How market environment may constrain global franchising in emerging markets

Abstract

Although emerging markets are some of the fastest growing economies in the world and represent countries that are experiencing a substantial economic transformation, little is known about the factors influencing country selection for expansion in those markets. In an attempt to enhance the knowledge that managers and scholars have on franchising expansion, the present study examines how market conditions may constrain international diffusion of franchising in emerging markets. They are: i) geographical distance; ii) cultural distance; iii) uncertainty avoidance; iv) individualism; v) unemployment rate; vi) political stability, vii) corruption, and viii) gross domestic product. This study uses a quantitative approach applied to a sample of 63 Spanish franchisers with 3,899 franchised outlets operating in a total of 27 emerging countries. Results conclude that political stability and gross domestic product are positively associated with franchising spread. In contrast, geographical distance and individualism show a negative relationship with franchising spread in emerging nations. Overall, this study provides readers with an overview of the current state of global franchising diffusion overseas. Moreover, results obtained in this study can be useful to understand and predict the demand for franchising across countries. The present paper develops and tests a model that can be useful not only to academics wishing to enhance their knowledge about global franchising, but also to firm managers wishing to establish new outlets in emerging nations. Thus, franchisers may use the results of this study as a starting point for identifying regions whose characteristics best meet their needs of expansion. This paper explores how certain market conditions may favor international diffusion of franchising in emerging markets. The scant theoretical or empirical attention given to this topic has usually been examined from a U.S. base and focusing on developed markets. To fill this gap, the present study analyzes the international spread of the Spanish franchise system, which since 2008 has occupied the fifth worldwide position in terms of both the number of franchisers and the quantity of franchised outlets, across emerging markets.