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An analysis of quality management in franchise systems

Margarita Fernandez Monroy and Luca Melian Alzola
Faculated de Ciencias Economicas y Empresariales, University of Las Palmas de Gran Canaria, Las Palmas, Spain

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Received December 2002 Revised September 2004

Abstract
Purpose The purpose of this paper is to provide a conceptual model of behavior in the franchise network from the perspective of quality management. Design/methodology/approach Based on the review of the literature, the development of a theoretical scale for measuring quality in franchise systems in the short term (i.e. transactional quality) and in the long term (i.e. relationship quality) is proposed. Findings Two dimensions of transactional quality are identied from the franchisee perspective: contents and assistance. The dimensions of transactional quality from the franchisors point of view refer to two aspects: formality and identify. The relationship quality identies variables such as trust between cooperation partners, mutual commitment, and relationalism. Research limitations/implications The proposed model is a theoretical model; an additional step is to validate empirically the dimensions of the model. Practical implications The main practical implication is that the contract does not completely reect the actual conduct of franchisor-franchisee relationships. It is necessary to harmonize the transactional or contractual perspective with the relationship view. Originality/value The franchise system has assumed great importance as a pattern for the expansion of services and, just like any other organization, needs to preserve the quality of the business concept to achieve overall success. On that basis, this paper aims to contribute to quality management in franchise networks and proposes a dual model for measuring quality: transactional and relational quality. Keywords Quality management, Relationship marketing, Franchising Paper type Conceptual paper

Introduction The evolution and development of the economy create new opportunities, so additional academic and professional contributions are necessary for guiding business practices. This is the case of the franchise system as a mode of expansion. The interorganizational collaboration needed in franchise networks requires innovate managerial formulas improving the achievement of synergy and the resource sharing in an optimal way. The underlying issue is the fact that allowing businesspeople to manage franchised outlets demands additional organizational qualities from the cooperation partners. Among such qualities, it is worth mentioning the franchisors capability to explain the business concept to the franchisee, thus making possible the adequate management of the franchised units. However, it is also necessary to improve a rm and reliable relationship between the franchisor and its franchisees in the long term in order to guarantee the consolidation of the network.

European Journal of Marketing Vol. 39 No. 5/6, 2005 pp. 585-605 q Emerald Group Publishing Limited 0309-0566 DOI 10.1108/03090560510590728

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Based on those considerations, it becomes very important to identify the success factors of that organizational model, so a deeper analysis of the franchise system is a critical task. An interesting perspective of study that may guide the research in this eld is quality management, which can be described as a business philosophy focused on customer satisfaction through the commitment between the network partners. Drawing on this view, in this paper we analyze the aspects that should guide the behavior of the parties involved in the franchise system when improving the end-customer satisfaction. The purpose of this paper, therefore, is to provide a conceptual model of behavior in the franchise network from the perspective of quality management. The article begins with a review of franchise networks, explaining its advantages and disadvantages, as well as the main reasons for implementing quality management in the franchise research. Next, the two dimensions of quality in franchise networks are described: transactional quality, which refers to the short term, and relationship quality, regarding the long term. Finally, the paper concludes with some reections on the implications of this study and directions for future research.

Quality management in franchise networks The franchise system is a business formula recognized for its steady growth in recent years, although it is quite an old system. In the European Code of Ethics for Franchising, the European Franchise Federation denes franchise as a system of marketing goods and/or services and/or technology, which is based upon a close, ongoing collaboration between legally and nancially separate and independent undertakings, the Franchisor and its individual Franchisees, whereby the Franchisor grants its individual Franchisee the right, and imposes the obligation, to conduct a business in accordance with the Franchisors concept. The franchise formula offers signicant advantages both to the franchisor and the franchisee (Norton, 1988; Carney and Gedajlovic, 1991; Combs and Castrogiovanni, 1994; Kaufmann and Stanworth, 1995; Bradach, 1998; Dez and Galan, 1998; Fulop, 2000; Michael, 2000a, b). The main advantages to the franchisor refer to two points: (1) the franchise system makes it possible to expand the business, and even provides access to new markets, by creating a distribution network at low cost; and (2) it ensures the development of brand image since the franchisor retains control of the distribution channel. Meanwhile, the advantages of this business model to the franchisee are: (1) access to a proven business concept and to a prestigious brand; (2) a guaranteed clientele from the outset; (3) constant support and training from the franchisor; and (4) the prots earned as an independent businessperson. However, the need for a trusting relationship between the two parties should be stressed, since a model of interorganizational cooperation requires each party to full their respective duties.

That is the reason for the increasing number of franchised units that have emerged in recent years. Therefore, franchising becomes a eld of research in quality management from both academic and professional points of view. In fact, the advantages that the implementation and development of quality management bring to franchises give rise to the recognition of the positive nature of the following aspects. . The more rapid growth of the franchise system that allows the customer better access to the service. . The franchisee is more motivated to act as businessperson, who enthusiastically leads and participates in the franchisors project, and shares in the prots of the franchised unit. . That greater motivation generates the franchisors trust, which leads to reduced monitoring costs. . The franchise system commits the franchisee to respect and implement the franchisors business concept. That contributes to maintaining the homogeneity of the provision of services and so improves perceived quality. . The franchisees involvement in service provision, and the direct contact with clients allow him/her to ascertain the level of customer satisfaction. The franchisees opinion and suggestions constitute a feedback that is crucial to the franchisor, who can then make improvements to the service supply. This leads to the putting into practice of one principle of quality, namely staff involvement in quality management. . Knowledge of the local market is maximised by proximity to the geographical area of interest. The franchisee constitutes not only the vehicle to transfer that knowledge, but also represents a primary point for its treatment and codication. Consequently, the design of an efcient communication system that permits knowledge transfer from the franchisee to the franchisor emerges as a key factor. In the interests of implementing quality management in the franchise research, it is necessary to develop a conceptual frame as a guide for identifying the priorities to that end. As a starting point, it is worth considering a broad horizon of time of research, comprising the short term and the long term. Thus, it is interesting to study quality from a short-term perspective to ensure a successful business start-up. But it is also important to enhance the status quo of the franchise business by developing a successful franchisor-franchisee relationship. In other words, the franchise performance in the short term, which results from the inuence of certain attributes and dimensions, should be improved by a strengthened relationship between the parties involved. This perspective of integration leads to a conceptual model that combines two areas: transactional quality, which refers to the short term, and relationship quality, regarding the long term. Transactional quality in franchise networks The transactional quality in franchise networks reects the business performance in the short term since the unit of analysis is the effective development of every transaction. It focuses on identifying and assessing the determinant factors of the franchisees success in the business start-up, which implies considering those aspects that constitute the minimum criteria for starting and managing a business in a right manner. Thus, as

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the literature shows by studying the contractual aspects of the franchise system (Table I), transactional quality has been revealed as an important issue to be improved. Given the involvement of two contractual parties, i.e. franchisor and franchisee, it is necessary to develop a model that includes the analysis of transactional quality from both perspectives, i.e. the franchisees perspective when evaluating the franchisors performance, and vice versa. As a starting point, we have considered the existing research focused on the contractual rights and obligations in the franchise networks as reference for developing the theoretical model of quality management. Transactional quality from the franchisees perspective The dimensions of transactional quality from the franchisees perspective refer to all areas of franchisors performance that the franchisee evaluates at the beginning of the business, even after every transaction. The proposed model identies two dimensions, i.e. contents and assistance, each of them explained by various items (Table II).
Researchers Hing (1995) Desai and Srinivasan (1996) Shane (1998) Dahlstrom and Nygaard (1999) Hing (1999) Main variables analyzed Ease of obtaining nance, fees/royalties paid, conict resolution methods, frequency of communication, independence, well-known name, fairness of contract Royalties, franchise fee, aggregate fees Royalties, complexity of the task, cash investment, master franchising, total investment Cooperation, formalization, opportunism, bargaining cost, monitoring cost, maladaption cost Initial training, help with site selection; help with purchasing equipment, help with raising business nance, help with local marketing, help with purchasing necessary supplies, help with employee training, help with accounting, general advice and consultation Initial training, franchise fees/royalties, promotional and advertising assistance, marketing fees, advertising fees Quality, free riding, residual claimant Royalties, franchise fee Assistance and formation in accounting, nancing, advertising and promotion, merchandising, purchasing and services before opening Price, quality, advertising

Lee (1999) Michael (2000a) Kaufmann and Dant (2001) Bermudez Gonzalez (2002) Michael (2002)

Table I. Contractual aspects of the franchise system

Dimensions Contents Table II. Dimensions of transactional quality from the franchisees perspective Assistance

Attributes Training Support Information Supply Financial facilities Management assistance Accessibility

Function What and how Means

The contents dimension includes issues related to the training and information that describe what to do and how to do it. The franchise contract refers to a variety of aspects concerning the operation of the franchised units, such as the products offered, the hours of operation, and the training of franchisees provided by franchisors (Baucus et al., 1993; Bradach, 1998). By establishing and enforcing contractual provisions for training and outlet operations, franchisors minimize franchisee free-riding (Shane, 1998), i.e. the risk that he/she maximizes his/her outlets prot at the expense of the chains reputation (Brickley and Dark, 1987). Moreover, the range and quality of franchisee support services enhance franchisee satisfaction (Hunt and Nevin, 1974; Lusch, 1977; Lewis and Lambert, 1991; Hing, 1995, 1999). Next, the aspects forming the contents dimension are described. . Training. The franchisor contributes to the franchisee the knowledge needed for the satisfactory development and fullment of the business concept, which mainly refers to the transfer of proprietary know-how about the production and service operations (Rubin, 1978; Shane, 1996, 1998; Bradach, 1998; Lashley, 2000a; Michael, 2000a; Teegen, 2000). Moreover, franchisors encourage franchisees to use the chains training programs, and by not charging franchisees for them, attendance increases and presumably problems with uniformity decline (Bradach, 1998). . Support. The franchisor is willing to support and advise the franchisee in every issue related to the business start-up and operation. Thus, most franchisers may provide practical support to franchisees in terms of site selection and general business start-up assistance (Rubin, 1978; Baucus et al., 1993; Shane, 1996; Hing, 1995, 1999; Bradach, 1998; Fulop, 2000; Lashley, 2000b; Teegen, 2000). Therefore, franchisees gain the freedom to operate in a controlled, assisted and supported environment, while at the same time reaping the benets of a brand name, professional management and the economies of scale of a larger organization (Fulop, 2000, p. 27). . Information. The franchisor provides the franchisee with the necessary information about the conditions of the franchise contract, placing special emphasis on the contractual duties, such as the nancial considerations. Moreover, there is legislation aimed at inducing appropriate disclosure of information prior to the signing of the franchise contract (Fulop, 2000). In fact, adequate disclosure documentation provided by the franchisor was found to contribute to the level of satisfaction experienced by franchisees regarding the purchase and operation of a franchised outlet (Hing, 1999). The assistance dimension constitutes the franchisors willingness to provide the franchisee with the necessary help in terms of nancial, supplying and marketing issues, as well as with continuous contact. The following elements comprise this dimension. . Supply. The franchisor provides the franchisee with the necessary materials and products for performing the contractual duties effectively. The franchise contract may require the franchisee to purchase specic inputs from the franchisor (Lafontaine and Shaw, 1999; Michael, 2000b). The franchisee can also use external suppliers; in fact, the franchisor may contribute the franchisees with a list of approved suppliers (Bradach, 1998). However, franchisees often use the

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chains internal distribution operation due to the better prices and service (Bradach, 1998). Financial facilities. The franchisor is willing to provide nancial assistance for the franchisee, not only directly, but also indirectly, by facilitating loan achievement. In this respect, several works show that franchisors may provide assistance with nancing (Baucus et al., 1993; Hing, 1995; Fulop, 2000; Teegen, 2000). Management assistance. The franchisor helps the franchisee with the business management. Thus, franchisors may provide practical support in terms of management practices, accounting methods and marketing services, among other aid (Hing, 1995, 1999; Desai, 1997; Teegen, 2000). Accessibility. This refers to the ease of contact between franchisor and franchisee. Once franchisees join up, chains maintain constant contact with them (Bradach, 1997). Regular communication with franchisees is one of the sources of non-coercive power available to the franchisor (Fulop, 2000).

Transactional quality from the franchisors perspective From the franchisors point of view, the transactional quality in franchise networks implies an evaluation of the franchisees performance that contributes to a successful business outlet. The proposed model reects two dimensions, namely formality and identity, each comprising various items (Table III). The formality dimension refers to the level of fullment of the franchisees contractual duties. Franchise contracts specify the length of franchise agreements, the nancial obligations of the parties, and the conditions for termination of the contract (Baucus et al., 1993; Bradach, 1998), among other things. Contract terms should reect the value of the franchise and its brand name, estimated nancial performance of the retail outlets, and costs associated with providing contracted services (Baucus et al., 1993). Formality comprises the following attributes. . Business development. The franchisee complies with the conditions of the franchise contract related to the business concept, which means implementing the franchisors know-how effectively. The franchisee has to be prepared to work within a system designed by the franchisors management, and accept the constraints and limits that have been set (Lashley, 2000b). Accordingly, franchisees are empowered to be intrapreneurial with a dened degree of responsible autonomy that is explicit within the operational guidelines, negotiated franchisee business objectives and legal contract (Morrison, 2000). . Training attendance. The franchisee attends the franchisors training programs. In fact, in Bradachs (1998, p. 210) work one franchisee in a restaurant chain
Dimensions Table III. Dimensions of transactional quality from the franchisors perspective Formality Identity Attributes Business development Training attendance Payment accomplishment Uniformity Transparency Function Fullment Identication

extols the benets of the chains training program as follows: It is free. They teach you how to do everything, and there is a way to do everything. Franchisees can rely on the franchisor to train them and provide the knowledge necessary to operate the franchised concept successfully (Kaufmann, 1999; Michael, 2000b). Payment accomplishment. The franchisee fulls the contractual conditions of payment. Moreover, franchisees must develop a clear understanding not only of their authority, but also of their responsibilities (Lashley, 2000b). The initial franchise fee and the ongoing royalty payment could reect the level of the franchisors investment in building its brand and training its franchisees to support the brand properly (Kaufmann and Dant, 2001).

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The identity dimension regards to the fullment of the franchisees contractual duties in those issues that assess the level of integrity or identity with the franchise network. As Michael (2000b) points out, the fundamental problem faced by the franchisor is to ensure the quality of the consumption experience represented by the trademark (Caves and Murphy, 1976; Rubin, 1978; Shane, 1996). As a matter of fact, maintaining the uniformity of units in a chain is what preserves its shared identity, which reduces the cost of monitoring since it is relatively easy to detect deviations (Bradach, 1998). The following elements comprise this dimension. . Uniformity. The franchisee respects the chains image and the business concept, and shows loyalty to the franchisor in terms of fulling the contractual norms about not only obeying the territorial limits of business development, but also avoiding opening similar businesses, giving other uses to the franchised outlet, and offering products or services other than the contracted ones (Bradach, 1998; Lashley, 2000b). In sum, franchisees internalize the chains standards and embed them in the operating procedures of their units, which helps to maintain uniformity across the chain (Bradach, 1997). . Transparency. The franchisee is prepared to be inspected by the franchisor, who may use different mechanisms such as eld audits and mystery shoppers (Bradach, 1997, 1998; Shane, 1998; Lashley, 2000a). In fact, without close monitoring, franchised units may soon experience inconsistencies in service quality (Gal-Or, 1995; Ball, 2000; Lashley, 2000b), which could have detrimental effects on the chains shared identity. However, the contract sets the expectations of the parties and creates a framework for the relationship, but it does not fully reect the actual conduct of the relationship (Macneil, 1978), being a limited route-map to understanding how franchisor-franchisee relationship is conducted in practice (Bradach, 1998). Thus, it is necessary to explore the relational aspect of long-term contracts. Relationship quality in franchise networks Existing research shows the importance of developing alliances of high quality in different scenes (Dwyer and Oh, 1987; Johnson et al., 1993; Kumar et al., 1995a). In this respect, Johnson (1999) argues that relationship quality describes the depth and organizational climate of the interrm relationship. Thus, several authors have considered the relationship quality as the overall evaluation of the relationship

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strength (Smith, 1998; Garbarino and Johnson, 1999). Accordingly, sociopsychological aspects embodied in relationship capital are important since they act as coordinating mechanisms and determine the quality of the relationship in the collaboration (Sarkar et al., 2001). When rms go beyond the transaction-based exchange and develop long-term relationships, interorganizational cooperation could lead to a competitive advantage (Dyer and Singh, 1998). Particularly in the franchise eld, several studies have focused on variables such as trust, commitment, conict, relationalism, and cooperation, among others, to describe the relational behavior in franchise networks (Dant and Schul, 1992; Cox, 1995; Dahlstrom and Nygaard, 1995; Mehta, 1999; Bordonaba Juste and Polo Redondo, 2002a, b; Garca Rodrguez et al., 2004). However, a review of the literature shows the lack of research that examines the quality of the relationship between franchise partners as a global construct, although it is worth mentioning Hopkinson and Hogarth-Scotts (1999) and Dickeys (2001) studies. Consequently, it is considered very important to develop a scale for measuring the quality of the franchisor-franchisee relationship in order to assess the strength of those dyadic relationships, and to explain not only the behavior of the network partners, but also the franchise performance. To that end, both theoretical and empirical works studying the relationship quality in different contexts have been examined. This review has revealed that researchers have operationalized the relationship quality in various ways, but sometimes differing in the terminology used to refer to that construct. In short, the most important contributions to the study of the relational aspects in a collaboration context are shown in Table IV. As a result, we propose that the relationship quality construct should include variables such as trust between cooperation partners, mutual commitment, and relationalism, which are widely described in the following sections. In fact, as Johnson (1999) states, the literature has shown that close interrm arrangements exhibiting those bilateral mechanisms offer a number of benets to participants, such as interrm learning and the transfer of proprietary know-how (Mohr and Sengupta, 2002). Trust The literature has recognized trust as an important determinant of successful cooperation (Dwyer et al., 1987; Ganesan, 1994; Mohr and Spekman, 1994; Morgan and Hunt, 1994; Gundlach et al., 1995; Varadarajan and Cunningham, 1995; Jap, 1999). Despite its various conceptualizations, trust has generally been described through two distinct components: credibility and benevolence (Ganesan, 1994; Mayer et al., 1995; Andaleeb, 1996; Doney and Cannon, 1997; Das and Teng, 1998; Siguaw et al., 1998; Baker et al., 1999; Gilliland and Bello, 2002; Vazquez Casielles et al. 2002). Credibility refers to the extent to which one partner believes that the other has the required expertise to perform the job effectively and reliably; while benevolence is based on the extent to which one partner believes that the other has intentions and motives benecial to the former when new conditions arise. The trust scale is developed from a review of the measures proposed in the literature (Ganesan, 1994; Kumar et al., 1995a, b; Doney and Cannon, 1997; Siguaw et al., 1998; Baker et al., 1999; Jap, 1999). As a result, trust is measured with a seven-point Likert-type scale (Table V), which includes the two mentioned dimensions, i.e. credibility and benevolence.

Researchers Crosby et al. (1990)

Dimensions

Research setting Customer-salesperson relationships in whole life insurance services Reseller-supplier relationships in the automobile industry

Trust in the salesperson Satisfaction with the salesperson Kumar et al. (1995b) Trust Commitment Willingness to invest Expectation of continuity Conict Dorsch et al. (1998) Trust Commitment Satisfaction Opportunism Customer orientation Ethical prole Leonidou and Kaleka (1998) Adaptation Commitment Communication Cooperation Conict Dependence Distance Satisfaction Trust Understanding Smith (1998) Trust Satisfaction Commitment Baker et al. (1999) Trust Commitment Cooperative norms Satisfaction Hopkinson and Hogarth-Scott (1999) Sense of unity Expectation of future Anticipation of trouble Balance of power Jap et al. (1999) Trust Conict Expectations of continuity Disengagement Johnson (1999) Trust Fairness Absence of opportunism Liu and Wang (1999) Continuant commitment Affective commitment Trust De Ruyter and Wetzels (2000) Trust Bonding Empathy

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Vendor-customer relationships

Exporter-importer relationships

Purchasing professional-supplier representative relationships Supplier-reseller relationships

Franchise relationships

Buyer-seller relationships in a grocery chain Buyer-seller relationships in the industrial machinery and equipment distribution industry Relationships between foreign companies operating in China and its local distributors Relationship between marketing and manufacturing departments Table IV. Dimensions of relationship quality

(continued)

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Researchers Hennig-Thurau (2000)

Dimensions Reciprocity Performance-related quality perception Trust Commitment to the relationship Relationship satisfaction Trust Relationship commitment Trust Commitment Relationalism Trust Commitment Mutual trust Reciprocal commitment Bilateral information exchange Trust Adaptation Satisfaction Communication Interdependence Commitment Cooperation Trust Affective commitment Calculative commitment Satisfaction Payment equity Trust in integrity Trust in benevolence Commitment Affective conict Satisfaction

Research setting Customer-manufacturer relationships

594
De Wulf et al. (2001) Hausman (2001)

Consumer-retailer relationships in the food and apparel industries Relationships between hospital purchasing agents and their major medical/surgical material supplier Supplier-dealer relationships International alliances in the construction contracting industry Buyer-supplier relationships in the electronics sector

Hibbard et al. (2001) Sarkar et al. (2001)

Fynes and Voss (2002)

Verhoef et al. (2002)

Customers of an insurance company

Roberts et al. (2003)

Relationships between consumers and their service providers

Table IV.

Commitment Several studies have noted that commitment is an essential ingredient for successful relationships (Dwyer et al., 1987; Ganesan, 1994; Mohr and Spekman, 1994; Morgan and Hunt, 1994; Gundlach et al., 1995; Varadarajan and Cunningham, 1995; Andaleeb, 1996; Geyskens et al., 1996; Jap, 1999). Thus, commitment is important insofar as it results in cooperation, reduces the potential of attractive short-term alternatives, and enhances protability (Anderson and Weitz, 1992; Morgan and Hunt, 1994; Andaleeb, 1996). Researchers attempt to distinguish the motives underlying the relationship commitment, although there is no general agreement about the elements constituting this construct. Nevertheless, Geyskens et al. (1996) argue that the differentiation between affective commitment and calculative commitment is the most frequent in the literature and seems to be one of the most important in interorganizational

Dimensions Credibility

Items We both are honest and sincere We keep the promises we make to each other We both believe that the exchanged information is reliable We both are honest about the problems that may affect the other partner We both have condence on the knowledge, expertise, and capabilities of the other partner We rely on the other partner whenever it gives us advice on our business operations When making important decisions, we both consider each others interests In times of shortages, we can continue counting on each other We both respond with understanding when problems arise We both feel we are on each others side We both are ready and willing to offer each other assistance and support when circumstances require We both care for each others welfare

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Benevolence

Table V. Measure of trust

relationships. In general terms, affective commitment relates to the desire to continue a relationship because of the positive effect toward, and identication with, the partner (Kumar et al., 1995a, b). From this point of view, an affectively committed partner desires to continue a relationship because of a liking for the other partner, enjoyment of the partnership, and a sense of loyalty and belongingness (Geyskens et al., 1996). In contrast, calculative commitment is a more instrumental type of commitment and is based on the extent to which partners perceive the need to maintain the relationship due to the signicant anticipated termination or switching costs associated with leaving (Geyskens et al., 1996). It results from a cold calculation of costs and benets, including an assessment of the investments made in the relationship and the availability of alternatives to replace or make up for those investments (Allen and Meyer, 1991). For the development of the commitment scale, existing research is analyzed. It is worth mentioning the works of Anderson and Weitz (1992), Kumar et al. (1995a, b), Gilliland and Bello (2002), and Verhoef et al. (2002). From this review, commitment measure is operationalized through a seven-point Likert-type scale (Table VI), which includes the two mentioned dimensions, i.e. affective commitment and calculative commitment.

Relationalism Relational norms also called social or cooperation norms (Cannon et al., 2000) are considered reference points for the evaluation of partners behavior. In fact, they permit the judging of the conformity of a partys actions with the established standards, completing written agreements and forming the basis for conict resolution (Ivens, 2002). According to the conceptualizations of relationalism existing in the literature (Kaufmann and Stern, 1988; Boyle et al., 1992; Dant and Schul, 1992; Heide and John, 1992; Kaufmann and Dant, 1992; Gundlach et al., 1995; Lusch and Brown, 1996; Simpson and Mayo, 1997; Siguaw et al., 1998; Cannon and Perreault, 1999; Paswan and Young, 1999; Cannon et al., 2000; Jap and Ganesan, 2000; Hausman, 2001; Vazquez Casielles et al., 2002; Bello et al., 2003), in this work, it is considered necessary to include

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Dimensions Affective commitment

Items We both have a strong sense of loyalty to each other We both want to continue the relationship because we really enjoy it Our positive feelings towards each other are a major reason to continue the relationship None of us is interested in offers of other companies that could replace the other partner Even if other company would offer us better conditions, we both will continue this relationship We both are patient with the other partner when it makes mistakes that cause us trouble We both consider our relationship as a long-term collaboration We both expect our relationship to continue for a long time We both consider that the renewal of our relationship is virtually automatic We are willing to put effort and investment in maintaining and improving our relationship We both will continue to work with each other because replacing the other partner would be too disruptive for our business

596

Calculative commitment

Table VI. Measure of commitment

the following relational norms: exibility, solidarity, mutuality, and harmonization of conict. Flexibility refers to a bilateral expectation of willingness to make adaptations as circumstances change (Boyle et al., 1992; Heide and John, 1992; Gundlach et al., 1995), so the agreement is a starting point to be modied as the market, the exchange relationship, and the fortunes of the parties evolve (Cannon et al., 2000). Solidarity is the degree to which the preservation of the unique and continuing relationship is internalized by the exchange partners as being important in and of itself (Kaufmann and Stern, 1988). Thus, it denes a bilateral expectation that a high value is placed on the relationship and prescribes behaviors directed specically toward relationship maintenance (Heide and John, 1992). Mutuality is the attitude that each partys success is a function of everyones success and expresses the sentiment of joint responsibility (Cannon et al., 2000). According to Boyle et al. (1992), under high levels of mutuality, benets are evaluated over a long period of time rather than on a transaction-by-transaction basis. Finally, harmonization of conict refers to the extent to which a spirit of mutual accommodation toward cooperative ends exists (Cannon et al., 2000), so parties attempt to reach mutually satisfactory compromises and avoid resorting to formal procedures and third-party involvement for conict resolution (Gundlach et al., 1995). The relationalism scale is developed based on the measures mainly used by Boyle et al. (1992), Heide and John (1992), Kaufmann and Dant (1992), Cannon and Perreault (1999), Jap and Ganesan (2000), Rokkan and Haugland (2002), Bello et al. (2003), and Gonzalez Hernando et al. (2003). As a result, relational norms are measured with a seven-point Likert-type scale (Table VII), which includes the four mentioned dimensions. Discussion and conclusion Based on the analysis of the proposed model, several questions considered crucial for managing quality in franchise networks have emerged: rstly, to what extent

Dimensions Solidarity

Items

We both consider our relationship as a cooperative effort rather than arms length negotiations None of us would do anything damaging to the other partner Problems that arise in this relationship are treated as joint rather than individual responsibilities We both are willing to make improvements that may benet the relationship as a whole and not only the individual parties We consider each other to be partners in the industry We must work together to be successful Mutuality Both sides are concerned about the others protability Each partners benets from this relationship are proportional to its level of effort Both sides would accept non-proportional distribution of costs and benets if over time things balance out We both usually get a fair share of the rewards and cost savings from our relationship We both help each other Flexibility The ability to react to a changing environment depends on the level of exibility of both partners We both are willing to make adjustments to our contract in the face of problems or special circumstances We both are willing to be exible with contractual terms in order to work through difcult problems raised by the other partner Both parties are exible in their response to last-minute requests made by the other party Harmonization of conict Both parties expect conicts to be solved in a cooperative manner without the use of third parties or lawsuits There are formalized procedures for solving conicts between partners that do not involve the use of third parties We are usually able to solve conicts to both parties satisfaction Both parties being constructive solve conicts We both consider that discussions may help to improve the strength of our relationship It is not frequent that conicts threatening our relationship arise

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Table VII. Measure of relationalism

transactional quality and relationship quality are opposite or complementary concepts; secondly, when transactional quality and relationship quality should be measured, and, thirdly, the inuence of transactional quality and relationship quality on the organizational performance. Finally, on the basis of the proposed model, some recommendations for future works are made. Transactional quality and relationship quality: opposite or complementary concepts? As Bradach (1998) suggests, the contract does not completely reect the actual conduct of franchisor-franchisee relationships. Moreover, it is difcult and costly, if not impossible, to specify quality completely and veriably; that is, contracting for quality is very complex (Michael, 2000a). Therefore, it is necessary to harmonize the transactional or contractual perspective with the relationship view. In fact, the franchise system mainly represents an interdependent relationship (Lashley, 2000b). In this respect, Poppo and Zenger (2002) conclude that formal contracts and relational

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governance function as complements; thus, well-specied contracts may actually promote more cooperative, long-term, trusting exchange relationships. At the same time, the continuity and cooperation encouraged by relational governance may generate contractual renements that further support greater cooperation (Poppo and Zenger, 2002). Therefore, transactional quality and relationship quality are different, but interdependent, constructs. Transactional quality measures the performance of the network partners (i.e. franchisor and franchisee) in those factors which contribute to the business start-up in an optimal way. A review of the literature reveals that transactional quality implies the analysis of the contractual rights and duties that both partners should full for the business start-up (Hing, 1999; Michael, 2000a, 2002). Thus, transactional quality assesses functional variables which should be achieved in the short term. Consequently, for a successful management of the franchise system from the beginning, both franchisor and franchisee should put in a lot of effort. In contrast, relationship quality reects the performance of the franchise partners in the long term. Relationship quality includes variables such as trust, commitment, and relationalism, which need time to be developed. Several works reect this idea by considering the relationship dimension within interorganizational structures (Hopkinson and Hogarth-Scott, 1999; Johnson, 1999). Those bilateral mechanisms would ensure a healthy dyadic relationship between franchisor and franchisee. This implies that both partners should have a willingness to consolidate their exchange relationship, based on their loyalty and honesty to each other. With regard to the complementarity between the mentioned constructs, the fact is that a positive and reciprocal inuence exists. On the one hand, transactional quality guarantees a satisfactory business start-up, constituting the rst step in the development of a long-term relationship. On the other, relationship quality contributes to improving transactional quality since the values explaining the relationship facilitate the effective fullment of the contractual rights and duties. Therefore, issues such as training, support and information, among others, are enhanced by the dynamics of the relationship, where both partners participate, collaborate and assume their responsibilities. When to measure transactional quality and relational quality Although both dimensions of quality are concepts clearly dened and delimited, they have not been strictly differed in the literature. Thus, several works analyze aspects of transactional quality and factors of relationship quality without distinction. For example, Lees (1999) study includes a frame of work considering elements taken from both sides of the dual model proposed in this paper (i.e. transactional/contractual and relationship perspectives). However, it is worth considering a time order for both dimensions of quality when creating and developing the proposed model and, more specically, when evaluating its efcacy and reciprocal effect. In fact, the relationship quality raises the status quo of the transactional quality. Thus, the initial transactional quality differs from the transactional quality achieved after the development of an optimal exchange relationship. Consequently, the assessment of the quality of a franchise network involves three phases. Firstly, the transactional quality is measured in the short term to ensure that both parties full their contractual rights and duties. Secondly, quality is

measured in the long term to nd out the relational strength of the franchisor-franchisee dyad, i.e. the stage of maturity of the franchise network. Thirdly, and after the positive assessment of the relationship quality, it is necessary to measure again the transactional quality to test the improvement experienced due to the inuence of the development of a satisfactory franchisor-franchisee relationship. Therefore, it would be possible to identify what factors or attributes of the transactional quality are more affected by the level of relationship quality, and to what extent this inuence exists. Inuence of transactional quality and relationship quality on performance The satisfactory performance of the partners involved in a franchise system yields important outcomes for the organization. Several authors have argued this issue when considering different variables within the model, they recognize that an excellent behavior of the parties improves their performance and satisfaction (Hing, 1999; Singh and Sirdeshmukh, 2000; Sarkar et al., 2001; Bello et al., 2003). Specically, the optimal transactional quality produces positive business outcomes in the short term. If the relationship quality enhances the status quo of the transactional quality, business outcomes will also be improved. With regard to what to measure, we propose two level of analysis: on the one hand, an evaluation at the franchised unit level; on the other, an assessment at a network level. The former involves measuring the performance of the franchised unit in terms of customer satisfaction, growth of incomes, and cost reduction, among others. The latter implies an overall assessment of the system performance, including the growth of the networks incomes, the overall cost reduction, the competitive position of the organization, and a comparative analysis between the performance of both franchised and owned units. This last issue allows evaluating how the involvement of partners in business (e.g. franchisees) could contribute to improve the organizational performance and what is exactly affected. Directions for future research In addition to the issues arising from the previous questions, the following research issues are important. First, and considering that the model presented in this paper is theoretical, an additional step is to validate empirically the dimensions of this model. Secondly, it might be worthwhile to analyze and study the evolution of the quality model in franchise networks. In other words, how the different elements comprising the transactional quality and the relationship quality modify their critical role in the network success. Consequently, the importance of every element in every phase of the franchise development should be evaluated. Thirdly, in order to develop a global perspective, future research ought to examine how the proposed model of quality behaves in different business activities and industries. Thus, for example, quick conict resolution could be more difcult in highly risky and variable industries than in controlled and standardized activities. Finally, identifying the environmental factors that could have an important inuence on the elements of the proposed model would provide valuable contribution to theory development and renement in the eld of quality management. Therefore, the willingness to be successful in the relationship may depend, for example, on the

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existence of other opportunities to do a highly protable business and on the economic facilities provided to start-up a business on her/his own.

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