International franchising decision-making: A model for country choice

Abstract

The present study examines how a number of market conditions may drive diffusion of franchising. It considers a sample of 63 Spanish franchisors operating through 2321 franchisee outlets across 20 different Latin American countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay, and Venezuela in January 2011. Results conclude that geographical and cultural distance between the host and home country, as well as the level of the host country’s uncertainty avoidance, individualism, political stability, unemployment rate, market potential, and efficiency of contract enforcement, may drive the spread of international franchising. Results reinforce previous research on country choice as to the association between international franchising and the host country’s unemployment rate and cultural distance, but also identify differences from other regions in some issues such as political stability. Moreover, new insights relative to the effect of market potential, individualism, uncertainty avoidance, and the efficiency of contract enforcement on international franchise diffusion are also shown.