomenon and its di fferent dimensions by exploring the applicability of
new methodologies.
7. Conclusion
Our review showed that international franchising research was
mainly approached from three theoretical perspectives: agency, re-
source-based, and transaction cost theory. Research in this area can
benefit from exploring new theories that can fill the knowledge gap in
the new (more collaborative) organizational forms that are gainingpopularity
in the international franchising industry. The majority of the
analysis used qualitative methodologies, mainly due to data shortage.We suggest that future research considers using mixed methodologies aswell as multidisciplinary examination between entrepreneurship, mar-
keting and international business. Such approach could help, for ex-
ample, understand the complex dynamics that occur within IF part-
nership relationships. Studies that combine the richness of interviews
with empirical analysis could also derive new frameworks, contribute
towards the development of new theories, and serve to strengthen ex-
isting models.
We developed an overarching framework that integrates past ap-
proaches to studying international franchising with a more con-
temporary focus. In such a way, we addressed one of the main limita-
tions of current literature, the exclusive focus on one-directional
relationships and the predominant franchisor's point of view. Our fra-
mework suggests a shift from the traditional focus on the franchisor to a
more contemporary, mixed franchiser/franchisee approach. We trust
our framework for IF partnership-centered research would in turn sti-
mulate scholars to better utilize behavioral theoretical models rather
than continue to apply traditional TCE or RBV theories.
Our review summarized the knowledge in the field and discovered
that studies in areas such as partner-dynamics in international fran-
chising and subsequent performance implications are particularly
lacking. This presents promising research opportunities. We presented
our ideas about new ways of integrating financial performance into a
multi-level and dynamic analysis of international franchising. We hopethat our suggestions are inspirational and pave the way towards more
insightful future research on international franchising.
Acknowledgements
Authors acknowledge the comments received from three reviewers
of American marketing Association conference held in Cuba as well as
Professors Ilan Alon (University of Agder, Norway), Constantine
Katsikeas (Leeds University) Elsie Candelaria Sosa, Ed.D. on previous
version of this article.
Appendix A. List of 112 articles analyzed for this literature review
Aliouche & Schlentrich, 2011 Fladmoe-Lindquist & Jacque, 1995
Alon, 2004 Forte & Carvalho, 2013
Alon, 2006 Garg & Rasheed, 2003
Alon & McKee, 1999 Gassenheimer et al., 1996
Alon et al., 2012 Gerringer, 1991
Al-Khalifa & Peterson, 1999 Grace, Weaven, Frazer, & Giddings, 2013
Altinay, 2004 Grewal et al., 2011
Altinay, 2006 Hadjimarcou & Barnes, 1998
Altinay & Brookes, 2012 Herndon, 2014
Altinay et al., 2014a Heung et al., 2008
Altinay et al., 2014b Hoffman et al., 2016A. Rosado-Serrano et al. Journal of Business Research 85 (2018) 238–257
254

Altinay & Miles, 2006 Huszagh et al., 1992
Altinay & Okumus, 2010 Jeffries & Reed, 2000
Altinay & Wang, 2006 Jell-Ojobor and Windsperger, 2014
Aydin & Kacker, 1990 Kalnins, 2005
Baena, 2009 Kashyap, Antia, & Frazier, 2012
Baena, 2012 Kedia et al., 1994
Baena & Cerviño, 2012 Kedia et al., 1995
Baena & Cerviño, 2014 Kedia & Lahiri, 2007
Barthélemy, 2011 Lafontaine, 1999
Blut et al., 2011 Lafontaine, 2014
Brookes, 2014 Lafontaine & Oxley, 2004
Brookes & Altinay, 2011 Lee, 2008
Brookes & Roper, 2011 Lee, Khan, & Ko, 2010
Buchan, 2014 Li & Dant, 1997
Burton, Cross, Rhodes, & M., 2000 López-Bayón & López-Fernández, 2016
Chang & Rosenzweig, 2001 Lusch & Brown, 1996
Cheng et al., 2007 Mariz-Pérez & García-Álvarez, 2009
Choo, 2005 McIntyre & Huszagh, 1995
Connell, 1999 Meek, Davis-Sramek, Baucus, & Germain, 2011
Combs & Ketchen, 2003 Merrilees, 2014
Combs et al., 2011 Miller, 2008
Combs et al., 2004b Ming-Sung, Yin-Chao, Tu, & Wu, 2007
Combs et al., 2011a Ni & Alon, 2010
Combs et al., 2011b
Contractor & Kundu, 1998a Paik & Choi, 2007
Contractor & Kundu, 1998b Perrigot et al., 2013
Dant & Grünhagen, 2014 Petersen & Welch, 2000
Dant et al., 2012 Quinn & Alexander, 2002
Dant & Nasr, 1998 Quinn & Doherty, 2000
Davies et al., 2011 Ryans et al., 1999
Doherty, 2007 Sashi & Karuppur, 2002
Doherty, 2009 Shane, 1996a, 1996b
Doherty & Alexander, 2004 Sirmon & Lane, 2004
Doherty & Alexander, 2006 Skarmeas & Robson, 2008
Doherty & Quinn, 1999 Sun & Lee, 2013
Dow & Larimo, 2009 Szulanski & Jensen, 2006
Durand & Wrigley, 2009 Thompson & Stanton, 2010
Elango, 2007 Vaishnav & Altinay, 2009
Elango & Fried, 1997 Walters & Toyne, 1989
Erramilli et al., 2002 Wang & Altinay, 2008
Erramilli & Rao, 1993 Welsh, 1993
Eroglu, 1992 Welsh et al., 2006
Evanschitzky et al., 2016 Williams, 1999
Falbe & Dandridge, 1992 Wu, 2015
Fladmoe-Lindquist, 1996 Yin & Zajac, 2004
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