Towards an understanding of the nature of the breakdown in relationship between a franchisee and a franchisor : an approach using psychological contract theory

Abstract

The ability of a franchisor to sustain a harmonious relationship with their franchisees, over a period of time, has been shown to ensure a sustainable relationship and continued success of the franchise system. Franchising is necessary to further economic growth, as well as to create employment, develop skills and empower individuals. It is, therefore, necessary for the relationships that underpin franchising to be successful and sustainable. The psychological contract is an unwritten agreement that exists between a set of individuals and goes above and beyond the written contract. It represents a set of beliefs or perceptions with regards to what each party owes to one another. This study uses the perspective of the psychological contract to scrutinise the relationship between a franchisor and a franchisee to ensure a lasting and mutually beneficial exchange. A multiple case study approach was used, along with elements of action research, as the methodological framing for the current study. The sample group consisted of de-franchised franchisees and franchisors who had prematurely cancelled a franchise contract. A snowball sampling technique was used and information was gathered using semi-structured and in-depth interviews, and analysed using ATLAS.ti. The validity and reliability of the study, as well as the limitations, are addressed below. Seven themes - industry fit, brand and marketing, finance, relationship, operations, customers and alignment - were found and analysed from a franchisee and franchisor perspective. A model for the overall success of a franchise system was created by linking these themes based upon their importance from the viewpoint of a franchisee and franchisor. Depicted within this model is the flow of these themes into one another and it has been suggested which elements result in a successful relationship for franchisees and franchisors by linking it to the theory of the psychological contract. Areas for future research have also been delineated.