Master Franchising as Foreign Entry Mode: Evidences from the Spanish Franchise System

Abstract

The present study examines how a number of market conditions may constrain entry mode choice into Middle East nations. Specifically, this paper focuses on master franchising and analyzes the determining factors in this entry mode decision. A quantitative approach was applied to a sample of Spanish franchisors operating through 96 franchisee outlets across 6 Middle East countries in January 2010. They are Bahrain, Cyprus, Israel, Jordan, Saudi Arabia, and United Arab Emirates. Findings show the importance of a number of host country’s features (economic development, corruption, and efficiency of contract enforcement). The scant theoretical or empirical attention given to the topic of foreign entry mode choice via franchising has usually been examined from a U.S. base and focused on developed markets. To fill this gap, the present study analyzes the international spread of the Spanish franchise system—ranked fifth worldwide both in terms of the number of franchisors (1,019) and the quantity of franchisee outlets (65,026)—into the Middle East.