First mover advantage through franchising

Abstract

Franchising has been argued to be a technique for entrepreneurs in service industries to assemble resources in order to rapidly create large chains and gain first mover advantage. Whether and how such first mover advantage is created is the subject of this paper. Using theories from strategic management and marketing, it is argued that the first mover advantage initially takes the form of a lead in the number of retail outlets, followed by a market share lead, and, finally, superior profitability. A structural equations model is specified, and empirical results from the restaurant industry support the model's predictions. Implications for research and practice are discussed.