The role of host country characteristics and the franchisor profile in the choice of foreign entry mode in international franchising

Resumen

Franchisors have many options when seeking to expand their business into foreign countries.Specifically, they can enter new markets in one of four ways: i) direct franchising; ii) masterfranchising; iii) joint venture; or iv) direct investment. The scant theoretical and empiricalattention given to this topic has usually been examined from a U.S. and British base, which inmost cases focuses on manufacturing or retailing sectors. To shed light on this issue, thisstudy draws from the Spanish franchise system, -which occupies the third position in Europein terms of the number of franchisors and the second position related to the quantity offranchisee outlets-, to identify the driving variables that impinge upon a firm’s choice offranchising entry mode. In order to advance our understanding and contribute to the literature,this study does not focus simply on one sector of activity, as previous studies in this area. Incontrast, the present paper considers all sectors of activity (retailing, leisure, hospitality,consulting, etc.) where the Spanish franchise system is operating. Specifically, in early 2011Spanish franchise chains have presence in 112 foreign countries through 210 franchisors, witha total of 10,135 outlets established abroad. Our results show the importance of a number offranchisor characteristics (international experience, brand awareness, and industry type(product versus service), in conjunction with a wide list of host country features (geographicaldistance, uncertainty avoidance, masculinity, political stability, economic development,unemployment rate and efficiency of contract enforcement), all of which have a drivinginfluence upon the decision of entry mode in international franchising.