Description
Franchising is the practice of using another firm's successful business model. The word 'franchise' is of Anglo-French derivation - from franc - meaning free, and is used both as a noun and as a (transitive) verb.
Reports Study on Organizational Identity Perspective in Franchise Branding
Abstract:- Despite the call for increased theoretical diversity in franchising research, the incorporation of organizational theory into this literature has been minimal. In response, we examine how aspects of organizational identity are repre- sented in franchisee recruitment Web sites. We develop the concept of franchise branding to understand how franchi- sors position franchise opportunities to attract potential franchisees. We find that firms in the Franchise 500 use more language associated with market orientation, entre- preneurial orientation, and charismatic rhetoric when compared to a sample of lower-performing franchises. We also examine the impact of franchisor size and age to examine how liabilities of size and newness impact language use. We find that larger firms tend to use more rhetoric but detect no significant differences based on age. We conclude by discussing future possibilities for incorpo- rating additional theoretical perspectives into the franchis- ing literature. Keywords Franchise . Market orientation . Entrepreneurial orientation . Leadership . Content analysis Franchising is a popular route to organizational growth, both in the United States and globally (Michael 2003). In 2005, United States franchises employed 11 million individuals and were responsible for 4.4% of the United States' privatesector economic output (IFA Educational Foundation 2005). In franchising, two independent parties establish an agreement whereby one firm (the franchisor) licenses the right to use its brand name and proprietary business processes to another firm or individual (the franchisee) in return for an initial payment and an annual royalty (Combs et al. 2004). Franchisors enter into these agreements to facilitate rapid growth while minimiz- ing the need to make large capital outlays, undertake significant new risks, and supply labor to facilitate such growth (Oxenfeldt and Kelly 1969). Consequently, fran- chising represents an important marketing strategy as franchisors encourage individuals to buy a franchise as a way to launch a new business with lower risk than launching a new venture. As such, franchising represents an important area of scholarly research in marketing (Varadarajan 2003). Scholars from a broad range of disciplines have contributed to the franchising literature (Combs et al. 2004); however, these scholars have rarely integrated multiple theoretical perspectives to rigorously investigate franchising phenome- na. Neumann (2002) argues that triangulating theories on a single phenomenon ("triangulation of theory") can facilitate idea generation and a better understanding of the phenom- enon. In this study, we use research on organizational identity to focus multiple theoretical lenses on the franchisor-franchisee relationship. In particular, we draw from research on market orientation, entrepreneurial orienta- tion, and charismatic rhetoric to examine how franchisors create a franchise brand that captures different aspects of their identity to attract potential franchisees.
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In support of the special issue's goal to integrate the marketing and organization theory literatures, we exam- ine how franchisors brand their franchising opportunities through projecting their organizational identity into the rhetoric on their corporate Web sites. We define rhetoric as the strategic use of words to persuade potential franchisees of the value of the franchisor's opportunity (c.f., Hartelius and Browning 2008). An organizational identity is the central and enduring perception of what makes an organization unique in the collective view of its members (Albert and Whetten 1985). Given that market- ing activities include the dissemination of organizational communications relevant to firm identity and its management (Christensen 1995), research in organizational identity provides an important theoretical lens with which to examine the solicitation of potential franchisees because franchisors seek to attract potential franchisees that align with their core values and beliefs. This alignment of identities is important as franchisees often have more latitude over the decision-making processes of their franchise than a manager of a corporate-owned/managed location might have (Kim 2000). If the decision-making tendencies of the franchisee are not in line with the organizational identity of the franchisor, this freedom may result in agency costs when the franchisee makes decisions that go against the wishes of the franchisor. Thus, the franchisor has an incentive to attract franchisees that identify with its organizational identity. To examine key elements of rhetoric associated with market orientation, entrepreneurial orientation, and charismatic leadership we examine language used in franchisors' franchisee recruitment Web sites. Organizational narratives, such as corporate Web sites, provide a tangible announcement of a firm's beliefs and values that reflect its unique identity (c.f., Pearce and David 1987). The market orientation construct examines how managers collect, disseminate and use information about the markets in which they compete (Kohli and Jaworski 1990; Pelham and Wilson 1996). Franchisors are incented to attract and select franchisees that that will share their marketing philosophy as many franchisees operate in markets that are difficult for franchisors to monitor with vigilance (Minkler 1990; Prendergast 1999). While correlated with and complementary to a market orientation, entrepreneurial orientation is a distinct strategic orientation, encompassing the behaviors and decision-making processes of entrepre- neurial businesses (Baker and Sinkula 2009; Lumpkin andDess 1996). To attract these would-be entrepreneurs, franchisors may use rhetoric consistent with their entrepreneurial orientation to highlight the entrepreneurial nature of the opportunity presented by franchise ownership. Leader behaviors provide an important catalyst with the potential to impact selling behavior (MacKenzie et al. 2001).
Charismatic rhetoric is used by leaders to convince followers to adopt the goals and ambitions of the leader as their own and to work together to accomplish these goals (Shamir and Howell 1999). Franchisors may use charismatic language to sell potential franchisees on a shared vision for the company, encourage them to incorporate the organizational identity of the franchisor into their future franchise, and to act in line with that vision and identity. In summary, there is reason to believe that these three constructs could influence how potential franchisees view a franchisor's opportunity. In summary, our study contributes to the marketing literature in three key ways. First, our incorporation of organizational identity brings a new theoretical perspective to the franchising literature, helping better explain the rhetoric used by franchisors when soliciting potential franchisees. We also incorporate two concepts from the organizational ecology literature—liabilities of newness and liabilities of smallness—to examine how franchising organizations may differ in their use of this rhetoric. Second, we show how content analysis can be used to identify how the rhetoric on franchisors' Web pages and other organizational narratives is used to attract potential franchisees. Content analysis is valuable in its ability to tap into the thoughts, beliefs, and values of organizations through their narratives (e.g., Short et al. 2010), and we provide a comparison between Franchise 500 firms and other franchisees to build understanding of the relationship between franchise performance and language use. Finally, drawing upon both the product and corporate branding literatures, we develop the "franchise brand" construct to facilitate research investigating how franchisors approach the marketing of their franchise opportunity to potential franchisees. In sum, this study provides both conceptual and empirical contributions to research on branding and franchising.
The role of franchise branding in attracting franchisees Given the ubiquity of franchises in the United States and internationally, potential franchisees have a broad range of franchising opportunities from which to select (Michael 2003). To facilitate franchise growth, franchisors must compete with each other by marketing their opportunity to franchisees. As a result, the franchisor develops a "franchise brand" with which to differentiate their opportunity, thereby attracting franchisees. The American Marketing Association defines a brand as "A name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers" (American Marketing Association 2010). Franchise branding, then, is the specific case of a franchisor marketing
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its franchising opportunity as a brand. While conceptually similar to corporate branding (Aaker 2004) and product or service branding (Aaker 1996; Gardner and Levy 1955), we posit that franchise branding is a necessarily distinct construct. Corporate branding takes place when a company creates organizational associations with the company's identity, reinforcing in a broad range of stakeholders' minds that the company will stand behind its products and services (Aaker 2004). Franchise branding is distinct in several key ways. First, the franchisor is specifically marketing an opportunity with the intent to "sell" the potential franchisees a contract. Further, franchise branding focuses on a target audience of potential franchisees whereas corporate branding is broader in its target audience (which would include, but not be limited to, potential franchisees). Despite being a distinct construct, a franchise brand should be similar to a corporate brand in several key ways. One way is that the franchise brand also incorporates aspects of the organization's identity, for instance, its core values and activities (Argenti and Druckenmiller 2004). This may reduce adverse selection in franchisee selection through the reduction of informa- tion asymmetries (Shane 1998). In doing so, the franchisor aims to attract franchisees that align with its values and goals and deter those that do not. Further, misfit between company and customer perceptions of the corporate brand has been shown to decrease customer loyalty and satisfaction (Anisimova 2010). Since the franchisee is a customer-facing agent of the franchisor, aligning the corporate and franchise brands should result in higher customer satisfaction. Finally, the franchisor's corporate branding before signing a franchising contract signals to the franchisee that the franchisor will likely continue to invest in brand development (Mathewson and Winter 1985). Franchise branding is also similar to product or service branding. Since the franchisor is selling the opportunity to open a franchise as a product/service to a target market of potential franchisees, the branding surrounding the opportunity may be similar to product or servicebranding. For instance, brand identity is a critical aspect of product branding, highlighting the advantages of one's product over rival offerings (Doyle 1989). To compete with rival opportunities the franchisor will need to build a franchise brand identity that differentiates the opportunity and resonates with its target market. Additionally, the process of brand image selection, implementation, and control is thought to be a vital part of brand management's leading to brand market performance (Park et al. 1986). This process will also be important in influencing the potential franchisees' perceptions of the franchising opportunity, facilitating self-selection by franchisees that would fit well with the franchisor.
The role of organizational identity in franchise branding An organizational identity refers to the central and enduring attributes of an organization that distinguish it from other similar firms (Albert and Whetten 1985). These identities help organizations make difficult decisions, guide the interpreta- tion of organizational issues, subsequent decision making (Dutton and Dukerich 1991), and influence the survival and performance of organizations (Barney et al. 1998). Franchisors draw from their organizational identity to convey an intended image through their franchise branding. To the extent that the franchisor's reputation aligns with the identity of the potential franchisee, the potential franchisee will more strongly identify with that franchisor, making them more likely to seize that franchisor's opportunity (Bhattacharya and Sen 2003). Furthermore, potential franchisees have a large number of opportunities and pit franchisors against each other to demonstrate the benefits of selecting their franchising opportunities. Such evalua- tions are especially critical to single-unit franchisees, who tend to emphasize the nonfinancial aspects of franchise ownership (Grünhagen and Mittelstaedt 2005). This emphasis on the nonfinancial aspects of franchise ownership makes it even more important for franchisors to convey the beliefs and values that distinguish their organization from their competitors through their fran- chise branding activities if they hope to generate interest in their franchising opportunity. The relationship between franchisor and franchisee is one of interdependence (Rodríguez et al. 2005). The franchisor depends on the franchisee as a source of income and to represent and grow the organization in a way consistent with the identity of the franchisor. The franchisee in turn depends on the franchisor to fulfill its commitments to assist with advertising, training, input sourcing, and other services (Achrol and Etzel 2003). Because of this interdependence and the possibility of double-sided moral hazard (Combs et al. 2004; Lafontaine 1992), the franchisor may align the intended image with its identity in organizational narratives to attract those franchisees that identify with its values (Bhattacharya and Sen 2003). In short, there is reason to believe that organizational identity may play a significant role in franchise branding. We apply this general logic to three key constructs associated with organizational narratives and relevant to the espousal of organizational identity, namely, market orientation, entrepreneurial orientation, and charismatic leadership, in the following sections. Market orientation and organizational identity A market orientation is characterized by the firm-wide generation, dissemination, and responsiveness to market information (Kohli and Jaworski 1990). It is best carried
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out by firms that view the gathering and sharing of market information as extending beyond the domain of the marketing department (Kohli and Jaworski 1990). While there are two prevailing definitions of market orientation (Ellis 2006)—MARKOR (Kohli and Jaworski 1990) and MKTOR (Narver and Slater 1990)—our study focuses on the MKTOR conceptualization of market orientation because it is the most common and comprehensive definition of the market orientation construct (Farrell 2002). MKTOR is composed of five dimensions: customer orientation, compet- itor orientation, interfunctional coordination, long-term focus, and profitability (Narver and Slater 1990). Conceptually, market orientation is viewed as a unidimensional construct due to the close relationships among the dimensions (Narver and Slater 1990). Within the context of market orientation, a customer orientation is the extent to which a firm understands and supports a customer's entire value chain (Narver and Slater 1990). Similarly, a competitor orientation is the extent to which a firm understands and preempts competitors by understanding both current and future ways in which customer value can be created and maximized (Narver and Slater 1990). Interfunctional coordination refers to the extent of interconnectedness of a firm's departments such that each unit collects and disseminates both customer and competitor information freely (Narver and Slater 1990). Long-term focus is the orientation of a firm toward long- term goals regarding all dimensions of market orientation (Narver and Slater 1990). Profitability is argued to be both an objective and component of market orientation (Kumar et al. 1998). Market orientation hinges on the cultural norms and behaviors perpetuated by top management (Jaworski and Kohli 1993). As management leads the culture of a firm to be more market oriented, the market orientation becomes central and enduring to the firm itself; thus the firm develops a market-oriented identity. A market-oriented firm commits itself to building a sustainable competitive advantage through the creation of superior customer value (Narver and Slater 1990). Franchisors espousing a market orientation in recruitment Web sites emphasize their commitment to marketing as a key aspect of the franchise brand. Market orientation is positively related to firm performance (Farrell 2002). Organizations that promote and capitalize on a market orientation tend to outperform other organizations with a lower market orientation (Kumar et al. 1998). As a result, franchisors identifying and recruiting franchisees that have a strong market orientation should perform better than those that do not. This market orientation, having become a central and enduring characteristic of the franchise, will be expressed in its recruitment Web sites as it attempts to attract potential franchisees that
align with the market-oriented franchise brand. We therefore propose: H1: Higher-performing franchisors will use more market orientation rhetoric than lower-performing franchisors in their recruitment Web sites. Entrepreneurial orientation and organizational identity An entrepreneurial orientation refers to the processes and practices that are characteristic of entrepreneurial companies (Lumpkin and Dess 1996). A firm with an entrepreneurial orientation is conceptualized to exhibit a combination of five characteristics: autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk taking (Lumpkin and Dess 1996). These dimensions have been found to influence firm performance (Rauch et al. 2009). Autonomy refers to the actions of individuals or teams to surface and pursue opportunities to completion (Lumpkin and Dess 1996). While franchisors typically want to standardize processes such that franchisees can address most issues by referring to the operations guide (Floyd and Fenwick 1999), not all issues can be addressed in this way. Understanding this, experienced, high-performing franchi- sors afford franchisees the autonomy to act on and resolve issues as they arise within certain bounds. Franchisees will seek opportunities where they perceive that their hands will not be tied, thus identifying with franchise brands that convey an image of autonomy. Because franchisees prefer some degree of autonomy, more interest and growth opportunities are provided to the already high-performing franchisors. Competitive aggressiveness is the aggressive organizational positioning or responses to competitors, unfavorable industry trends, and other external threats (Lumpkin and Dess 2001). The ability to compete effectively with one's competitors and manage external threats is vital for firm performance (Lumpkin and Dess 1996, 2001). Franchisees are a key source of growth and funds for franchisors, so for franchisees to become complacent would be counterproductive to the performance of the franchise. Thus, as long as the franchisee stays in line with the franchisor's overall strategy, franchisors would prefer that franchisees actively compete with rivals, and franchisors will convey their support of this as part of the franchise brand. Thus, high-performing franchisors will tend to espouse more competitive aggressiveness rhetoric than low-performing franchisors. Lumpkin and Dess (1996) define innovativeness as "a firm's propensity to engage in and support new ideas, novelty, experimentation, and creative processes that may result in new products, services, or processes" (p. 142). Innovative franchisees can contribute novel ideas and
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product concepts to the broader franchise, potentially improving the performance of the chain (e.g., Jambulingam and Nevin 1999; Strutton et al. 1993). While the franchisor may understand benefits of having innovative franchisees, some still prefer that the franchisee simply follow instruc- tions. This gives the franchisor more control over the operations of the franchisee but reduces the possibility of new cost-saving or revenue-generating initiatives from franchisees that would improve the performance of the chain. This suggests that emphasis on the innovativeness afforded in the opportunity in franchise branding may positively influence performance; as a result, highperforming franchises can be expected to espouse more innovativeness than lower-performing franchises. Proactiveness refers to a situation where a firm anticipates future changes and takes appropriate action to capitalize on the opportunity or mitigate the threat (Lumpkin and Dess 1996). Penrose (1959) highlighted that this forward-looking perspective is characteristic of entrepreneurial managers who, using this foresight, are able to drive firm growth by exploiting opportunities. Market intelligence sharing in the franchising relationship goes both ways (Dant and Nasr 1998). The franchisor shares information about the macro environment with the franchisee, and the franchisee shares information about the local market with the franchisor. To the extent that both the franchisor and franchisee are proactive in obtaining, disseminating, and acting upon this data, the franchise should outperform those that do not. As such, highperforming franchisors are more likely to convey proactiveness in their franchise branding activities than lower-performing franchisors. A defining characteristic of entrepreneurship is a willingness to assume risk in the face of uncertainty in exchange for entrepreneurial rents (Knight 1921). Similarly, franchisees make up-front and ongoing investments in their franchise with limited support from the franchisor in terms of mitigating the market risk of the venture. Therefore franchisees, in evaluating potential franchising opportuni- ties, will look to maximize their rewards, taking calculated risks in doing so. If a franchisor were to down-play the risk involved in launching a franchise, a prospective franchisee might also discount the potential rewards associated with the opportunity. Further, down-playing the risks associated with the franchise opportunity would be tantamount to misinforming the franchisee. In the case of a risk-averse franchisee, this may result in their leaving the franchise prematurely or their failure to sustain the business because they were not aware of the risks involved. Therefore, down-playing the risks associated with a franchise opportunity will likely lead to suboptimally performing franchises. In conjunction with the other dimensions, we argue that high-performing franchises will espouse a
higher entrepreneurial orientation than lower-performing franchises. Stated formally, H2: Higher-performing franchisors will use more entrepreneurial orientation rhetoric than lower-performing franchisors in their recruitment Web sites. Charismatic leadership and organizational identity The field of leadership provides a rich intellectual history with the potential to shed light on the franchisor-franchisee relationship. Conceptually, the field of leadership shares much in common with the broader domain of marketing (MacKenzie et al. 2001). Both leadership and marketing scholars are interested in organizational stakeholder influence processes, power relationships, and the alignment of diverse interests (e.g., Conger and Kanungo 1987; Fletcher 2004; Kim 2000). Despite this shared interest, leadership has been given limited attention in the marketing field and particularly in the franchising literature despite the clear parallels between the leader-follower and franchisorfranchisee relationships. Charismatic leadership, in particular, has important implications for understanding the franchisor-franchisee relationship. Charismatic leadership is defined as "an interaction between leaders and followers that results in (1) making the followers' self-esteem contingent on the vision and mission articulated by the leader, (2) strong internalization of the leader's values and goals by the followers, (3) strong personal or moral (as opposed to calculative) commitment to these values and goals, and (4) a willingness on the part of the followers to transcend their selfinterests for the sake of the collective (team or organization)" (Shamir and Howell 1999, p. 259). Franchisors communicate their mission, values, and goals, along with key elements of the franchisor's organizational identity, through their franchise branding with the objective of recruiting potential franchisees and inciting them to commit to the vision of the franchise both financially and emotionally. In the context of franchising, charismatic leadership may shed light on key issues germane to the growth and continued success of franchises. Charismatic leadership builds the leader-follower trust relationship, encouraging followers to forsake their own self-interests for the good of the group (Conger and Kanungo 1987, 1988). This relationship is enhanced through franchisor-franchisee vision, and goal alignment as communicated and assessed through the organizational identity of the franchisor. Developing an organizational identity that incorporates charismatic leadership and using its rhetoric in franchise branding is beneficial for franchisors when followers (e.g., franchisees) must make sacrifices and take risks to join the franchise (Floyd and Fenwick 1999).
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Further, the use of charisma in the leader-follower relation- ship promotes cooperation and attachment to the goals and interests of the franchise, encouraging followers to put in extra effort to accomplish the goals of the franchise (Bass 1990). Since the initial social distance between the franchisor and potential franchisees may be large (for example, when a potential franchisee views the franchisor's Web site), charismatic leadership (and the use of charismatic rhetoric) may assist in closing the gap between the franchisor and potential franchisees. Baum and colleagues (1998) studied the role of vision in entrepreneurial venture growth and found that the content and attributes of the vision (brevity, clarity, abstractness, challenge, future orientation, and ability to inspire) were related to the venture's success. Thus, charismatic rhetoric focuses on the vision of the leader and the motivational effects that charismatic leaders have on their followers (Shamir et al. 1993), such as increasing follower commitment and effort expended in the pursuit of organizational goals. Hence, charismatic rhetoric has the potential to incite action in followers (franchisees) within the recruitment process. The characteristics of charismatic rhetoric which enhance the leader-follower or franchisor-franchisee relationship include references to history and tradition, an emphasis on the collective identity, reinforcement of the collective efficacy, a focus on the leader's identifi- cation with the followers, references to values and moral justifications, references to hope and faith, and references to the followers' self-efficacy (Bligh et al. 2004; Shamir et al. 1994). Conceptually, charismatic leadership is measured by the following dimensions: collective focus, temporal orientation, follower's worth, similarity to followers, values and moral justification, tangibility, action, and adversity. The collective focus dimension examines whether the leader places increased emphasis on the group and less on the individual. Temporal orientation focuses on the extent to which the leader references history and traditions. Follower's worth refers to rhetoric that promotes the follower's "collective sense of self-efficacy" (Bligh et al. 2004, p. 218), while the similarity to followers dimension measures how much the leader emphasizes identification with the followers. Values and moral justification looks at leader references to the dominant social value of the followers (Shamir and Howell 1999). The tangibility dimension assesses the references to refer to future intangible goals rather than concrete outcomes (Bligh et al. 2004). The action dimension measures the communication of the leader's vision according to purpose and confidence. The final dimension of charismatic leadership is adversity, which measures the leader's mention of crisis and hardship associated with the current situation.
Together, these rhetorical elements of charismatic leadership communicate the vision, values, and mission of the franchisor with the purposes of motivating and appealing to franchisees. Additionally, these elements have been argued to influence followers' self-concepts, values, and motivations such that through the use of rhetoric, the franchisors enact a dynamic leader-follower relationship with their franchisees, with the ultimate goal of engaging followers in a stronger and more personal manner, resulting in a commitment to the franchise (Bligh et al. 2004; Shamir et al. 1994). Because franchisors in the Franchise 500 may benefit from including elements of charismatic leadership rhetoric in their Web sites since they may more easily attract franchisees and may develop stronger relationships with their franchisees based on shared morals, goals, and vision, we hypothesize the following: H3: Higher-performing franchisors will use more charismatic rhetoric than lower-performing franchisors in their recruitment Web sites. Liabilities of newness and franchises Extant research suggests that young firms face greater obstacles such as dependence on unfamiliar stakeholders, lower levels of legitimacy, and difficulties competing against established organizations than do older firms (Stinchcombe 1965). Young franchisors are no exception to the liabilities of newness (Castrogiovanni et al. 1993). Newer franchisors lack the experience necessary to determine the appropriate type of potential franchisee for their opportunity (Floyd and Fenwick 1999). New franchises are also less likely to have a well-established organizational identity (Albert and Whetten 1985). With- out a well-established identity, the firm may not have the knowledge to discern which franchisees fit with their franchising opportunity. This may lead them to overlook market orientation, entrepreneurial orientation, and charismatic aspects of their franchise brand for other more operational traits such as industry experience. This may also lead them to incorporate inappropriate levels of the associated rhetoric in their franchise branding. Addition- ally, newer franchises are unproven and thus are seen as less legitimate in the eyes of potential franchisees (Floyd and Fenwick 1999). Finally, newer franchises are in competition with older, more established franchises for the same potential franchisees (Weinrauch 1986). As a result, we assert that older, more established franchises will better understand the factors that make a potential franchisee desirable and will use more rhetoric associated with entrepreneurial orientation, market orientation, and charismatic leadership in their franchise branding to solicit
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those potential franchisees with these characteristics. More formally stated: H4: Firm age is positively related to the prevalence of market orientation rhetoric. H5: Firm age is positively related to the prevalence of entrepreneurial orientation rhetoric. H6: Firm age is positively related to the prevalence of charismatic rhetoric. Liabilities of smallness and franchises Liabilities of smallness are often discussed with liabilities of newness; however, they are conceptually distinct (Brüderl et al. 1992; Freeman et al. 1983). Liability of smallness suggests that smaller firms are faced with similar issues as new firms, including difficulty in raising capital, fewer tax benefits, and issues related to diseconomies of scale (Brüderl et al. 1992). In franchising, one salient liability of smallness is the lack of legitimacy in the eyes of potential franchisees. Smaller franchises struggle to acquire a critical mass of franchisees to legitimate themselves in the eyes of potential franchisees (Floyd and Fenwick 1999). Additionally, when a franchise has few corporate locations the immediacy of attracting franchisees is significant (Shane 1996). Thus, those franchises unable to quickly acquire franchisees will not likely survive. As a result, we posit that larger franchises are more likely to utilize rhetoric consistent with market orientation, entrepreneurial orienta- tion, and charismatic leadership in their franchise branding than smaller franchises. Stated formally: H7: Firm size is positively related to the prevalence of market orientation rhetoric. H8: Firm size is positively related to the prevalence of entrepreneurial orientation rhetoric. H9: Firm size is positively related to the prevalence of charismatic rhetoric. In summary, this study tests the extent to which franchisor performance, age, and size influence the degree to which franchisors leverage rhetoric indicative of a market orientation, entrepreneurial orientation, and charis- matic leadership in their franchise branding materials. Figure 1 provides a visual representation of the hypotheses tested in this study.
Franchise Performance
H1 (+) H2 (+) H3 (+) H4 (+)
Market Orientation Rhetoric
Franchise Age
H6 (+) H7 (+)
H5 (+)
Entrepreneurial Orientation Rhetoric
H8 (+)
Franchise Size
H9 (+)
Charismatic Leadership Rhetoric
Fig. 1 A conceptual framework model of franchise performance, size, and age characteristics on market orientation, entrepreneurial orientation, and charismatic leadership rhetoric
Method Sample description Our study leverages two samples: a sample of Franchise 500 firms and a random sample of firms not represented in
the Franchise 500. Because the Franchise 500 distinction identifies franchisors that are outperforming their nonFranchise 500 counterparts (Entrepreneur Magazine 2010), our purposive sampling approach allows us to make performance comparisons when examining differences in the rhetoric when between our two samples. The Franchise 500 sample was collected from the 2010 Franchise 500 list provided by Entrepreneur Magazine (2010). The Franchise 500 provides an attractive sampling frame for this study because it includes a large cross-section of franchisors from diverse industries, of varying sizes, and contains both public and private firms. The Franchise 500 is also a common sampling frame for research in franchising (c.f., Combs and Castrogiovanni 1994; Sen 1998). The majority of franchises in the Franchise 500 were retail establishments, including food services (e.g., Subway, McDonald's), consumer goods (e.g., Ace Hardware, Play It Again Sports), hotel/motel services (e.g., Country Inn &Suites, Hilton Garden Inn, Howard Johnson), automotiveservices (e.g., Midas International, AAMCO Transmissions), and household services (e.g., Mr. Rooter, Lawn Doctor). Most were privately-held companies franchising in the US. Our random sample of non-Franchise 500 companies was collected using a list of over 2,300 franchises collected from Gaebler (Gaebler 2010). The non-Franchise 500 sample also included companies that are generally privately-held and typically franchise within the US. Most are retail franchises including food services (e.g., Arby's LLC, Burger King), consumer goods (e.g., Do It Best Hardware, ASI Dollar Stores), financial services (e.g., American Billing Systems, Business Advisers International), and household services (e.g., Carpet Network, The Maids Home Services). The non-Franchise 500 companies were, on average, 3.16 years younger and had been a franchisor for 4.93 years fewer than the Franchise 500 companies. In terms of size, the non-Franchise 500 companies had approximately 468 fewer franchise locations but had 266 more employees than the Franchise 500 companies. We collected the text of the franchisee recruitment Web sites for all franchisors in both of our samples that had this
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content presented on their Web site. Franchisor Web sites play an important role in recruiting potential franchisees, are a key source of inquiries from prospective franchisees (Rao and Frazer 2004), and are valuable media through which franchisors communicate with potential franchisees (Young et al. 2004). To identify franchisee recruitment Web sites we looked for the following key words/phrases: "to be a franchisee", "own a business", "franchising information", "franchisee opportunity", "cooperation", and other permuta- tions thereof. Of the 500 franchisors on the Franchise 500 list, we were able to collect Web site text from 466 companies. Of the random sample of 500 unlisted franchisors, we were able to collect Web site text from 314 companies. Content analysis of corporate Web sites We measured the extent of market orientation, entrepreneurial orientation, and charismatic rhetoric in the franchisor recruitment Web site texts using content analysis. Content analysis is a commonly used technique to capture marketing phenomena of interest. Scholars have advocated for the use of content analysis in marketing research to build knowledge in areas including international marketing research (Wheeler 1988) and consumer research (Kassarjian 1977), and to measure constructs of interest such as market orientation (Zachary et al. 2011). Content analysis is particularly well-suited for analyzing documents in which the author conveys aspects of themselves in the narrative (Kassarjian 1977), making thistechnique ideal for measuring aspects of an organizational identity. One compelling advantage of using content analysis is its ability to avoid subjective errors and biases common to other techniques (e.g., interviews or surveys; Barr et al. 1992). Because of its potential to measure a number of theoretical constructs in entrepreneurship and marketing research in an efficient manner, we use the DICTION software package to conduct our computer-aided content analysis in this study (Hart 2000). Of significant relevance to this study, DICTION has previously been used to measure market orientation (Zachary et al. 2011), entrepreneurial orientation (Short et al. 2009; Short et al. 2010) and charismatic leadership (Bligh et al. 2004). Measuring performance The performance of franchises can be difficult to assess because many franchises are privately-held and do not frequently release quantitative performance data. However, the ranking of franchises in the Franchise 500 is based on criteria suitable to relative performance comparisons. Rankings are based on financial and operational data collected during the previous year (Entrepreneur Magazine 2010). These criteria include financial strength, financial stability, growth rate,
start-up costs, termination rates, and internal financing options (Entrepreneur Magazine 2010). Using these objective rank- ings allows us to make comparisons between Franchise 500 firms and those not represented in this elite list. Measuring market orientation While market orientation is commonly treated as a unidimensional construct, breaking it into its component parts can highlight how specific dimensions contribute to the overall market orientation (Greenley 1995). In this study we used a word list generated and validated by Zachary and colleagues (2011) to measure the five dimensions of market orientation (competitor orientation, consumer orientation, interfunctional coordination, long term focus, and profitability). Sample words representing each dimension of market orientation are presented in Table 1. Measuring entrepreneurial orientation We used the five dimension conceptualization of entrepreneur- ial orientation as the basis of our analysis (Lumpkin and Dess 1996). To measure each of the five component dimensions of entrepreneurial orientation (autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk taking), we leveraged the word list developed and validated by Short and colleagues (2010). This measure allows us to identify and quantify rhetoric indicative of each dimension of entrepre- neurial orientation. Sample words for each of the dimensions of entrepreneurial orientation are presented in Table 2. Measuring charismatic leadership Charismatic leadership was measured using eight dimensions which represent concrete examples of the characteristics of charismatic language identified by Shamir and colleagues (1994). These dimensions include: (1) temporal orientation, (2) collective focus, (3) appeals to followers' worth, (4) similarity to followers, (5) values and moral justifications, (6) tangibility, (7) action, and (8) adversity (Bligh et al. 2004). Each dimension was operationalized in accordance with the procedure delineated by Bligh and associates (2004). Hence, these constructs were developed using the dictionaries included in the DICTION software as well as custom dictionaries. Sample words for each construct can be found in Table 3. Measuring liabilities of newness/smallness We gathered available size and age data for the Franchise 500 sample of franchisors. The number of global franchises served as the measure of franchise size. Age was measured as the age of the firm in years.
. Table 1 Evidence of a market orientation in franchisors' recruitment Web sites Dimension Consumer Orientation Definition The sufficient understanding of one's target buyers to be able to create superior value for them continuously A seller understands the short-term strengths and weaknesses and long-term capabilities and strategies of both the key current and the key potential competitors The coordinated utilization of company resources in creating superior value for target customer Example words buyer, customer, patron Examples in recruitment Web sites "Because cruise purchasers benefit from the education and relationships they can only get from a professional cruise planner" (#134-Cruise Holidays) "What started as a meeting of the minds between two rival travel professional agencies has become an awardwinning franchise company" (#62-Cruise Planners American Express) "In addition to introducing you to our various support departments, the opening and integration team will train you on key operational tools" (#135-Knights Inn) "What we hope is a long successful relationship with our well known and well respected brand" (#076-Checkers Drive-In Restaurants Inc.) "You'll want to own a profitable and fulfilling business, yet you won't want to recreate the wheel" (#65-ActionCoach)
Competitor Orientation
competitor, entrant, rival
Interfunctional Coordination
collaborate, integrate, joint
Long-Term Focus
Profitability
Constantly discover and implement additional value for customers, which necessitates a range of appropriate tactics and investments Create and maintain overriding profit
continuing, permanent, shared
earnings, income, profits
Table 2 Evidence of an entrepreneurial orientation in franchisors' recruitment Web sites Dimension Autonomy Definition Actions of individuals and teams to carry new ideas to completion Example words autonomous, freedom, independent Example in recruitment Web sites "Franchise owners enjoy the authority to steer their business and control their own careers" (#075-Express Employment Professionals) "Now in our fifth decade, Jani-King has developed industry-specific contract cleaning programs that keep our franchise owners on top of current trends and allow them to stay competitive" (#8-Jani-King) "To help you stay ahead of the competition, we work constantly to identify and respond to consumer trends, expand regional products and Fresh Foods, and accelerate product innovation" (#3-7-Eleven) "Encourage you to continue your exploration of how your entrepreneurial interests combined with our proven business plan can launch you into a new and exciting career" (#221-DirectBuy Inc.) "The ideal candidate loves learning, sees business as an adventure, wants to make a difference" (#238-Learning Express)
Competitive Aggressiveness
Tendency to challenge competitors to gain entry to outperform marketplace rivals
ambitious, contest, rival
Innovativeness
Willingness to experiment and create in order to exploit marketable ideas and inventions
create, imaginative, radical
Proactiveness
Focus on anticipating future needs and marketplace changes
anticipate, inquire, proactive
Risk Taking
The degree to which organizations make large resource commitments that have a chance of costly failure
bold-spirited, daring, uncertain
. Table 3 Evidence of charismatic leadership in franchisors' recruitment Web sites Dimension Collective Focus Definition Emphasizes and affects followers sense of collective identity Example words assembly, residents, crowd Example in recruitment Web sites "Our annual convention is more like a family reunion. And our Seminars at Sea are the perfect way to reconnect with members while you learn" (#062-Cruise Planners American Express) "We have a proven business concept that has existed since 1984 and we operate in a growing, recession resistant industry" (#030-Vanguard Cleaning Systems) "Lawn Doctor is made up of intelligent, business-minded people like you!" (#91-Lawn Doctor)
Temporal Orientation
References history and tradition by describing past successes and emphasizes future rewards Emphasizes the benefit of joining the group to share the same identity and promises followers the bright future that comes from working with the group Points out similarities between the leader and the followers to gain the followers' acceptance and build trust Emphasizes values and moral justifications that match or are closely related to followers' social values References to future intangible goals versus more concrete outcomes Inspire followers to pursue and accomplish goals based on the leaders' insight Referring to hardship or intolerable situations
take, want, took, wanted
Follower Worth
admirable, leadership, devotion
Similarity to Followers
anybody, everybody, family
"We will direct you to franchisees that may have similar experiences or situations to provide the most value for your time" (#471-Snip-Its) "It offers hope to nearly 12 million people each year through the security of employment" (#075-Express Employment Professionals) "More than 62% of U.S. households have one or more pets; 65 million households have dogs" (#250-Petland) "If you have determination and the inner drive to achieve, we want you" (#455-Fun Bus Fitness Fun on Wheels) "Monitoring [a] hotel is a day to day challenge?" (#1020-Accor Hotels)
Values
charity, faith, justice
Tangibility
businessman, factory, school
Action
desperate, loss, outrage
Adversity
Contemptible, fear, never
Results The means, standard deviations, and correlations for each of the constructs are listed in Table 4. The significant positive correlation of the individual dimensions of each construct is consistent with the extant literature and demonstrates the convergent validity of the dimensions. We tested for statistical differences between Franchise 500 and non-Franchise 500 franchises using a multiple analysis of variance (MANOVA). Each construct was tested individually and yielded significant results. In each case, Franchise 500 franchises used a greater amount of rhetoric consistent with market orientation, entrepreneurial orientation, and charismatic leadership than non-Franchise 500 franchises (market orientation Wilks' ?=0.983, p<0.01), entrepreneurial orientation Wilks' ?=0.931, p<0.01, and charismatic leadership Wilks' ?=0.942, p<0.01). Thus Hypotheses 1, 2, and 3 were supported. The MANOVA output as well as the ANOVA output for each dimension of each construct is displayed in Tables 5, 6, and 7.
To test the liabilities of newness and liabilities of smallness and their effect on franchise branding and associated language, we performed three regression analy- ses on the Franchise 500 franchise sample. Hypotheses 4 and 7 proposed positive relationships between age and market orientation rhetoric, as well as size and market orientation rhetoric. Our regression analysis indicated that while age was not significant (?=?0.06; p>0.05), size was positively associated with market orientation rhetoric (?=1.80; p<0.01), supporting Hypothesis 7. Hypotheses 5 and 8 suggested similar relationships between age, size, and entrepreneurial rhetoric and found similar results. Franchise age did not significantly influence entrepreneurial rhetoric (? =?0.06; p > 0.05); however, size was positive and significant (?=1.80; p<0.01), supporting Hypothesis 8. Finally, Hypotheses 6 and 9 looked at age, size, and charismatic rhetoric. These hypotheses yielded similar results with no significant impact of age (?=?1.92; p>0.05) and a significant and positive influence of size (?=42.82; p<0.01), supporting Hypothesis 9. All three regression analyses explained signif-
.
Table 4 Descriptive statistics and correlation matrix
S D 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7
Mea n
.52 .30 .40 .32 -.03 -.02 -.02 .06 .01 .05 -.06 .08 .01 .06 .02 .08 -.05 .04
** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
**
1. Competitor Orientatio n 2. Consumer Orientation 3. .29 .51 .35 .01 .02 .01 .02 .06 .10 -.02 .06 .04 .07 .05 -.04 .05 .04
** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
1.5 5 6.3 7 0.9 .19 .19 .03 .04 .13 .07 .20 .46 .17 -.07 -.04 -.02 .44 -.08 -.07 .06
** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
2.5 9 6. 4 6.3
Interfunctional Coordinatio n 4. Long-Term Focus 5. Profitability .39 .29 .24 .45 .26 .19 -.01 -.02 .02 .66
** ** ** ** ** ** ** ** ** **
2 2.8 1 4.2 5 6.3 8 2.7 -.02 .03 .50 .55 .40 .15 .04 -.07 .13 .75
** ** ** ** ** ** ** ** ** **
8 2.7 7 9.4 .02 .07 .02 .03 -.05 .09 -.01 .03 .07 .03 .07 .0 2 0 .0 1 2 .0 6 3 .0 0 .0 1 .0 .0 4 .0 .0 6 .0
** ** ** ** ** ** ** ** ** **
6. Autonomy
9 2.7 7 2.2
7. Competitive Aggressivene 8. ss Innovativeness 9. 7 9.4 5 3.2 .05 -.02 -.03 -.03 .00 -.03 .03 .0 1 .02 .0 1
** ** ** ** ** ** **
1 10.7 1 2.5 .08 .06 .02 .02 .01 .12
** ** ** ** ** **
Proactiveness 10. Risk Taking 11. Collective .28 .11** .06 .05 -.10** .10** .53
** ** ** **
6 0.7 4 10.4 .01 -.04 .06 .65
** ** ** **
4 1.3 2 8.5 -.21 .06
**
Focus 12. Temporal Orientatio Follower Worth 13. n
**
.13 -.03 .26
**
**
2 17.6 8 16. 1 140.5
7 7.8 7 7.1 9 19.5
.14
**
**
.15 .01 -.08
** **
**
-.05 .24 -.04
** ** **
**
.12 -.11 .17
** **
**
14. Similarity to Follower 15. s Values 16. Tangibility 1 358.3 7 78.5 -.03 -.10** .02
**
6 435.3 3 150.1 1 10.0 1 2.7 2
-.38 .05 .12
** **
**
-.07 -.16 -.04
** **
**
17. Action
-.16 -.10** -.02
**
-.11 -.05
**
**
.19 .07
**
**
18. Adversity
8 14.8 3 3.
.07
**
8
.02
.0 3
**
p<0.1; p<0.05
*
. Table 5 ANOVA/MANOVA procedure of market orientation dimensions between Franchise 500 and random sample Market orientation MANOVA Franchise 500a Customer Orientation Competitor Orientation Interfunctional Coordination Long-Term Focus ** p<0.01
a b
Wilks'? 0.938 Random Sampleb 3.64 0.89 0.45 1.75 2.73 9.46 6.37 1.55 0.92 2.81 4.29 15.94
Overall F 10.09** F-value 44.37** 15.67** 12.9** 20.37** 16.95** 45.55**
Profitability Overall Market Orientation
n= 466 n = 314
icant variance in the dependent variables: market orientation (F=5.80; p<0.01; R2=0.03), entrepreneurial orientation (F=5.86; p<0.01; R2=0.03), and charismatic leadership (F= 5.42, p<0.01; R2=0.02). In sum, Hypotheses 4, 5, and 6 were not supported, and Hypotheses 7, 8, and 9 were supported. We conducted a post hoc analysis investigating differences among industries in the level of entrepreneurial orientation and charismatic leadership rhetoric and found significant differences in the language usage associated with these two constructs (p<0.01); however, we found no differences in the use of market orientation rhetoric. These results are consistent with the extant knowledge surrounding these three constructs. Entrepreneurial orientation has been suggested to be moderated by both internal and external contingencies, suggesting that contextual considerations such as industry membership may introduce variance in entrepreneurial orientation rhetoric (e.g., Lumpkin and Dess 1996; Rauch et al. 2009). Charismatic leadership has also been argued to be context-dependent (Mumford et al. 2008). However, research on market orientation has suggested that being marketoriented is a salient goal for all organizations, and therefore it may not vary significantly between industries (Narver and Slater 1990). Future research could build on our efforts by examining the degree to which rhetoric is driven by firm characteristics, industry differences, or perhaps differences driven by industry groups (c.f., Short et al. 2007).
Discussion Franchising represents an important business model both within the US and globally (Combs et al. 2004). However,
Table 6 ANOVA/MANOVA procedure of entrepreneurial orientation dimensions between Franchise 500 and random sample Entrepreneurial orientation MANOVA
our understanding of franchise branding practices in the context of organizational identity is limited. This study represents a first step in filling this knowledge gap and makes three contributions to the branding and franchising literatures. The first major contribution is that our paper explicitly draws from the organizational identity literature to help understand franchise branding phenomena. Using the organizational identity lens, we argue that franchisors look for franchisees that are of similar levels of entrepre- neurial and market orientation as themselves and commu- nicate with these potential franchisees using charismatic rhetoric. Thus, organizational identity can be valuable in explaining how franchisors brand their franchise opportu- nity in a way that appeals to their preferred segment of potential franchisees. The general question firms use when considering their organizational identity ("who are we as an organization?") might be used to explain a variety of marketing phenomena. In addition to franchise and corporate branding, product branding can be greatly informed by better understanding of the identity of the organization. The role of product branding has changed in recent years with the transition of marketing to social media (Marketing Science Institute 2010). Today, brands not only carry functional and emotional attributes but also convey aspects of the organizational identity of the producer (Marketing Science Institute 2010). Because the identity of the organization is conveyed through product branding efforts, it may be valuable to investigate the ways in which these identities are reflected in product branding campaigns and the brand equity consequences of different manifestations of organizational identity.
Wilks'? 0.931 Franchise 500a Random Sampleb 1.53 1.24 6.54 1.22 0.47 2.77 2.21 10.71 2.56 0.74
Overall F 11.45** F-value 10.98** 28.83** 41.78** 41.96** 10.23**
Autonomy Competitive Aggressiveness Innovativeness Proactiveness Risk-Taking
** p<0.01
a
n= 466 b n
= 314
. Table 7 ANOVA/MANOVA procedure of charismatic leadership dimensions between Franchise 500 and random sample Charismatic leadership MANOVA Franchise 500a Collective Focus Temporal Orientation Follower's Worth Similarity to Followers Values & Moral Justification * p<0.05 ** p<0.01
a b
Wilks'? 0.942 Random Sampleb 8.95 17.92 16.30 142.66 1.07 52.52 14.93 3.94 10.42 17.69 16.10 140.56 2.52 150.18 14.83 3.80
Overall F 5.01** F-value 5.86* 0.18 0.14 2.17 14.36** 22.17** 0.02 0.45
Tangibility Action Adversity
n=466 n=314
Relationship marketing may also benefit from further integration of organizational identity theory. Marketing scholars have begun to examine influence of individuallevel identity on relationship marketing phenomena (e.g. Arnett et al. 2003); however, research drawing from organizational identity is needed. A future study might draw from organizational identity theory to explain the relationship between consumers' identification with the selling organization's identity and the efficacy of relation- ship marketing efforts. Specifically, organizational identity theory suggests that when the values and goals of the consumer and the selling organization are aligned, relation- ship marketing campaigns within that segment should perform better than with segments where the values and/ or goals are in conflict. The second major contribution of this paper is our use of content analysis to identify how franchisors use rhetoric indicative of a market orientation, entrepreneurial orientation, and charismatic leadership on franchise recruitment Web sites to attract potential franchisees. Our findings indicate that franchisors convey these in their franchise recruitment Web sites and that high-performing franchisors tend to do so more than lower-performing franchisors. This is consistent with recent meta-analyses indicating a positive relationship between firm performance and both entrepreneurial orientation (c.f., Rauch et al. 2009) and market orientation (c.f., Ellis 2006). We also find that larger franchisors tend to incorporate more rhetoric indicative of a market orientation, entrepreneurial orientation, and charismatic leadership in their franchise branding than do smaller franchises. This suggests that franchising organizations may be able to use an emphasis on market orientation, entrepreneurial orientation, and charismatic leadership to help overcome the liabilities of smallness. However, we did not find differences between young and old firms among these dimensions, suggesting that they may not help overcome the liabilities of newness. These findings provide empirical reinforcement in distinguishing between the liabilities of newness and the liabilities of smallness as distinct constructs (c.f., Brüderl et al. 1992; Freeman et al. 1983).
The third major contribution of this paper is the development of the franchise branding concept and the couching of this concept in the greater branding literature as similar to, yet conceptually distinct from, product, service, and corporate branding. Franchisees are seen as an important source of growth, funds and distribution in the marketing and management literatures (e.g., Michael 2003;Oxenfeldt and Kelly 1969). However, the means by which franchising organizations recruit potential franchisees, particularly through branding activities, is sparsely addressed (Macmillan 1996). This gap in the franchising literature presents an opportunity for further research using organizational theory and the franchise branding concept. This study leveraged research in organizational identity to examine how franchisors build a franchise brand to attract potential franchisees. Future research could build on our efforts by incorporating other key areas of marketing research. Consequently, we present a number of possibilities based on the research priorities developed by the Marketing Science Institute (e.g., Marketing Science Institute 2010). The Marketing Science Institute (2010) developed these priorities in consultation with prominent scholars and practitioners to guide marketing research into high-impact areas, particularly relating to the rapidly changing business environment. For example, drawing on institutional theory (e.g., DiMaggio and Powell 1983), future studies might look at how social, ethical and regulatory issues affect how franchisors portray their franchising opportunity. Leveraging information pro- cessing theory (e.g., Bettman 1979), a future study might also look at how different franchise branding tactics could influence the decision to pursue specific franchising oppor- tunities. Table 8 presents these and several other opportuni- ties for future research where organizational theories might inform the franchise branding literature. Implications for theory building There has been debate in the franchising literature regarding whether franchisees are more like entrepreneurs or investors (Grünhagen and Mittelstaedt 2005). This study finds that
. Table 8 Potential research questions integrating franchise branding with organizational theory MSI research priority Using Market Information to Identify Opportunities for Profitable Growth Understanding Customer Experience and Behavior Developing Marketing Capabilities for a Customerfocused Organization Identifying and Realizing Innovation Opportunities Organizational theory Institutional Theory (e.g., DiMaggio and Powell 1983) Information Processing Theory (e.g., Bettman 1979) Stakeholder Theory (e.g., Donaldson and Preston 1995) Potential franchise branding research question How do social, ethical and regulatory issues affect how franchisors portray their franchising opportunity? How do different franchise branding tactics influence the decision to pursue a franchise opportunity? To what extent is the market orientation espoused in franchise branding materials related to the level of support and services provided to franchisees on an ongoing basis? What is the role of current franchisees in the updating of the franchise branding strategy of the franchisor and the attraction of new potential franchisees? To what extent are firms able to adapt their franchise brand positioning to societal changes such as the rise of social and mobile media? Does franchise branding practice systematically differ in global franchises versus national or local franchises? How does the size of the market segment of potential franchisees for a franchising opportunity influence the annual spend on and types of franchise branding activities? How might franchisees' assessments of the franchise brand, conveyed through narratives such as blogs, emails, and other commentaries, be used to assess the extent to which they identify with the franchise?
Networks (e.g., Granovetter 1973)
Delivering Value Through Enhanced Media and Channels Managing Brands in a Transformed Marketplace Allocating Resources to Marketing Activities
Organizational Ecology (e.g., Hannan and Freeman 1977)
Contingency Theory (e.g., Donaldson 1996) Resource Dependence (e.g., Pfeffer and Salancik 1978)
Leveraging Research Tools and New Sources of Data
Organizational Identity Theory (e.g., Albert and Whetten 1985)
franchisors use entrepreneurial rhetoric in their franchise branding to attract potential franchisees, suggesting that franchisors either view franchisees as being similar to entrepreneurs or prefer those franchisees that are. Future studies might investigate which of these suggestions best represents franchisors' perceptions of franchisees. Regardless of the outcome of such a study, our findings suggest that entrepreneurial rhetoric in franchise branding materials and franchise performance are positively related (c.f., Rauch et al. 2009). Since a major justification for franchising is to grow the franchise (Oxenfeldt and Kelly 1969), it is not surprising that franchisors would attempt to recruit franchisees that would behave more like entrepreneurs than investors. Evidence of charismatic rhetoric in franchise branding offers new insight into how organizational identity congruence, as relates to vision and goal alignment between franchisors and franchisees, may influence the franchisee recruitment process. Considering the role of power and influence in the franchising context allows for an integration of the leadership and franchising fields, yet a greater understanding of how followers (i.e., franchisees) evaluate franchises based on the three components of
organizational identity examined in this paper is necessary. Future studies could address the follower side of the franchisor-franchisee relationship by interviewing or survey- ing followers to better understand what about the recruitment Web site or other franchise branding media influenced their decision to select a particular franchise opportunity. Doing so would shed more light on the context in which these decisions are made. Implications for empirical research Level of measurement and analysis has been an issue for researchers investigating entrepreneurial orientation. Although entrepreneurial orientation is an organizational-level construct, many extant studies have measured the level of entrepreneurial orientation using single-respondent, selfreport measures (e.g., surveys) (Lyon et al. 2000). Such an approach to measuring organizational-level constructs can be problematic when the researcher is unable to parse out the organizational from the individual characteristics (Lyon et al. 2000). This study illustrates how franchisor recruitment Web sites can provide a viable
.
complement or even alternative to the use of surveys to assess the entrepreneurial orientation of franchisors. Implications for practitioners The ultimate goal of a franchisor's recruitment Web site is to promote the franchise such that potential franchisees will commit their time and resources to the venture. Hence, those franchisors that better communicate their organizational identity may have greater success in recruiting franchisees that identify with this identity, leading to greater profits and a larger number of franchised locations. Our study suggests that franchisors use entrepreneurial, market- ing and charismatic rhetoric to convey this identity and influence franchisees to behave in a manner consistent with the identity of the franchisor. Future research in this area might investigate the mechanisms by which this rhetoric attracts new franchisees and the extent to which it reduces agency costs through the alignment of franchisors' and franchisees' identities and decision-making processes. Our study also has implications for franchise applicants. Evidence of market and entrepreneurial orientations in the franchise branding materials suggests that franchisors may prefer franchisees that will behave entrepreneurially and actively pursue and leverage market knowledge. As such, would-be franchisees that position themselves in line with these preferences may find themselves sought after by franchisors and may be able to negotiate more favorable terms (e.g., more favorable contract termination policies, lower royalties, or additional services rendered by the franchisor) in the franchise agreement negotiation process (Kim 2000). Limitations The findings and contributions of this paper should be viewed with consideration of its limitations. It is likely that the rhetoric on franchisors' Web sites contains elements created with the goal of persuading potential franchisees of the merits of the franchisors' business model. Both Web site content and style have been shown to influence the extent to which potential new employees are attracted to an organization (Cober et al. 2003). All else held equal, in recruiting potential franchisees, the organization would want to use rhetoric that would attract the most promising new franchisees. However, agency and organizational identity/image theories suggest that the rhetoric used will still generally be in line with the organization's identity. Organizations frequently communicate their identity to stakeholders through the use of signs and symbols (Albert and Whetten 1985). Web sites and the rhetoric contained therein, with their symbolic content, then can be used to communi- cate organizational identity (e.g., Coupland and Brown 2004). If a franchisor communicates an inauthentic identity
to potential franchisees through disingenuous rhetoric, those that respond to the Web site will likely identify more closely with the inauthentic identity (Bhattacharya and Sen 2003). This misalignment in goals and values is problematic as this creates additional agency costs to align the franchisee with the franchisor. Given the long-term nature of most franchis- ing contracts, this presents an interesting opportunity for future research to look at the long-term effects of misalign- ment. For example a study might look at the effects of misalignment on levels of agency costs, or on the probability of a variety of negative outcomes (e.g., early contract termination, non-renewal of the franchising contract, shirk- ing, reduced sales and royalties). This study conducted a content analysis of two samples of franchisors' Web sites to investigate how franchisors market their franchise opportunity to potential franchisees. Content analysis has been used on multiple occasions to measure the constructs of interest to this study (e.g., Bligh et al. 2004; Short et al. 2010). Still, a replication study using multiple different methods and sampling frames to test these hypotheses would shed further light on the external validity of our findings. Other methods used to measure organiza- tional identity include case studies/ethnography (e.g., Dutton and Dukerich 1991), surveys (e.g., Foreman and Whetten 2002) and content analysis of other organizational narratives such as shareholder letters (e.g., Short et al. 2009), each of which could be employed in the replication to provide a different perspective of the organization's identity. Further, extant research has used various industry-specific (e.g., Grünhagen and Mittelstaedt 2005) or cross-industry (e.g., Lafontaine and Kaufmann 1994) sampling frames that could be used to capture a broader range of franchises.
Conclusion Our study is the first to integrate the organizational identity and franchising literatures. We find evidence that franchi- sors use market orientation, entrepreneurial orientation, and charismatic leadership in their online franchising recruit- ment Web sites. For marketing scholars, our work suggests that such language might constitute a franchise brand that is associated with superior franchise performance. For practi- tioners, our work suggests that careful Web site manage- ment may have implications for the recruitment of potential franchisees.
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doc_203975122.docx
Franchising is the practice of using another firm's successful business model. The word 'franchise' is of Anglo-French derivation - from franc - meaning free, and is used both as a noun and as a (transitive) verb.
Reports Study on Organizational Identity Perspective in Franchise Branding
Abstract:- Despite the call for increased theoretical diversity in franchising research, the incorporation of organizational theory into this literature has been minimal. In response, we examine how aspects of organizational identity are repre- sented in franchisee recruitment Web sites. We develop the concept of franchise branding to understand how franchi- sors position franchise opportunities to attract potential franchisees. We find that firms in the Franchise 500 use more language associated with market orientation, entre- preneurial orientation, and charismatic rhetoric when compared to a sample of lower-performing franchises. We also examine the impact of franchisor size and age to examine how liabilities of size and newness impact language use. We find that larger firms tend to use more rhetoric but detect no significant differences based on age. We conclude by discussing future possibilities for incorpo- rating additional theoretical perspectives into the franchis- ing literature. Keywords Franchise . Market orientation . Entrepreneurial orientation . Leadership . Content analysis Franchising is a popular route to organizational growth, both in the United States and globally (Michael 2003). In 2005, United States franchises employed 11 million individuals and were responsible for 4.4% of the United States' privatesector economic output (IFA Educational Foundation 2005). In franchising, two independent parties establish an agreement whereby one firm (the franchisor) licenses the right to use its brand name and proprietary business processes to another firm or individual (the franchisee) in return for an initial payment and an annual royalty (Combs et al. 2004). Franchisors enter into these agreements to facilitate rapid growth while minimiz- ing the need to make large capital outlays, undertake significant new risks, and supply labor to facilitate such growth (Oxenfeldt and Kelly 1969). Consequently, fran- chising represents an important marketing strategy as franchisors encourage individuals to buy a franchise as a way to launch a new business with lower risk than launching a new venture. As such, franchising represents an important area of scholarly research in marketing (Varadarajan 2003). Scholars from a broad range of disciplines have contributed to the franchising literature (Combs et al. 2004); however, these scholars have rarely integrated multiple theoretical perspectives to rigorously investigate franchising phenome- na. Neumann (2002) argues that triangulating theories on a single phenomenon ("triangulation of theory") can facilitate idea generation and a better understanding of the phenom- enon. In this study, we use research on organizational identity to focus multiple theoretical lenses on the franchisor-franchisee relationship. In particular, we draw from research on market orientation, entrepreneurial orienta- tion, and charismatic rhetoric to examine how franchisors create a franchise brand that captures different aspects of their identity to attract potential franchisees.
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In support of the special issue's goal to integrate the marketing and organization theory literatures, we exam- ine how franchisors brand their franchising opportunities through projecting their organizational identity into the rhetoric on their corporate Web sites. We define rhetoric as the strategic use of words to persuade potential franchisees of the value of the franchisor's opportunity (c.f., Hartelius and Browning 2008). An organizational identity is the central and enduring perception of what makes an organization unique in the collective view of its members (Albert and Whetten 1985). Given that market- ing activities include the dissemination of organizational communications relevant to firm identity and its management (Christensen 1995), research in organizational identity provides an important theoretical lens with which to examine the solicitation of potential franchisees because franchisors seek to attract potential franchisees that align with their core values and beliefs. This alignment of identities is important as franchisees often have more latitude over the decision-making processes of their franchise than a manager of a corporate-owned/managed location might have (Kim 2000). If the decision-making tendencies of the franchisee are not in line with the organizational identity of the franchisor, this freedom may result in agency costs when the franchisee makes decisions that go against the wishes of the franchisor. Thus, the franchisor has an incentive to attract franchisees that identify with its organizational identity. To examine key elements of rhetoric associated with market orientation, entrepreneurial orientation, and charismatic leadership we examine language used in franchisors' franchisee recruitment Web sites. Organizational narratives, such as corporate Web sites, provide a tangible announcement of a firm's beliefs and values that reflect its unique identity (c.f., Pearce and David 1987). The market orientation construct examines how managers collect, disseminate and use information about the markets in which they compete (Kohli and Jaworski 1990; Pelham and Wilson 1996). Franchisors are incented to attract and select franchisees that that will share their marketing philosophy as many franchisees operate in markets that are difficult for franchisors to monitor with vigilance (Minkler 1990; Prendergast 1999). While correlated with and complementary to a market orientation, entrepreneurial orientation is a distinct strategic orientation, encompassing the behaviors and decision-making processes of entrepre- neurial businesses (Baker and Sinkula 2009; Lumpkin andDess 1996). To attract these would-be entrepreneurs, franchisors may use rhetoric consistent with their entrepreneurial orientation to highlight the entrepreneurial nature of the opportunity presented by franchise ownership. Leader behaviors provide an important catalyst with the potential to impact selling behavior (MacKenzie et al. 2001).
Charismatic rhetoric is used by leaders to convince followers to adopt the goals and ambitions of the leader as their own and to work together to accomplish these goals (Shamir and Howell 1999). Franchisors may use charismatic language to sell potential franchisees on a shared vision for the company, encourage them to incorporate the organizational identity of the franchisor into their future franchise, and to act in line with that vision and identity. In summary, there is reason to believe that these three constructs could influence how potential franchisees view a franchisor's opportunity. In summary, our study contributes to the marketing literature in three key ways. First, our incorporation of organizational identity brings a new theoretical perspective to the franchising literature, helping better explain the rhetoric used by franchisors when soliciting potential franchisees. We also incorporate two concepts from the organizational ecology literature—liabilities of newness and liabilities of smallness—to examine how franchising organizations may differ in their use of this rhetoric. Second, we show how content analysis can be used to identify how the rhetoric on franchisors' Web pages and other organizational narratives is used to attract potential franchisees. Content analysis is valuable in its ability to tap into the thoughts, beliefs, and values of organizations through their narratives (e.g., Short et al. 2010), and we provide a comparison between Franchise 500 firms and other franchisees to build understanding of the relationship between franchise performance and language use. Finally, drawing upon both the product and corporate branding literatures, we develop the "franchise brand" construct to facilitate research investigating how franchisors approach the marketing of their franchise opportunity to potential franchisees. In sum, this study provides both conceptual and empirical contributions to research on branding and franchising.
The role of franchise branding in attracting franchisees Given the ubiquity of franchises in the United States and internationally, potential franchisees have a broad range of franchising opportunities from which to select (Michael 2003). To facilitate franchise growth, franchisors must compete with each other by marketing their opportunity to franchisees. As a result, the franchisor develops a "franchise brand" with which to differentiate their opportunity, thereby attracting franchisees. The American Marketing Association defines a brand as "A name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers" (American Marketing Association 2010). Franchise branding, then, is the specific case of a franchisor marketing
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its franchising opportunity as a brand. While conceptually similar to corporate branding (Aaker 2004) and product or service branding (Aaker 1996; Gardner and Levy 1955), we posit that franchise branding is a necessarily distinct construct. Corporate branding takes place when a company creates organizational associations with the company's identity, reinforcing in a broad range of stakeholders' minds that the company will stand behind its products and services (Aaker 2004). Franchise branding is distinct in several key ways. First, the franchisor is specifically marketing an opportunity with the intent to "sell" the potential franchisees a contract. Further, franchise branding focuses on a target audience of potential franchisees whereas corporate branding is broader in its target audience (which would include, but not be limited to, potential franchisees). Despite being a distinct construct, a franchise brand should be similar to a corporate brand in several key ways. One way is that the franchise brand also incorporates aspects of the organization's identity, for instance, its core values and activities (Argenti and Druckenmiller 2004). This may reduce adverse selection in franchisee selection through the reduction of informa- tion asymmetries (Shane 1998). In doing so, the franchisor aims to attract franchisees that align with its values and goals and deter those that do not. Further, misfit between company and customer perceptions of the corporate brand has been shown to decrease customer loyalty and satisfaction (Anisimova 2010). Since the franchisee is a customer-facing agent of the franchisor, aligning the corporate and franchise brands should result in higher customer satisfaction. Finally, the franchisor's corporate branding before signing a franchising contract signals to the franchisee that the franchisor will likely continue to invest in brand development (Mathewson and Winter 1985). Franchise branding is also similar to product or service branding. Since the franchisor is selling the opportunity to open a franchise as a product/service to a target market of potential franchisees, the branding surrounding the opportunity may be similar to product or servicebranding. For instance, brand identity is a critical aspect of product branding, highlighting the advantages of one's product over rival offerings (Doyle 1989). To compete with rival opportunities the franchisor will need to build a franchise brand identity that differentiates the opportunity and resonates with its target market. Additionally, the process of brand image selection, implementation, and control is thought to be a vital part of brand management's leading to brand market performance (Park et al. 1986). This process will also be important in influencing the potential franchisees' perceptions of the franchising opportunity, facilitating self-selection by franchisees that would fit well with the franchisor.
The role of organizational identity in franchise branding An organizational identity refers to the central and enduring attributes of an organization that distinguish it from other similar firms (Albert and Whetten 1985). These identities help organizations make difficult decisions, guide the interpreta- tion of organizational issues, subsequent decision making (Dutton and Dukerich 1991), and influence the survival and performance of organizations (Barney et al. 1998). Franchisors draw from their organizational identity to convey an intended image through their franchise branding. To the extent that the franchisor's reputation aligns with the identity of the potential franchisee, the potential franchisee will more strongly identify with that franchisor, making them more likely to seize that franchisor's opportunity (Bhattacharya and Sen 2003). Furthermore, potential franchisees have a large number of opportunities and pit franchisors against each other to demonstrate the benefits of selecting their franchising opportunities. Such evalua- tions are especially critical to single-unit franchisees, who tend to emphasize the nonfinancial aspects of franchise ownership (Grünhagen and Mittelstaedt 2005). This emphasis on the nonfinancial aspects of franchise ownership makes it even more important for franchisors to convey the beliefs and values that distinguish their organization from their competitors through their fran- chise branding activities if they hope to generate interest in their franchising opportunity. The relationship between franchisor and franchisee is one of interdependence (Rodríguez et al. 2005). The franchisor depends on the franchisee as a source of income and to represent and grow the organization in a way consistent with the identity of the franchisor. The franchisee in turn depends on the franchisor to fulfill its commitments to assist with advertising, training, input sourcing, and other services (Achrol and Etzel 2003). Because of this interdependence and the possibility of double-sided moral hazard (Combs et al. 2004; Lafontaine 1992), the franchisor may align the intended image with its identity in organizational narratives to attract those franchisees that identify with its values (Bhattacharya and Sen 2003). In short, there is reason to believe that organizational identity may play a significant role in franchise branding. We apply this general logic to three key constructs associated with organizational narratives and relevant to the espousal of organizational identity, namely, market orientation, entrepreneurial orientation, and charismatic leadership, in the following sections. Market orientation and organizational identity A market orientation is characterized by the firm-wide generation, dissemination, and responsiveness to market information (Kohli and Jaworski 1990). It is best carried
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out by firms that view the gathering and sharing of market information as extending beyond the domain of the marketing department (Kohli and Jaworski 1990). While there are two prevailing definitions of market orientation (Ellis 2006)—MARKOR (Kohli and Jaworski 1990) and MKTOR (Narver and Slater 1990)—our study focuses on the MKTOR conceptualization of market orientation because it is the most common and comprehensive definition of the market orientation construct (Farrell 2002). MKTOR is composed of five dimensions: customer orientation, compet- itor orientation, interfunctional coordination, long-term focus, and profitability (Narver and Slater 1990). Conceptually, market orientation is viewed as a unidimensional construct due to the close relationships among the dimensions (Narver and Slater 1990). Within the context of market orientation, a customer orientation is the extent to which a firm understands and supports a customer's entire value chain (Narver and Slater 1990). Similarly, a competitor orientation is the extent to which a firm understands and preempts competitors by understanding both current and future ways in which customer value can be created and maximized (Narver and Slater 1990). Interfunctional coordination refers to the extent of interconnectedness of a firm's departments such that each unit collects and disseminates both customer and competitor information freely (Narver and Slater 1990). Long-term focus is the orientation of a firm toward long- term goals regarding all dimensions of market orientation (Narver and Slater 1990). Profitability is argued to be both an objective and component of market orientation (Kumar et al. 1998). Market orientation hinges on the cultural norms and behaviors perpetuated by top management (Jaworski and Kohli 1993). As management leads the culture of a firm to be more market oriented, the market orientation becomes central and enduring to the firm itself; thus the firm develops a market-oriented identity. A market-oriented firm commits itself to building a sustainable competitive advantage through the creation of superior customer value (Narver and Slater 1990). Franchisors espousing a market orientation in recruitment Web sites emphasize their commitment to marketing as a key aspect of the franchise brand. Market orientation is positively related to firm performance (Farrell 2002). Organizations that promote and capitalize on a market orientation tend to outperform other organizations with a lower market orientation (Kumar et al. 1998). As a result, franchisors identifying and recruiting franchisees that have a strong market orientation should perform better than those that do not. This market orientation, having become a central and enduring characteristic of the franchise, will be expressed in its recruitment Web sites as it attempts to attract potential franchisees that
align with the market-oriented franchise brand. We therefore propose: H1: Higher-performing franchisors will use more market orientation rhetoric than lower-performing franchisors in their recruitment Web sites. Entrepreneurial orientation and organizational identity An entrepreneurial orientation refers to the processes and practices that are characteristic of entrepreneurial companies (Lumpkin and Dess 1996). A firm with an entrepreneurial orientation is conceptualized to exhibit a combination of five characteristics: autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk taking (Lumpkin and Dess 1996). These dimensions have been found to influence firm performance (Rauch et al. 2009). Autonomy refers to the actions of individuals or teams to surface and pursue opportunities to completion (Lumpkin and Dess 1996). While franchisors typically want to standardize processes such that franchisees can address most issues by referring to the operations guide (Floyd and Fenwick 1999), not all issues can be addressed in this way. Understanding this, experienced, high-performing franchi- sors afford franchisees the autonomy to act on and resolve issues as they arise within certain bounds. Franchisees will seek opportunities where they perceive that their hands will not be tied, thus identifying with franchise brands that convey an image of autonomy. Because franchisees prefer some degree of autonomy, more interest and growth opportunities are provided to the already high-performing franchisors. Competitive aggressiveness is the aggressive organizational positioning or responses to competitors, unfavorable industry trends, and other external threats (Lumpkin and Dess 2001). The ability to compete effectively with one's competitors and manage external threats is vital for firm performance (Lumpkin and Dess 1996, 2001). Franchisees are a key source of growth and funds for franchisors, so for franchisees to become complacent would be counterproductive to the performance of the franchise. Thus, as long as the franchisee stays in line with the franchisor's overall strategy, franchisors would prefer that franchisees actively compete with rivals, and franchisors will convey their support of this as part of the franchise brand. Thus, high-performing franchisors will tend to espouse more competitive aggressiveness rhetoric than low-performing franchisors. Lumpkin and Dess (1996) define innovativeness as "a firm's propensity to engage in and support new ideas, novelty, experimentation, and creative processes that may result in new products, services, or processes" (p. 142). Innovative franchisees can contribute novel ideas and
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product concepts to the broader franchise, potentially improving the performance of the chain (e.g., Jambulingam and Nevin 1999; Strutton et al. 1993). While the franchisor may understand benefits of having innovative franchisees, some still prefer that the franchisee simply follow instruc- tions. This gives the franchisor more control over the operations of the franchisee but reduces the possibility of new cost-saving or revenue-generating initiatives from franchisees that would improve the performance of the chain. This suggests that emphasis on the innovativeness afforded in the opportunity in franchise branding may positively influence performance; as a result, highperforming franchises can be expected to espouse more innovativeness than lower-performing franchises. Proactiveness refers to a situation where a firm anticipates future changes and takes appropriate action to capitalize on the opportunity or mitigate the threat (Lumpkin and Dess 1996). Penrose (1959) highlighted that this forward-looking perspective is characteristic of entrepreneurial managers who, using this foresight, are able to drive firm growth by exploiting opportunities. Market intelligence sharing in the franchising relationship goes both ways (Dant and Nasr 1998). The franchisor shares information about the macro environment with the franchisee, and the franchisee shares information about the local market with the franchisor. To the extent that both the franchisor and franchisee are proactive in obtaining, disseminating, and acting upon this data, the franchise should outperform those that do not. As such, highperforming franchisors are more likely to convey proactiveness in their franchise branding activities than lower-performing franchisors. A defining characteristic of entrepreneurship is a willingness to assume risk in the face of uncertainty in exchange for entrepreneurial rents (Knight 1921). Similarly, franchisees make up-front and ongoing investments in their franchise with limited support from the franchisor in terms of mitigating the market risk of the venture. Therefore franchisees, in evaluating potential franchising opportuni- ties, will look to maximize their rewards, taking calculated risks in doing so. If a franchisor were to down-play the risk involved in launching a franchise, a prospective franchisee might also discount the potential rewards associated with the opportunity. Further, down-playing the risks associated with the franchise opportunity would be tantamount to misinforming the franchisee. In the case of a risk-averse franchisee, this may result in their leaving the franchise prematurely or their failure to sustain the business because they were not aware of the risks involved. Therefore, down-playing the risks associated with a franchise opportunity will likely lead to suboptimally performing franchises. In conjunction with the other dimensions, we argue that high-performing franchises will espouse a
higher entrepreneurial orientation than lower-performing franchises. Stated formally, H2: Higher-performing franchisors will use more entrepreneurial orientation rhetoric than lower-performing franchisors in their recruitment Web sites. Charismatic leadership and organizational identity The field of leadership provides a rich intellectual history with the potential to shed light on the franchisor-franchisee relationship. Conceptually, the field of leadership shares much in common with the broader domain of marketing (MacKenzie et al. 2001). Both leadership and marketing scholars are interested in organizational stakeholder influence processes, power relationships, and the alignment of diverse interests (e.g., Conger and Kanungo 1987; Fletcher 2004; Kim 2000). Despite this shared interest, leadership has been given limited attention in the marketing field and particularly in the franchising literature despite the clear parallels between the leader-follower and franchisorfranchisee relationships. Charismatic leadership, in particular, has important implications for understanding the franchisor-franchisee relationship. Charismatic leadership is defined as "an interaction between leaders and followers that results in (1) making the followers' self-esteem contingent on the vision and mission articulated by the leader, (2) strong internalization of the leader's values and goals by the followers, (3) strong personal or moral (as opposed to calculative) commitment to these values and goals, and (4) a willingness on the part of the followers to transcend their selfinterests for the sake of the collective (team or organization)" (Shamir and Howell 1999, p. 259). Franchisors communicate their mission, values, and goals, along with key elements of the franchisor's organizational identity, through their franchise branding with the objective of recruiting potential franchisees and inciting them to commit to the vision of the franchise both financially and emotionally. In the context of franchising, charismatic leadership may shed light on key issues germane to the growth and continued success of franchises. Charismatic leadership builds the leader-follower trust relationship, encouraging followers to forsake their own self-interests for the good of the group (Conger and Kanungo 1987, 1988). This relationship is enhanced through franchisor-franchisee vision, and goal alignment as communicated and assessed through the organizational identity of the franchisor. Developing an organizational identity that incorporates charismatic leadership and using its rhetoric in franchise branding is beneficial for franchisors when followers (e.g., franchisees) must make sacrifices and take risks to join the franchise (Floyd and Fenwick 1999).
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Further, the use of charisma in the leader-follower relation- ship promotes cooperation and attachment to the goals and interests of the franchise, encouraging followers to put in extra effort to accomplish the goals of the franchise (Bass 1990). Since the initial social distance between the franchisor and potential franchisees may be large (for example, when a potential franchisee views the franchisor's Web site), charismatic leadership (and the use of charismatic rhetoric) may assist in closing the gap between the franchisor and potential franchisees. Baum and colleagues (1998) studied the role of vision in entrepreneurial venture growth and found that the content and attributes of the vision (brevity, clarity, abstractness, challenge, future orientation, and ability to inspire) were related to the venture's success. Thus, charismatic rhetoric focuses on the vision of the leader and the motivational effects that charismatic leaders have on their followers (Shamir et al. 1993), such as increasing follower commitment and effort expended in the pursuit of organizational goals. Hence, charismatic rhetoric has the potential to incite action in followers (franchisees) within the recruitment process. The characteristics of charismatic rhetoric which enhance the leader-follower or franchisor-franchisee relationship include references to history and tradition, an emphasis on the collective identity, reinforcement of the collective efficacy, a focus on the leader's identifi- cation with the followers, references to values and moral justifications, references to hope and faith, and references to the followers' self-efficacy (Bligh et al. 2004; Shamir et al. 1994). Conceptually, charismatic leadership is measured by the following dimensions: collective focus, temporal orientation, follower's worth, similarity to followers, values and moral justification, tangibility, action, and adversity. The collective focus dimension examines whether the leader places increased emphasis on the group and less on the individual. Temporal orientation focuses on the extent to which the leader references history and traditions. Follower's worth refers to rhetoric that promotes the follower's "collective sense of self-efficacy" (Bligh et al. 2004, p. 218), while the similarity to followers dimension measures how much the leader emphasizes identification with the followers. Values and moral justification looks at leader references to the dominant social value of the followers (Shamir and Howell 1999). The tangibility dimension assesses the references to refer to future intangible goals rather than concrete outcomes (Bligh et al. 2004). The action dimension measures the communication of the leader's vision according to purpose and confidence. The final dimension of charismatic leadership is adversity, which measures the leader's mention of crisis and hardship associated with the current situation.
Together, these rhetorical elements of charismatic leadership communicate the vision, values, and mission of the franchisor with the purposes of motivating and appealing to franchisees. Additionally, these elements have been argued to influence followers' self-concepts, values, and motivations such that through the use of rhetoric, the franchisors enact a dynamic leader-follower relationship with their franchisees, with the ultimate goal of engaging followers in a stronger and more personal manner, resulting in a commitment to the franchise (Bligh et al. 2004; Shamir et al. 1994). Because franchisors in the Franchise 500 may benefit from including elements of charismatic leadership rhetoric in their Web sites since they may more easily attract franchisees and may develop stronger relationships with their franchisees based on shared morals, goals, and vision, we hypothesize the following: H3: Higher-performing franchisors will use more charismatic rhetoric than lower-performing franchisors in their recruitment Web sites. Liabilities of newness and franchises Extant research suggests that young firms face greater obstacles such as dependence on unfamiliar stakeholders, lower levels of legitimacy, and difficulties competing against established organizations than do older firms (Stinchcombe 1965). Young franchisors are no exception to the liabilities of newness (Castrogiovanni et al. 1993). Newer franchisors lack the experience necessary to determine the appropriate type of potential franchisee for their opportunity (Floyd and Fenwick 1999). New franchises are also less likely to have a well-established organizational identity (Albert and Whetten 1985). With- out a well-established identity, the firm may not have the knowledge to discern which franchisees fit with their franchising opportunity. This may lead them to overlook market orientation, entrepreneurial orientation, and charismatic aspects of their franchise brand for other more operational traits such as industry experience. This may also lead them to incorporate inappropriate levels of the associated rhetoric in their franchise branding. Addition- ally, newer franchises are unproven and thus are seen as less legitimate in the eyes of potential franchisees (Floyd and Fenwick 1999). Finally, newer franchises are in competition with older, more established franchises for the same potential franchisees (Weinrauch 1986). As a result, we assert that older, more established franchises will better understand the factors that make a potential franchisee desirable and will use more rhetoric associated with entrepreneurial orientation, market orientation, and charismatic leadership in their franchise branding to solicit
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those potential franchisees with these characteristics. More formally stated: H4: Firm age is positively related to the prevalence of market orientation rhetoric. H5: Firm age is positively related to the prevalence of entrepreneurial orientation rhetoric. H6: Firm age is positively related to the prevalence of charismatic rhetoric. Liabilities of smallness and franchises Liabilities of smallness are often discussed with liabilities of newness; however, they are conceptually distinct (Brüderl et al. 1992; Freeman et al. 1983). Liability of smallness suggests that smaller firms are faced with similar issues as new firms, including difficulty in raising capital, fewer tax benefits, and issues related to diseconomies of scale (Brüderl et al. 1992). In franchising, one salient liability of smallness is the lack of legitimacy in the eyes of potential franchisees. Smaller franchises struggle to acquire a critical mass of franchisees to legitimate themselves in the eyes of potential franchisees (Floyd and Fenwick 1999). Additionally, when a franchise has few corporate locations the immediacy of attracting franchisees is significant (Shane 1996). Thus, those franchises unable to quickly acquire franchisees will not likely survive. As a result, we posit that larger franchises are more likely to utilize rhetoric consistent with market orientation, entrepreneurial orienta- tion, and charismatic leadership in their franchise branding than smaller franchises. Stated formally: H7: Firm size is positively related to the prevalence of market orientation rhetoric. H8: Firm size is positively related to the prevalence of entrepreneurial orientation rhetoric. H9: Firm size is positively related to the prevalence of charismatic rhetoric. In summary, this study tests the extent to which franchisor performance, age, and size influence the degree to which franchisors leverage rhetoric indicative of a market orientation, entrepreneurial orientation, and charis- matic leadership in their franchise branding materials. Figure 1 provides a visual representation of the hypotheses tested in this study.
Franchise Performance
H1 (+) H2 (+) H3 (+) H4 (+)
Market Orientation Rhetoric
Franchise Age
H6 (+) H7 (+)
H5 (+)
Entrepreneurial Orientation Rhetoric
H8 (+)
Franchise Size
H9 (+)
Charismatic Leadership Rhetoric
Fig. 1 A conceptual framework model of franchise performance, size, and age characteristics on market orientation, entrepreneurial orientation, and charismatic leadership rhetoric
Method Sample description Our study leverages two samples: a sample of Franchise 500 firms and a random sample of firms not represented in
the Franchise 500. Because the Franchise 500 distinction identifies franchisors that are outperforming their nonFranchise 500 counterparts (Entrepreneur Magazine 2010), our purposive sampling approach allows us to make performance comparisons when examining differences in the rhetoric when between our two samples. The Franchise 500 sample was collected from the 2010 Franchise 500 list provided by Entrepreneur Magazine (2010). The Franchise 500 provides an attractive sampling frame for this study because it includes a large cross-section of franchisors from diverse industries, of varying sizes, and contains both public and private firms. The Franchise 500 is also a common sampling frame for research in franchising (c.f., Combs and Castrogiovanni 1994; Sen 1998). The majority of franchises in the Franchise 500 were retail establishments, including food services (e.g., Subway, McDonald's), consumer goods (e.g., Ace Hardware, Play It Again Sports), hotel/motel services (e.g., Country Inn &Suites, Hilton Garden Inn, Howard Johnson), automotiveservices (e.g., Midas International, AAMCO Transmissions), and household services (e.g., Mr. Rooter, Lawn Doctor). Most were privately-held companies franchising in the US. Our random sample of non-Franchise 500 companies was collected using a list of over 2,300 franchises collected from Gaebler (Gaebler 2010). The non-Franchise 500 sample also included companies that are generally privately-held and typically franchise within the US. Most are retail franchises including food services (e.g., Arby's LLC, Burger King), consumer goods (e.g., Do It Best Hardware, ASI Dollar Stores), financial services (e.g., American Billing Systems, Business Advisers International), and household services (e.g., Carpet Network, The Maids Home Services). The non-Franchise 500 companies were, on average, 3.16 years younger and had been a franchisor for 4.93 years fewer than the Franchise 500 companies. In terms of size, the non-Franchise 500 companies had approximately 468 fewer franchise locations but had 266 more employees than the Franchise 500 companies. We collected the text of the franchisee recruitment Web sites for all franchisors in both of our samples that had this
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content presented on their Web site. Franchisor Web sites play an important role in recruiting potential franchisees, are a key source of inquiries from prospective franchisees (Rao and Frazer 2004), and are valuable media through which franchisors communicate with potential franchisees (Young et al. 2004). To identify franchisee recruitment Web sites we looked for the following key words/phrases: "to be a franchisee", "own a business", "franchising information", "franchisee opportunity", "cooperation", and other permuta- tions thereof. Of the 500 franchisors on the Franchise 500 list, we were able to collect Web site text from 466 companies. Of the random sample of 500 unlisted franchisors, we were able to collect Web site text from 314 companies. Content analysis of corporate Web sites We measured the extent of market orientation, entrepreneurial orientation, and charismatic rhetoric in the franchisor recruitment Web site texts using content analysis. Content analysis is a commonly used technique to capture marketing phenomena of interest. Scholars have advocated for the use of content analysis in marketing research to build knowledge in areas including international marketing research (Wheeler 1988) and consumer research (Kassarjian 1977), and to measure constructs of interest such as market orientation (Zachary et al. 2011). Content analysis is particularly well-suited for analyzing documents in which the author conveys aspects of themselves in the narrative (Kassarjian 1977), making thistechnique ideal for measuring aspects of an organizational identity. One compelling advantage of using content analysis is its ability to avoid subjective errors and biases common to other techniques (e.g., interviews or surveys; Barr et al. 1992). Because of its potential to measure a number of theoretical constructs in entrepreneurship and marketing research in an efficient manner, we use the DICTION software package to conduct our computer-aided content analysis in this study (Hart 2000). Of significant relevance to this study, DICTION has previously been used to measure market orientation (Zachary et al. 2011), entrepreneurial orientation (Short et al. 2009; Short et al. 2010) and charismatic leadership (Bligh et al. 2004). Measuring performance The performance of franchises can be difficult to assess because many franchises are privately-held and do not frequently release quantitative performance data. However, the ranking of franchises in the Franchise 500 is based on criteria suitable to relative performance comparisons. Rankings are based on financial and operational data collected during the previous year (Entrepreneur Magazine 2010). These criteria include financial strength, financial stability, growth rate,
start-up costs, termination rates, and internal financing options (Entrepreneur Magazine 2010). Using these objective rank- ings allows us to make comparisons between Franchise 500 firms and those not represented in this elite list. Measuring market orientation While market orientation is commonly treated as a unidimensional construct, breaking it into its component parts can highlight how specific dimensions contribute to the overall market orientation (Greenley 1995). In this study we used a word list generated and validated by Zachary and colleagues (2011) to measure the five dimensions of market orientation (competitor orientation, consumer orientation, interfunctional coordination, long term focus, and profitability). Sample words representing each dimension of market orientation are presented in Table 1. Measuring entrepreneurial orientation We used the five dimension conceptualization of entrepreneur- ial orientation as the basis of our analysis (Lumpkin and Dess 1996). To measure each of the five component dimensions of entrepreneurial orientation (autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk taking), we leveraged the word list developed and validated by Short and colleagues (2010). This measure allows us to identify and quantify rhetoric indicative of each dimension of entrepre- neurial orientation. Sample words for each of the dimensions of entrepreneurial orientation are presented in Table 2. Measuring charismatic leadership Charismatic leadership was measured using eight dimensions which represent concrete examples of the characteristics of charismatic language identified by Shamir and colleagues (1994). These dimensions include: (1) temporal orientation, (2) collective focus, (3) appeals to followers' worth, (4) similarity to followers, (5) values and moral justifications, (6) tangibility, (7) action, and (8) adversity (Bligh et al. 2004). Each dimension was operationalized in accordance with the procedure delineated by Bligh and associates (2004). Hence, these constructs were developed using the dictionaries included in the DICTION software as well as custom dictionaries. Sample words for each construct can be found in Table 3. Measuring liabilities of newness/smallness We gathered available size and age data for the Franchise 500 sample of franchisors. The number of global franchises served as the measure of franchise size. Age was measured as the age of the firm in years.
. Table 1 Evidence of a market orientation in franchisors' recruitment Web sites Dimension Consumer Orientation Definition The sufficient understanding of one's target buyers to be able to create superior value for them continuously A seller understands the short-term strengths and weaknesses and long-term capabilities and strategies of both the key current and the key potential competitors The coordinated utilization of company resources in creating superior value for target customer Example words buyer, customer, patron Examples in recruitment Web sites "Because cruise purchasers benefit from the education and relationships they can only get from a professional cruise planner" (#134-Cruise Holidays) "What started as a meeting of the minds between two rival travel professional agencies has become an awardwinning franchise company" (#62-Cruise Planners American Express) "In addition to introducing you to our various support departments, the opening and integration team will train you on key operational tools" (#135-Knights Inn) "What we hope is a long successful relationship with our well known and well respected brand" (#076-Checkers Drive-In Restaurants Inc.) "You'll want to own a profitable and fulfilling business, yet you won't want to recreate the wheel" (#65-ActionCoach)
Competitor Orientation
competitor, entrant, rival
Interfunctional Coordination
collaborate, integrate, joint
Long-Term Focus
Profitability
Constantly discover and implement additional value for customers, which necessitates a range of appropriate tactics and investments Create and maintain overriding profit
continuing, permanent, shared
earnings, income, profits
Table 2 Evidence of an entrepreneurial orientation in franchisors' recruitment Web sites Dimension Autonomy Definition Actions of individuals and teams to carry new ideas to completion Example words autonomous, freedom, independent Example in recruitment Web sites "Franchise owners enjoy the authority to steer their business and control their own careers" (#075-Express Employment Professionals) "Now in our fifth decade, Jani-King has developed industry-specific contract cleaning programs that keep our franchise owners on top of current trends and allow them to stay competitive" (#8-Jani-King) "To help you stay ahead of the competition, we work constantly to identify and respond to consumer trends, expand regional products and Fresh Foods, and accelerate product innovation" (#3-7-Eleven) "Encourage you to continue your exploration of how your entrepreneurial interests combined with our proven business plan can launch you into a new and exciting career" (#221-DirectBuy Inc.) "The ideal candidate loves learning, sees business as an adventure, wants to make a difference" (#238-Learning Express)
Competitive Aggressiveness
Tendency to challenge competitors to gain entry to outperform marketplace rivals
ambitious, contest, rival
Innovativeness
Willingness to experiment and create in order to exploit marketable ideas and inventions
create, imaginative, radical
Proactiveness
Focus on anticipating future needs and marketplace changes
anticipate, inquire, proactive
Risk Taking
The degree to which organizations make large resource commitments that have a chance of costly failure
bold-spirited, daring, uncertain
. Table 3 Evidence of charismatic leadership in franchisors' recruitment Web sites Dimension Collective Focus Definition Emphasizes and affects followers sense of collective identity Example words assembly, residents, crowd Example in recruitment Web sites "Our annual convention is more like a family reunion. And our Seminars at Sea are the perfect way to reconnect with members while you learn" (#062-Cruise Planners American Express) "We have a proven business concept that has existed since 1984 and we operate in a growing, recession resistant industry" (#030-Vanguard Cleaning Systems) "Lawn Doctor is made up of intelligent, business-minded people like you!" (#91-Lawn Doctor)
Temporal Orientation
References history and tradition by describing past successes and emphasizes future rewards Emphasizes the benefit of joining the group to share the same identity and promises followers the bright future that comes from working with the group Points out similarities between the leader and the followers to gain the followers' acceptance and build trust Emphasizes values and moral justifications that match or are closely related to followers' social values References to future intangible goals versus more concrete outcomes Inspire followers to pursue and accomplish goals based on the leaders' insight Referring to hardship or intolerable situations
take, want, took, wanted
Follower Worth
admirable, leadership, devotion
Similarity to Followers
anybody, everybody, family
"We will direct you to franchisees that may have similar experiences or situations to provide the most value for your time" (#471-Snip-Its) "It offers hope to nearly 12 million people each year through the security of employment" (#075-Express Employment Professionals) "More than 62% of U.S. households have one or more pets; 65 million households have dogs" (#250-Petland) "If you have determination and the inner drive to achieve, we want you" (#455-Fun Bus Fitness Fun on Wheels) "Monitoring [a] hotel is a day to day challenge?" (#1020-Accor Hotels)
Values
charity, faith, justice
Tangibility
businessman, factory, school
Action
desperate, loss, outrage
Adversity
Contemptible, fear, never
Results The means, standard deviations, and correlations for each of the constructs are listed in Table 4. The significant positive correlation of the individual dimensions of each construct is consistent with the extant literature and demonstrates the convergent validity of the dimensions. We tested for statistical differences between Franchise 500 and non-Franchise 500 franchises using a multiple analysis of variance (MANOVA). Each construct was tested individually and yielded significant results. In each case, Franchise 500 franchises used a greater amount of rhetoric consistent with market orientation, entrepreneurial orientation, and charismatic leadership than non-Franchise 500 franchises (market orientation Wilks' ?=0.983, p<0.01), entrepreneurial orientation Wilks' ?=0.931, p<0.01, and charismatic leadership Wilks' ?=0.942, p<0.01). Thus Hypotheses 1, 2, and 3 were supported. The MANOVA output as well as the ANOVA output for each dimension of each construct is displayed in Tables 5, 6, and 7.
To test the liabilities of newness and liabilities of smallness and their effect on franchise branding and associated language, we performed three regression analy- ses on the Franchise 500 franchise sample. Hypotheses 4 and 7 proposed positive relationships between age and market orientation rhetoric, as well as size and market orientation rhetoric. Our regression analysis indicated that while age was not significant (?=?0.06; p>0.05), size was positively associated with market orientation rhetoric (?=1.80; p<0.01), supporting Hypothesis 7. Hypotheses 5 and 8 suggested similar relationships between age, size, and entrepreneurial rhetoric and found similar results. Franchise age did not significantly influence entrepreneurial rhetoric (? =?0.06; p > 0.05); however, size was positive and significant (?=1.80; p<0.01), supporting Hypothesis 8. Finally, Hypotheses 6 and 9 looked at age, size, and charismatic rhetoric. These hypotheses yielded similar results with no significant impact of age (?=?1.92; p>0.05) and a significant and positive influence of size (?=42.82; p<0.01), supporting Hypothesis 9. All three regression analyses explained signif-
.
Table 4 Descriptive statistics and correlation matrix
S D 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7
Mea n
.52 .30 .40 .32 -.03 -.02 -.02 .06 .01 .05 -.06 .08 .01 .06 .02 .08 -.05 .04
** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
**
1. Competitor Orientatio n 2. Consumer Orientation 3. .29 .51 .35 .01 .02 .01 .02 .06 .10 -.02 .06 .04 .07 .05 -.04 .05 .04
** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
1.5 5 6.3 7 0.9 .19 .19 .03 .04 .13 .07 .20 .46 .17 -.07 -.04 -.02 .44 -.08 -.07 .06
** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
2.5 9 6. 4 6.3
Interfunctional Coordinatio n 4. Long-Term Focus 5. Profitability .39 .29 .24 .45 .26 .19 -.01 -.02 .02 .66
** ** ** ** ** ** ** ** ** **
2 2.8 1 4.2 5 6.3 8 2.7 -.02 .03 .50 .55 .40 .15 .04 -.07 .13 .75
** ** ** ** ** ** ** ** ** **
8 2.7 7 9.4 .02 .07 .02 .03 -.05 .09 -.01 .03 .07 .03 .07 .0 2 0 .0 1 2 .0 6 3 .0 0 .0 1 .0 .0 4 .0 .0 6 .0
** ** ** ** ** ** ** ** ** **
6. Autonomy
9 2.7 7 2.2
7. Competitive Aggressivene 8. ss Innovativeness 9. 7 9.4 5 3.2 .05 -.02 -.03 -.03 .00 -.03 .03 .0 1 .02 .0 1
** ** ** ** ** ** **
1 10.7 1 2.5 .08 .06 .02 .02 .01 .12
** ** ** ** ** **
Proactiveness 10. Risk Taking 11. Collective .28 .11** .06 .05 -.10** .10** .53
** ** ** **
6 0.7 4 10.4 .01 -.04 .06 .65
** ** ** **
4 1.3 2 8.5 -.21 .06
**
Focus 12. Temporal Orientatio Follower Worth 13. n
**
.13 -.03 .26
**
**
2 17.6 8 16. 1 140.5
7 7.8 7 7.1 9 19.5
.14
**
**
.15 .01 -.08
** **
**
-.05 .24 -.04
** ** **
**
.12 -.11 .17
** **
**
14. Similarity to Follower 15. s Values 16. Tangibility 1 358.3 7 78.5 -.03 -.10** .02
**
6 435.3 3 150.1 1 10.0 1 2.7 2
-.38 .05 .12
** **
**
-.07 -.16 -.04
** **
**
17. Action
-.16 -.10** -.02
**
-.11 -.05
**
**
.19 .07
**
**
18. Adversity
8 14.8 3 3.
.07
**
8
.02
.0 3
**
p<0.1; p<0.05
*
. Table 5 ANOVA/MANOVA procedure of market orientation dimensions between Franchise 500 and random sample Market orientation MANOVA Franchise 500a Customer Orientation Competitor Orientation Interfunctional Coordination Long-Term Focus ** p<0.01
a b
Wilks'? 0.938 Random Sampleb 3.64 0.89 0.45 1.75 2.73 9.46 6.37 1.55 0.92 2.81 4.29 15.94
Overall F 10.09** F-value 44.37** 15.67** 12.9** 20.37** 16.95** 45.55**
Profitability Overall Market Orientation
n= 466 n = 314
icant variance in the dependent variables: market orientation (F=5.80; p<0.01; R2=0.03), entrepreneurial orientation (F=5.86; p<0.01; R2=0.03), and charismatic leadership (F= 5.42, p<0.01; R2=0.02). In sum, Hypotheses 4, 5, and 6 were not supported, and Hypotheses 7, 8, and 9 were supported. We conducted a post hoc analysis investigating differences among industries in the level of entrepreneurial orientation and charismatic leadership rhetoric and found significant differences in the language usage associated with these two constructs (p<0.01); however, we found no differences in the use of market orientation rhetoric. These results are consistent with the extant knowledge surrounding these three constructs. Entrepreneurial orientation has been suggested to be moderated by both internal and external contingencies, suggesting that contextual considerations such as industry membership may introduce variance in entrepreneurial orientation rhetoric (e.g., Lumpkin and Dess 1996; Rauch et al. 2009). Charismatic leadership has also been argued to be context-dependent (Mumford et al. 2008). However, research on market orientation has suggested that being marketoriented is a salient goal for all organizations, and therefore it may not vary significantly between industries (Narver and Slater 1990). Future research could build on our efforts by examining the degree to which rhetoric is driven by firm characteristics, industry differences, or perhaps differences driven by industry groups (c.f., Short et al. 2007).
Discussion Franchising represents an important business model both within the US and globally (Combs et al. 2004). However,
Table 6 ANOVA/MANOVA procedure of entrepreneurial orientation dimensions between Franchise 500 and random sample Entrepreneurial orientation MANOVA
our understanding of franchise branding practices in the context of organizational identity is limited. This study represents a first step in filling this knowledge gap and makes three contributions to the branding and franchising literatures. The first major contribution is that our paper explicitly draws from the organizational identity literature to help understand franchise branding phenomena. Using the organizational identity lens, we argue that franchisors look for franchisees that are of similar levels of entrepre- neurial and market orientation as themselves and commu- nicate with these potential franchisees using charismatic rhetoric. Thus, organizational identity can be valuable in explaining how franchisors brand their franchise opportu- nity in a way that appeals to their preferred segment of potential franchisees. The general question firms use when considering their organizational identity ("who are we as an organization?") might be used to explain a variety of marketing phenomena. In addition to franchise and corporate branding, product branding can be greatly informed by better understanding of the identity of the organization. The role of product branding has changed in recent years with the transition of marketing to social media (Marketing Science Institute 2010). Today, brands not only carry functional and emotional attributes but also convey aspects of the organizational identity of the producer (Marketing Science Institute 2010). Because the identity of the organization is conveyed through product branding efforts, it may be valuable to investigate the ways in which these identities are reflected in product branding campaigns and the brand equity consequences of different manifestations of organizational identity.
Wilks'? 0.931 Franchise 500a Random Sampleb 1.53 1.24 6.54 1.22 0.47 2.77 2.21 10.71 2.56 0.74
Overall F 11.45** F-value 10.98** 28.83** 41.78** 41.96** 10.23**
Autonomy Competitive Aggressiveness Innovativeness Proactiveness Risk-Taking
** p<0.01
a
n= 466 b n
= 314
. Table 7 ANOVA/MANOVA procedure of charismatic leadership dimensions between Franchise 500 and random sample Charismatic leadership MANOVA Franchise 500a Collective Focus Temporal Orientation Follower's Worth Similarity to Followers Values & Moral Justification * p<0.05 ** p<0.01
a b
Wilks'? 0.942 Random Sampleb 8.95 17.92 16.30 142.66 1.07 52.52 14.93 3.94 10.42 17.69 16.10 140.56 2.52 150.18 14.83 3.80
Overall F 5.01** F-value 5.86* 0.18 0.14 2.17 14.36** 22.17** 0.02 0.45
Tangibility Action Adversity
n=466 n=314
Relationship marketing may also benefit from further integration of organizational identity theory. Marketing scholars have begun to examine influence of individuallevel identity on relationship marketing phenomena (e.g. Arnett et al. 2003); however, research drawing from organizational identity is needed. A future study might draw from organizational identity theory to explain the relationship between consumers' identification with the selling organization's identity and the efficacy of relation- ship marketing efforts. Specifically, organizational identity theory suggests that when the values and goals of the consumer and the selling organization are aligned, relation- ship marketing campaigns within that segment should perform better than with segments where the values and/ or goals are in conflict. The second major contribution of this paper is our use of content analysis to identify how franchisors use rhetoric indicative of a market orientation, entrepreneurial orientation, and charismatic leadership on franchise recruitment Web sites to attract potential franchisees. Our findings indicate that franchisors convey these in their franchise recruitment Web sites and that high-performing franchisors tend to do so more than lower-performing franchisors. This is consistent with recent meta-analyses indicating a positive relationship between firm performance and both entrepreneurial orientation (c.f., Rauch et al. 2009) and market orientation (c.f., Ellis 2006). We also find that larger franchisors tend to incorporate more rhetoric indicative of a market orientation, entrepreneurial orientation, and charismatic leadership in their franchise branding than do smaller franchises. This suggests that franchising organizations may be able to use an emphasis on market orientation, entrepreneurial orientation, and charismatic leadership to help overcome the liabilities of smallness. However, we did not find differences between young and old firms among these dimensions, suggesting that they may not help overcome the liabilities of newness. These findings provide empirical reinforcement in distinguishing between the liabilities of newness and the liabilities of smallness as distinct constructs (c.f., Brüderl et al. 1992; Freeman et al. 1983).
The third major contribution of this paper is the development of the franchise branding concept and the couching of this concept in the greater branding literature as similar to, yet conceptually distinct from, product, service, and corporate branding. Franchisees are seen as an important source of growth, funds and distribution in the marketing and management literatures (e.g., Michael 2003;Oxenfeldt and Kelly 1969). However, the means by which franchising organizations recruit potential franchisees, particularly through branding activities, is sparsely addressed (Macmillan 1996). This gap in the franchising literature presents an opportunity for further research using organizational theory and the franchise branding concept. This study leveraged research in organizational identity to examine how franchisors build a franchise brand to attract potential franchisees. Future research could build on our efforts by incorporating other key areas of marketing research. Consequently, we present a number of possibilities based on the research priorities developed by the Marketing Science Institute (e.g., Marketing Science Institute 2010). The Marketing Science Institute (2010) developed these priorities in consultation with prominent scholars and practitioners to guide marketing research into high-impact areas, particularly relating to the rapidly changing business environment. For example, drawing on institutional theory (e.g., DiMaggio and Powell 1983), future studies might look at how social, ethical and regulatory issues affect how franchisors portray their franchising opportunity. Leveraging information pro- cessing theory (e.g., Bettman 1979), a future study might also look at how different franchise branding tactics could influence the decision to pursue specific franchising oppor- tunities. Table 8 presents these and several other opportuni- ties for future research where organizational theories might inform the franchise branding literature. Implications for theory building There has been debate in the franchising literature regarding whether franchisees are more like entrepreneurs or investors (Grünhagen and Mittelstaedt 2005). This study finds that
. Table 8 Potential research questions integrating franchise branding with organizational theory MSI research priority Using Market Information to Identify Opportunities for Profitable Growth Understanding Customer Experience and Behavior Developing Marketing Capabilities for a Customerfocused Organization Identifying and Realizing Innovation Opportunities Organizational theory Institutional Theory (e.g., DiMaggio and Powell 1983) Information Processing Theory (e.g., Bettman 1979) Stakeholder Theory (e.g., Donaldson and Preston 1995) Potential franchise branding research question How do social, ethical and regulatory issues affect how franchisors portray their franchising opportunity? How do different franchise branding tactics influence the decision to pursue a franchise opportunity? To what extent is the market orientation espoused in franchise branding materials related to the level of support and services provided to franchisees on an ongoing basis? What is the role of current franchisees in the updating of the franchise branding strategy of the franchisor and the attraction of new potential franchisees? To what extent are firms able to adapt their franchise brand positioning to societal changes such as the rise of social and mobile media? Does franchise branding practice systematically differ in global franchises versus national or local franchises? How does the size of the market segment of potential franchisees for a franchising opportunity influence the annual spend on and types of franchise branding activities? How might franchisees' assessments of the franchise brand, conveyed through narratives such as blogs, emails, and other commentaries, be used to assess the extent to which they identify with the franchise?
Networks (e.g., Granovetter 1973)
Delivering Value Through Enhanced Media and Channels Managing Brands in a Transformed Marketplace Allocating Resources to Marketing Activities
Organizational Ecology (e.g., Hannan and Freeman 1977)
Contingency Theory (e.g., Donaldson 1996) Resource Dependence (e.g., Pfeffer and Salancik 1978)
Leveraging Research Tools and New Sources of Data
Organizational Identity Theory (e.g., Albert and Whetten 1985)
franchisors use entrepreneurial rhetoric in their franchise branding to attract potential franchisees, suggesting that franchisors either view franchisees as being similar to entrepreneurs or prefer those franchisees that are. Future studies might investigate which of these suggestions best represents franchisors' perceptions of franchisees. Regardless of the outcome of such a study, our findings suggest that entrepreneurial rhetoric in franchise branding materials and franchise performance are positively related (c.f., Rauch et al. 2009). Since a major justification for franchising is to grow the franchise (Oxenfeldt and Kelly 1969), it is not surprising that franchisors would attempt to recruit franchisees that would behave more like entrepreneurs than investors. Evidence of charismatic rhetoric in franchise branding offers new insight into how organizational identity congruence, as relates to vision and goal alignment between franchisors and franchisees, may influence the franchisee recruitment process. Considering the role of power and influence in the franchising context allows for an integration of the leadership and franchising fields, yet a greater understanding of how followers (i.e., franchisees) evaluate franchises based on the three components of
organizational identity examined in this paper is necessary. Future studies could address the follower side of the franchisor-franchisee relationship by interviewing or survey- ing followers to better understand what about the recruitment Web site or other franchise branding media influenced their decision to select a particular franchise opportunity. Doing so would shed more light on the context in which these decisions are made. Implications for empirical research Level of measurement and analysis has been an issue for researchers investigating entrepreneurial orientation. Although entrepreneurial orientation is an organizational-level construct, many extant studies have measured the level of entrepreneurial orientation using single-respondent, selfreport measures (e.g., surveys) (Lyon et al. 2000). Such an approach to measuring organizational-level constructs can be problematic when the researcher is unable to parse out the organizational from the individual characteristics (Lyon et al. 2000). This study illustrates how franchisor recruitment Web sites can provide a viable
.
complement or even alternative to the use of surveys to assess the entrepreneurial orientation of franchisors. Implications for practitioners The ultimate goal of a franchisor's recruitment Web site is to promote the franchise such that potential franchisees will commit their time and resources to the venture. Hence, those franchisors that better communicate their organizational identity may have greater success in recruiting franchisees that identify with this identity, leading to greater profits and a larger number of franchised locations. Our study suggests that franchisors use entrepreneurial, market- ing and charismatic rhetoric to convey this identity and influence franchisees to behave in a manner consistent with the identity of the franchisor. Future research in this area might investigate the mechanisms by which this rhetoric attracts new franchisees and the extent to which it reduces agency costs through the alignment of franchisors' and franchisees' identities and decision-making processes. Our study also has implications for franchise applicants. Evidence of market and entrepreneurial orientations in the franchise branding materials suggests that franchisors may prefer franchisees that will behave entrepreneurially and actively pursue and leverage market knowledge. As such, would-be franchisees that position themselves in line with these preferences may find themselves sought after by franchisors and may be able to negotiate more favorable terms (e.g., more favorable contract termination policies, lower royalties, or additional services rendered by the franchisor) in the franchise agreement negotiation process (Kim 2000). Limitations The findings and contributions of this paper should be viewed with consideration of its limitations. It is likely that the rhetoric on franchisors' Web sites contains elements created with the goal of persuading potential franchisees of the merits of the franchisors' business model. Both Web site content and style have been shown to influence the extent to which potential new employees are attracted to an organization (Cober et al. 2003). All else held equal, in recruiting potential franchisees, the organization would want to use rhetoric that would attract the most promising new franchisees. However, agency and organizational identity/image theories suggest that the rhetoric used will still generally be in line with the organization's identity. Organizations frequently communicate their identity to stakeholders through the use of signs and symbols (Albert and Whetten 1985). Web sites and the rhetoric contained therein, with their symbolic content, then can be used to communi- cate organizational identity (e.g., Coupland and Brown 2004). If a franchisor communicates an inauthentic identity
to potential franchisees through disingenuous rhetoric, those that respond to the Web site will likely identify more closely with the inauthentic identity (Bhattacharya and Sen 2003). This misalignment in goals and values is problematic as this creates additional agency costs to align the franchisee with the franchisor. Given the long-term nature of most franchis- ing contracts, this presents an interesting opportunity for future research to look at the long-term effects of misalign- ment. For example a study might look at the effects of misalignment on levels of agency costs, or on the probability of a variety of negative outcomes (e.g., early contract termination, non-renewal of the franchising contract, shirk- ing, reduced sales and royalties). This study conducted a content analysis of two samples of franchisors' Web sites to investigate how franchisors market their franchise opportunity to potential franchisees. Content analysis has been used on multiple occasions to measure the constructs of interest to this study (e.g., Bligh et al. 2004; Short et al. 2010). Still, a replication study using multiple different methods and sampling frames to test these hypotheses would shed further light on the external validity of our findings. Other methods used to measure organiza- tional identity include case studies/ethnography (e.g., Dutton and Dukerich 1991), surveys (e.g., Foreman and Whetten 2002) and content analysis of other organizational narratives such as shareholder letters (e.g., Short et al. 2009), each of which could be employed in the replication to provide a different perspective of the organization's identity. Further, extant research has used various industry-specific (e.g., Grünhagen and Mittelstaedt 2005) or cross-industry (e.g., Lafontaine and Kaufmann 1994) sampling frames that could be used to capture a broader range of franchises.
Conclusion Our study is the first to integrate the organizational identity and franchising literatures. We find evidence that franchi- sors use market orientation, entrepreneurial orientation, and charismatic leadership in their online franchising recruit- ment Web sites. For marketing scholars, our work suggests that such language might constitute a franchise brand that is associated with superior franchise performance. For practi- tioners, our work suggests that careful Web site manage- ment may have implications for the recruitment of potential franchisees.
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