An Empirical Evaluation of Conflict in the Franchise System
| Date | 01 December 1998 |
| Author | Steve Spinelli,Sue Birley |
| Published date | 01 December 1998 |
| DOI | http://doi.org/10.1111/1467-8551.00101 |
Introduction
There is ample theoretical justification to assume
the existence of conflict in the franchise relation-
ship. However, conflict can be a positive force
in a commercial relationship. Zonober (1990)
lists seven potentially positive results of conflict:
stimulating problem solving, causing parties to the
inter-organizational relationship to unite around
an issue, uncovering and defining problems, creat-
ing new learning opportunities, forcing the prior-
itizing of opportunities, preventing escalation
of unaddressed conflict and increasing mutual
understanding. The conflict literature is also
clear that the positive aspects of conflict dissipate
when that conflict manifests as dissatisfaction in
the relationship (Schul, 1987). Dissatisfaction
manifests for any number of reasons (Gaski,
1984) and it is the evolution of conflict, through
its five stages of latent, perceived, felt, manifest
and aftermath which can lead to the deterioration
of the relationship if the parties to the relation-
ship are dissatisfied with the resolutions (Pondy,
1992).
In an earlier paper (Spinelli and Birley, 1996)
we moved towards a theory of conflict in the fran-
chise system. We argued that there is a perceived
contract between the franchisor and franchisee.
This contract incorporates goal congruence with
the franchisor as an expectation of the franchisee.
These goals are validated or violated through
inter-organizational interaction, executed primarily
through franchisor-provided services. Moreover,
franchisees make a decision to remain in the
British Journal of Management, Vol. 9, 301–325 (1998)
An Empirical Evaluation of Conflict
in the Franchise System
Steve Spinelli and Sue Birley*
Babson College, Forest Street, Babson Park, MA 01257-0310, USA and *The Management School,
Imperial College of Science, Technology and Medicine, 53 Princes Gate, Exhibition Road, SW7 2PG, UK
This paper articulates the theoretical rationale for conflict in franchising, operationalizes
conflict through the measurement of franchisee satisfaction and labels empirically
supported stratified satisfaction levels. Two propositions are advanced in relation to the
drivers of conflict in franchise systems. The first proposition is underpinned by relational
exchange theory, which postulates that franchisee–franchisor goal congruence is im-
portant to the fulfilment of the alliance efficiencies which motivate inter-organizational
forms. Cooperation, communication, coordination and commitment, as perceived by
the franchisees, are used in the context of a survey instrument to operationalize goal
congruence.
The second proposition involves franchisor-provided services. Transaction-cost ana-
lysis suggests that long-term contractual relationships must be flexibly interpreted and
governed if the relationship is to be maintained over a series of transactions. We pro-
pose that the transactional intersection of the franchise system is in franchisor-provided
services. The perceived importance and subsequent adequacy of delivery of these ser-
vices established a tolerance zone within which transactions support and/or enhance
the relationship between the franchisor and the franchisee.
The empirical objectives of the study are accomplished utilizing a questionnaire sent
to nine franchise systems, to which 621 franchisees responded. Three clear clusters of
franchisee conflict emerged in near equal proportions. The propositions are supported
and illustrated empirically and in CHAID tree diagram form.
© 1998 British Academy of Management
system or to exit based upon valuing the cost of
the transaction versus the benefit. The sum of this
valuation is embodied in the trademark. Trade-
mark valuation is operationalized through the
franchisee perception of exit costs. This leads
to an examination of the relationship between
perceived trademark valuation, perceived exit
costs and conflict. A previous paper dealt with the
former (Spinelli and Birley, 1997). This paper
focuses upon the first part of the argument – the
relationship between perceived goal congruence,
franchisor-provided services and conflict.
Conflict in a franchise organization
Previous studies on intra-channel conflict have
shown inconsistent results (Brown, 1981; Gaski,
1984; Hunt, Ray and Wood, 1985; Ruekert and
Churchill, 1984), many of which Schul (1987)
believes can be explained by methodological weak-
nesses. The intra-channel perspective presupposes
a channel leader role in the franchisee–franchisor
relationship (Brown and Day, 1981), a role filled
by the franchisor. Lusch (1976) supports this
notion of economic and social power imbalance in
favour of the franchisor because of the nature of
the contractual arrangement. However, we believe
that defining franchising as an organization
established to conduct channel functions may
be at the root of the methodological problems.
We believe that the development of large fran-
chisee territories, the growing power of franchisee
organizations, and the legal difficulties which
franchisors face in terminating contracts, all
mitigate against this concept. Therefore, we have
defined franchising as an inter-organizational
form which may have channel implications and
which defines the franchisee as a distinct entity
rather than as a part of the franchisor organ-
ization (Spinelli and Birley, 1996). Consequently,
our research does not necessarily accept either
that the franchisor is the channel leader, or that
the relationship exists within a single organ-
izational structure. Nevertheless, a dependent
relationship does exist and one in which there
is clear potential for conflict, the focus of our
research.
To develop the conflict construct we draw upon
the work of Kaufmann and Stern (1988) who
studied conflict in long-term wholesaler–retailer
relationships. They used the relational-exchange
theory framework, which states that commercial
transactions occur along a spectrum from discrete
individual transactions to transactions which
occur in the context of a long-term relationship
which is perceived as valuable in and of itself and
should be maintained. In franchising, the alliance
between franchisee and franchisor is established
and maintained to promote the trademark because
the trademark embodies commercial value for
both parties to the licence agreement. If the fran-
chisee perceives the relationship as inadequate
and therefore the value of the trademark as not
having long-term potential to fulfil their return
requirements, then the franchisee, or any part to a
transaction, will have a short-term view of the
relationship (Kaufmann and Stern, 1988; Pondy
and Huff, 1985).
McNeil (1980) states that in exchange relation-
ships with a high relational norm of solidarity – a
norm which holds the relationship together – the
parties are likely to develop a strong reliance
upon trust. In seeking to maintain perceptual con-
sistency, a party may discount observed behaviour
interpreted as inconsistent with those feelings. All
else being equal, when faced with manifest con-
flict behaviour, a party acting under a relational
norm of solidarity can be expected to interpret
ambiguous behaviour as fair. The same expecta-
tion cannot be made in the discrete transaction.
As the maintenance of roles, or role integrity,
becomes more relational, the roles enacted by the
parties become more complex. This heightened
complexity implies greater interdependence
between the parties and therefore increases the
probability of latent conflict (Pondy, 1967; Kauf-
mann and Stern, 1988). The multiple connections
between the parties also increase the number
of uncontrollable precipitating factors that could
conceivably bring about a manifest conflict event
(Boyle and Dwyer, 1990).
Of course not all such conflict is serious, but
over time the parties will develop a method for
resolving conflict, move toward a discrete trans-
action relationship or seek to end the relationship
(McNeil, 1978). If the parties are in a highly re-
lational form of exchange we can expect them to
cope, de-emphasize or deny conflict events. Because
the potential for conflict being precipitated by
uncontrollable circumstances is high, intention-
ally produced conflict can be particularly disturb-
ing to the perceiving party. In a highly relational
exchange this behaviour will be seen as a breach
302 S. Spinelli and S. Birley
To continue reading
Request your trial