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A Comparison of Finish and United States Franchisee Satisfaction


Paper to be presented at the EMNet-Conference on

"Economics and Management of Franchising Networks"

Vienna, Austria, June 26 – 28, 2003

www.univie.ac.at/EMNET 
 

A Comparison of Finnish and United States Franchisee Satisfaction 
 
 

Frank Wadsworth

Indiana University Southeast

United States 

Mika Tuunanen

University of Jyv�skyl�

Finland 
 

Douglas C. Haines

University of Idaho

United States

 

 

 

Abstract

This paper investigates, using a multi-dimensional model, differences between franchisee satisfaction in Finland and the United States.  Comparison of Finnish and American franchisee satisfaction levels is made across eight dimensions of franchisee satisfaction.

      Data was collected using a postal survey of Quick Service Restaurant (Hamburger) franchisees in Finland and the United States. Results show franchisees in Finland and the United States are overall equally satisfied.  Data analysis revealed that for four of the eight dimensions, franchisees in both countries have statistically equal levels of satisfaction.  However, for the other four dimensions, a statistical difference exists between franchisee perceptions in the two countries.  United States franchisees are more satisfied than Finnish franchisees with the financial, entrepreneurial control, communication and franchise contract dimensions.

      A multiple regression model of franchisee satisfaction is able to explain 89 percent of the variation of franchisee general satisfaction with the variation of seven dimensions; financial, relation, support services, brand image, entrepreneurial control, contract and training.

      Future research comparing franchisee satisfaction among various countries should be undertaken to comprehend differences in franchisee satisfaction between countries.  Models explaining cross-cultural differences should be employed to explain different results for different countries.

 

 

Introduction

      A franchisor considering how to improve the effectiveness of their system might be concerned about how to improve franchisee satisfaction and whether satisfaction impacts performance.  A prospective franchisee might wonder whether they would be satisfied in a particular franchise system.  Franchisee satisfaction is an important construct in franchising.  Some studies have explicitly investigated franchisee satisfaction (Hunt and Nevin 1974, Hing 1995, Morrison 1996, Wadsworth and Haines 2000) and operationalized the construct with single or multiple item measures.  Franchisee satisfaction is an antecedant or consequence depending on the context. The purpose of this manuscript is to compare franchise satisfaction in a cross-cultural setting.

 

Literature Review

      Franchisee satisfaction may reasonably be viewed in the general context of channel relationships and channel satisfaction. Examinations of channel member satisfaction usually focus on the satisfaction of the downstream channel member. Channel member satisfaction is more often measured and modeled as an outcome, consequence or “terminal value” determined by other constructs such as power and dependence (Frazier and Summers 1984, 1986, Lusch 1976, and Skinner, Gassenheimer and Kelly 1992), conflict and cooperation (Gaski 1984).  Measures of channel member satisfaction include single item, overall satisfaction measures Ping (1994) and multi-item measures that address various asserted dimensions of the satisfaction construct (Gassenheimer, Sterling and Robicheax 1996, Gassenheimer, Davis and Dahlstrom 1998, Reukert and Churchill 1984, and Schul, Little and Pride 1985).

      Two fundamental dimensions of satisfaction are satisfaction with economic and non-economic aspects of the relationship (Geyskins, Steenkamp and Kumar 1999). In their meta-analysis, Geyskins, Steenkamp and Kumar (1999) suggest that the channel satisfaction literature may be reasonably organized into these two dimensions. This suggests an overriding economic dimension for alternative dimensions such as satisfaction with products, financial considerations (Ruekert and Churchill 1984), profits, new product opportunities, and growth potential (Gassenheimer, Sterling and Robicheaux 1996, Gassenheimer, Davis and Dahlstrom 1998). Non-economic aspects could include social interaction and cooperation (Ruekert and Churchill 1984), franchise administration, service support, policies and reward systems (Schul, Little and Pride 1985) and treatment by headquarters and local sales representatives, fairness and honesty, and concern for channel member’s goal accomplishment (Gassenheimer, Sterling and Robicheaux 1996, Gassenheimer, Davis and Dahlstrom 1998).

      Some have suggested that the franchisor-franchisee relationship might be considered an employer-employee relationship so that job-satisfaction dimensions apply (Morrison 1996). Salesperson job satisfaction is an antecedent of organizational commitment (Brown and Peterson 1993). Job satisfaction is a consequence of role perceptions  (Brown and Peterson 1993). In their meta-analysis of salesperson job satisfaction, Brown and Peterson (1993) noted that job satisfaction is not related to performance either as a consequence or a determinant. They suggest that sales performance is a terminal value for sales people. Using a job satisfaction model, Morrison (1996) examines franchisee satisfaction in terms of non-economic dimensions.

      A franchisee makes a long-term investment or purchase decision when they elect to begin a relationship with a franchisor.  In this sense, the franchisee is a customer of the franchisor and has entered into an agreement that might be characterized more as an agreement for service rather than product. One perspective in the service satisfaction literature suggests that customer characteristics and expectations are important in determining perceived service quality and satisfaction (Parasuraman, Zeithaml and Berry, 1994, Hing 1995).

      Recent franchisee satisfaction research has considered economic and non-economic dimensions (Elango and Fried, 1997), franchisee and franchisor characteristics, and expectations (Hing, 1995; Morrison, 1996). Economic dimensions of franchisee satisfaction can be broadly categorized as reward systems, perceptions of the franchisor’s contribution to the franchisee’s financial success, expectations for future success and growth, and satisfaction with cooperative advertising and promotion programs (Elango and Fried, 1997). Non-economic factors include autonomy, fairness, operations support, training, control systems, and communications (Elango and Fried, 1997). Morrison (1996) also suggests that characteristics of the franchisee such as extraversion and subjective well being contribute to franchisees’ job satisfaction. Recognizing that franchisee characteristics and expectations contribute to franchisee satisfaction, Hing (1995) suggests that franchisors more carefully and completely screen potential franchisees to ensure higher levels of franchisee satisfaction.

      A number of limitations exist with respect to past literature.  First, past studies have not examined franchisee satisfaction across different cultures.  Second, some past studies borrow scales without adapting the scale to a franchising context.

      A goal of the franchisee satisfaction measure is to be specific enough to distinguish franchisee satisfaction from other types of satisfaction, yet capture the franchisee satisfaction domain of most franchise systems.  In the context of this paper, franchisee satisfaction measures should be generalizable across different cultures.

 

Franchisee Satisfaction Measure

      A eight-dimension measure of franchisee satisfaction exists (Wadsworth and Haines 2000, Haines and Wadsworth 2001) but has not been tested in a cross-cultural setting.  Wadsworth and Haines used Churchill’s (1979) measure development procedure in designing their measure.  The eight factors are: Relationship, Financial, Training, Support Services, Fees, Brand Image, Entrepreneurial Control, and Franchise Contract.  Advisory Council is a new dimension that has only been used in the 2001 survey.

 

Data Collection

      Data was collected using a postal survey of Finnish and U.S. Quick Service Restaurants.  The procedures have been discussed elsewhere (Wadsworth and Haines 2000, Tunnanen 2001) and need not be repeated here.  This study used the data from 21 United States and 45 Finnish Quick Service Restaurant (Hamburger) franchisees.

 

Results

      Results are discussed in the following order.  First, we examine results of statistical tests designed to examine for differences between countries on the eight franchisee satisfaction dimensions and the general franchisee satisfaction dimension.  Following the single dimension analysis, we examine dimension reliability consistency across studies and the two countries.  Last, we examine the regression analysis results and implications from our study.

      Examining each dimension of franchisee satisfaction separately to determine if a statistical difference exists between the Finland and the United States franchisees showed that four of the dimensions had no statistical differences (Figure 1 and Figure 6).  Franchisee satisfaction with Relationship, Support Services, Brand Image, Training, and the General Franchisee Satisfaction Measure do not differ between Finland and the United States.  However, statistical differences do exist between Finland and the United States on Financial, Entrepreneurial Control, Communication, and Franchise Contract (Figures 2-5).  For every one of the dimensions with a statistical difference, United States franchisees are more satisfied than their Finnish counterparts.

      Table 1 shows the consistency of the measure dimensions across time, studies and countries.  Every dimension is remarkably consistent across time, studies and countries.  These results give us confidence in the validity of the measure and it’s generalizability.

      Regression results are shown in Tables 2-4.  When examining results separately for each country, they do not share dimensions that are significant predictors of general franchisee satisfaction.  For Finland, franchisees’ satisfaction with Relation, Brand Image, and Entrepreneurial Control are predictive of their general franchisee satisfaction.  For the United States, franchisees’ satisfaction with Financial and Contract dimensions were predictive of their general franchisee satisfaction.  When the data across the countries were combined to predict general franchisee satisfaction, Financial, Relation, Support Services, Brand Image, Entrepreneurial Control, Contract and Training dimensions were significant predictors.

 

Conclusions

      This study undertook to compare franchisee satisfaction across two different cultures.  Franchisees in the two cultures did differ on their satisfaction with the Financial, Entrepreneurial Control, Communication, and Franchise Contract dimensions.  Reliability analysis showed that franchisee satisfaction dimensions are generalizable across time, studies and cultures.  Regression analysis revealed that the dimensions are able to explain almost 90% of the variation of general franchisee satisfaction with seven of the eight dimensions.

      Limitations of the chosen research method include the use of a single data collection method rather than two or three methods.  Either an observational or other communication method such as in-depth interviews or existential phenomenology might lead to a different conceptual model. A second limitation is the use of the franchisee satisfaction measure in a single category of a single industry rather than across multiple categories or  industries.  A third limitation is the small sample size used in this study.

      A number of future directions are suggested by this study.  First, additional testing of the franchisee satisfaction measure with other franchise industries and systems is recommended.  Testing is necessary to confirm the reliability and validity of the measure.  Second, continued testing of the instrument over time should be used to determine if the satisfaction construct indicants are stable over time and cultures.  Finally, the goal of future research would be to place the franchisee satisfaction construct into a nomological network which will allow other researchers to use and confirm its appropriateness.  In particular, for cross-cultural work, the use of variables that could potentially explain difference across cultures would be important to increasing our understanding of what makes franchising successful in one culture but perhaps not be as successful in another culture. 

 

 References 

    Brown, Steven P. and Robert A. Peterson (1993), “Antecedents and Consequences of Salesperson Job Satisfaction: Meta-Analysis and Assessment of Causal Effects”, Journal of Marketing Research, 30 (1), 63-78. 

    Churchill, Gilbert A., Jr. (1979), "A Paradigm for Developing Better Measures of Marketing Constructs," Journal of Marketing Research, 16 (February), 64-73. 

    Churchill, Gilbert A., Jr. (1995), Marketing Research: Methodological Foundations, 6th ed., Fort Worth, TX: The Dryden Press. 

    Elango, B. and Vance H. Fried (1997), “Franchising Research: A Literature Review and Synthesis,” Journal of Small Business Management, 35(3), 68-82. 

    Frazier, G.L. and J.O. Summers (1984), “Interfirm Influence Strategies and Their Application Within Distribution Channels”, Journal of Marketing, 21(Summer), 43-55. 

    Frazier, G.L. and J.O. Summers (1986), “Perceprions of Power and Its Use Within a  Franchise Channel of Distribution”, Journal of Marketing Research, 23(May), 169-76. 

    Gaski, John F. (1984), “The Theory of Power and Conflict in Channels of Distribution”, Journal of Marketing, 48(Summer), 9-29. 

    Gassenheimer, Jule B., Jay U. Sterling, and Robert A. Robicheaux (1996), “Long-Term Channel Member Relationships”, International Journal of Physical Distribution and Logistics Management, 26 (5), 94-117. 

    Gassenheimer, Jule, E. J. Charlene Davis and Robert Dahlstrom (1998), “Is Dependent What We Want to Be? Effects of Incongruency”, Journal of Retailing, 74(2), 247-272. 

    Geyskens, Inge, Jan-Benedict E. M. Steenkamp and Nirmalya Kumar (1999), “A Meta-Analysis of Satisfaction in Marketing Channel Relationships”, Journal of Marketing Research, 36(2), 223-239. 

    Hing, Nerilee (1995), “Franchisee Satisfaction: Contributors and Consequences”, Journal of Small Business Management, 33(2), 12-26. 

    Hunt, Shelby and John Nevin (1974), "Power in a Channel of Distribution: Sources and Consequences," Journal of Marketing Research, 11, 186-93. 

    Lusch, Robert F. (1976), “Sources of Power: Their Impact on Intrachannel Conflict, Journal of Marketing Research, 13(November), 382-390. 

    Morrison, Kimberley (1996), “An Empirical Test of a Model of Franchisee Job Satisfaction”, Journal of Small Business Management, 34(3), 27-42. 

    Parasuraman, A., Valerie A. Zeithaml and Leonard Berry (1994), "Reassessment of Expectations as a Comparison Standard in Measuring Service Quality: Implications for Further Research," Journal of Marketing, 58(January), 111-124. 

    Ping Jr., Robert A. (1994), “Does Satisfaction Moderate the Association Between Alternative Attractiveness and Exit Intention in a Marketing Channel?”, Journal of the Academy of Marketing Science, 22(4), 364-372. 

    Ruekert, Robert W. and Gilbert A. Churchill, Jr. (1984), “Reliability and Validity of Alternative Measures of Channel Member Satisfaction”, Journal of Marketing Research, 21(May), 226-233. 

    Schul, Patrick L., Taylor E. Little, Jr. and William M. Pride (1985), “Channel Climate: Its Impact on Channel Members’ Satisfaction”, Journal of Retailing, 61(2), 9-38. 

    Skinner, S.J., J.B. Gassenheimer and S.W. Kelly (1992), “Cooperation in Supplier Dealer Relations”, Journal of Retailing, 8(Summer), 174-193. 

    Tuunanen, Mika (2001), An Ounce of Prevention is Worth a Pound of Cure: Findings from National Franchisee (Dis-)Satisfaction Study in Finland,” Proceedings of the 15th Annual Conference of the International Society of Franchising, Las Vegas, NV. 

    Wadsworth, Frank H. and Douglas C. Haines (2000), “Franchisee Satisfaction: A Measurement Approach,” Proceedings of the 14th Annual Conference of the International Society of Franchising, San Diego, CA. 

    Wadsworth, Frank H. and Wayne Jones (1996), “Franchisee Satisfaction Survey Report”, Proceedings of the Third Annual Convention of the American Franchisee Association, Washington, D.C. 
     

     

    Figure 1 

    Factor Score Averages

    (Non-significant culture differences) 
     
     
     
     
     

     

    Figure 2 

    Financial Factor Score Averages 
     
     
     
     
     
     

     

    Figure 3 

    Entrepreneurial Control  Factor Score Averages 
     
     
     
     
     

     

    Figure 4 

    Commuication Factor Score Averages 
     
     
     
     
     

     

    Figure 5 

    Franchise Contract Factor Score Averages 
     
     
     
     
     
     

     

    Figure 6 

    General Franchise Satisfaction Factor Score Averages 
     
     
     
     
     

     

    Figure 7 

    Response Distribution for Overall Franchise System Rating Question 
     
     

     

    Table 1 

    Reliability of the Eight Factor Solution Dimensions 

     


    Factor Coefficient Alpha

    (Number of Items)

      Wadsworth

    and Haines

    (2000)

    Finland

    (1999 data)

    U.S.

    (1999 data)

    Haines and Wadsworth (2001)
    Relationship .92 (5) .87 .84 .91
    Financial .85 (3)* .90 .91 .88
    Training .89 (5) .87 .90 .90
    Fees .81 (3)* .72 .93 .79
    Brand Image .86 (5) .88 .82 .82
    Entrepreneurial Control .89 (9) .79 .86 .86
    Franchise Agreement .86 (8) .78 .72 .85
    Advisory Council Not included Not included Not included .86
     

    * The use of a coefficient alpha with a three-item scale is questioned by some researchers.

       
     

     

    Table 2 

    Finland Regression Output 
     
     

    Model Summary 


    Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
    1 .941(a) .885 .862 .51398 1.945
     
     
     
     

    Coefficients 


       Unstandardized Coefficients Standardized Coefficients t Sig.
        B Std. Error Beta      
    (Constant) -1.241 .381    -3.255 .003
    Financial Factor Score Average .166 .105 .117 1.587 .121
    Relational Factor Score Average .310 .144 .284 2.157 .038
    Brand Image Factor Score Average .318 .116 .267 2.734 .010
    Entrepreneurial Control Factor Score Average .237 .103 .181 2.297 .028
    Communication Factor Score Average 3.270E-02 .140 .029 .233 .817
    Contract Factor Score Average .190 .150 .161 1.269 .213
    Training Factor Score Average .119 .098 .112 1.214 .233
     
     
     
     
     

    Table 3 

    United States Regression Results 
     

     

    Model Summary

     
    Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
    1 .968(a) .937 .893 .40037 2.198

     

    Coefficients

     
        Unstandardized Coefficients Standardized Coefficients t Sig.
        B Std. Error Beta      
    (Constant) -1.915 .542    -3.535 .005
    Financial Factor Score Average .696 .254 .480 2.734 .021
    Relational Factor Score Average -.096 .196 -.063 -.491 .634
    Brand Image Factor Score Average .104 .179 .100 .585 .572
    Entrepreneurial Control Factor Score Average .205 .199 .150 1.029 .328
    Communication Factor Score Average -.201 .158 -.179 -1.275 .231
    Contract Factor Score Average .853 .280 .485 3.044 .012
    Training Factor Score Average 3.806E-02 .133 .036 .287 .780
     
     
     

    Table 4 

    Combined Country Regression Results 
     

     

    Model Summary

     
    Model R R Square Adjusted R Square Std. Error of the Estimate
    1 .943(a) .890 .871 .47875
     
     
     
     

    Coefficients(a) 


       Unstandardized Coefficients Standardized Coefficients t Sig.
        B Std. Error Beta      
    (Constant) -1.855 .421    -4.406 .000
    Country .167 .164 .058 1.014 .315
    Financial Factor Score Average .276 .094 .200 2.928 .005
    Relational Factor Score Average .288 .117 .247 2.465 .017
    Support Services Factor Score Average -.384 .132 -.398 -2.907 .005
    Brand Image Factor Score Average .403 .088 .359 4.580 .000
    Entrepreneurial Control Factor Score Average .239 .086 .188 2.780 .008
    Communication Factor Score Average .151 .121 .137 1.251 .217
    Contract Factor Score Average .387 .116 .313 3.341 .002
    Training Factor Score Average .162 .080 .153 2.017 .049

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