Influence of franchise supervisors’ relationship orientation on franchisees’ satisfaction and transactional risks

Abstract

The successful operation of franchise systems is critical for the development of tourism and hospitality sectors. Despite a long history of studies, few researchers have paid attention to the role and effects of franchise supervisors. Franchise supervisors play not only the role of providing operational and marketing support to individual franchisees but also performing regulatory activities to enforce franchisors’ strategic policies and quality controls. This study understands franchise supervisors as a boundary spanner who represents the franchisor’s business assistance to franchisees and intermediates collaborative relationships with franchisees. This study investigates if and how supervisors’ relationship orientation influences franchisee satisfaction and transactional risks. Supervisors’ relationship orientation refers to the personal attitude and behavior strategies to proactively create, develop, and maintain mutually beneficial relationships with franchisees. According to transaction cost theory, the franchisees perceive transactional risks when franchisors act opportunistically, such as ignoring business territories, discriminating product prices, and enforcing unfair contract conditions. Based on a survey of two bakery franchises in Korea, this study shows that franchise supervisors’ relationship orientation has a positive effect of on satisfaction and a negative effect on the transaction risks perceived by franchisees. The results of this paper stress the importance of recruiting and developing franchise supervisors with strong relationship orientation as they can successfully realize satisfactory support and relieve the transactional risks perceived by franchisees.