The Impact of Value Signalling on Franxhising Acceptance

Abstract

It is the determination of any franchisors to grow their business either by company-owned multi-units or through appointed franchisees. Both efforts have the pros and cons, opportunities and constraints. Many franchisors prefer to grow their business by emphasizing the advantages of their network size using franchised units- due to local knowledge advantage of the prospects, host-country government policy on franchise investment, risk-sharing and minimum capital they have to invest. With all the known advantages, the franchisors have to decide what strategies will attract prospective franchisees. On the other hand, potential franchisees may consider a number of different franchise chains. Therefore franchisors usually offer prospects a variety of services and contractual arrangements that they will consider valuable once the prospects franchisee become part of the network. Currently franchisees will often value the costly support services, either in the form of training and knowledge sharing, advertising and initial financial or investment assistance; hence the franchisor may deploy the same support services to attract prospects. Thus, this review focuses on the values that might signal or influence prospects towards the acceptance of a franchise brand/chain