Roy L. Beheler, Seth W. Norton5 and Kabir C.

Sen6

(5) Wheaton College, Wheaton, IL, 60187, USA

(6) College of Business, Lamar University, Beaumont, TX 77710, USA
Abstract
The paper compares the performance of franchised and company owned fast food
outlets located within the same region in the USA. These outlets are inspected by
the same team of health inspectors who use a standardized 44 item scale derived
from Federal Drug Administration guidelines. Analysis of the health inspection
scores received by the fast food outlets over approximately two and a half years
shows that franchised stores receive significantly better ratings. The inspection
scores of franchised outlets also have a lower standard deviation than that of
company owned stores. The results support the view that the incentives provided in
the franchise contract as well as the additional layer of supervision by the
franchisee are likely to lead to better and more consistent outlet performance. At
the same time, there are a few chains where company owned stores get higher
scores than theirfranchised counterparts. This suggests that there are inter chain
differences in the operational efficiencies of the two organizational formats.

by Vance H. Fried , B. Elango

In the last 20 years, a significant amount of research on franchising has been conducted in
various disciplines, including economics, law, management, marketing, and management
science. A major goal of this article is to provide a comprehensive overview of the existing
literature. A second goal of this article is to enumerate steps that can be taken to improve both the
rigor and relevance of franchising research. Since this represents an initial overview of a very
broad research field, we have not attempted to develop a tightly focused research agenda on any
one topic. Instead we present several relatively general, widely applicable suggestions that can
significantly improve future research. We first split existing research into three categories and
provide reasons for this split. Each of the categories is then reviewed, and suggestions are offered
to improve research. Finally, methodologies for franchising research are discussed.
Franchising sales of goods and services in the U.S. are estimated at $758 billion (U.S.
Department of Census 1994), with further expansion expected (Hoffman and Preble 1991). There
are 2,177 franchisors with 542,000 units (U.S. Department of Census 1994); 374 U.S.
franchisors operate about 35,000 franchised units abroad, 75 percent of which are in Canada,
Japan, Western Europe, and Australia (U.S. Department of Commerce 1988; U.S. Department of
Census 1994). Franchising is an important means of doing business for many entrepreneurs. It is
suited for environments characterized by intense competition, rapidly changing customer tastes,
and a trend towards localized market segments.