Retail Franchising: An Intellectual Capital Perspective

Abstract:     
In order to better understand why retail companies choose to franchise, a framework investigating intellectual capital and knowledge management is presented. Four aspects of intellectual capital are examined: human, structural, relational, and competitive. Results of the analysis find that the decision to franchise depends on the perception of whether intellectual capital can best be captured through franchising or a company-owned firm. Specifically, it was found that franchising is more likely to occur when: (1) competitive capital cannot be easily obtained from other sources; (2) relational capital can be better managed through franchisees; (3) human capital can be found more readily in franchisees than in company managers; and (4) the perceived complexity and cost of structural capital is lower for franchises than for company-owned units. Also, there may be a relationship between the ability to manage the four elements of intellectual capital and company performance. Propositions are made about the relationships between franchise performance and head office structure, the communication strategy between head office and franchise, and the willingness of the franchisor to accept franchisee innovation. (LKB)

Keywords: Theoretical, Firm performance, Oversight, Franchises, Retail industry, Intangible assets, Service industries, Human capital, Social capital, Intellectual capital, Franchises, Knowledge management

Accepted Paper Series