Do franchised chains advertise enough?

Abstract

Evidence from the research literature and the trade press suggests that advertising is a common source of controversy among channel partners in franchised chains. A theoretical explanation for this controversy is that investment in an asset will be less when that asset is shared. Hybrid organizational forms such as franchised chains share a brand name among the franchisor and its franchisees, so advertising that brand name is predicted to be less in a franchised chain than in a corporate chain. To test the hypothesis, this paper analyzes empirically advertising levels based upon the extent of franchising in restaurant chains and in hotel chains. Advertising falls with the level of franchising in both industries, controlling for size of chain and other variables. Implications for theory and marketing practice are discussed.