Restaurant Franchisees’ View of the Relationships Among the Determinants of Franchisors’ Entrepreneurial Strategy Processes

Abstract

The determinants of entrepreneurial strategy processes in franchising were identified as external environment, entrepreneurial strategy, mechanistic-organic structure, and financial performance. The primary purpose of this study was to explore a model that examines the relationships among the external environment, entrepreneurial strategy, mechanistic-organic structure, and financial performance of restaurant franchisors from the perspective of the franchisees. Structural equation modeling (SEM) was employed to develop this exploratory model. The final structural model indicated that franchisors’ external environment forces such as competition, politics, technology, and price wars are perceived as having a negative effect on franchisor’s financial performances. Restaurant franchisees perceive that franchisors’ entrepreneurial strategies such as aggressive expansion of franchise units, innovative system development, and menu development to meet local needs make a highly positive contribution to franchisors’ financial performance. Franchisees also perceived that franchisors’ entrepreneurial strategies and mechanistic-organic structure could have a significantly and mutually positive effect on each other.