The franchise partner selection process and implications for india

The franchise partner selection

process and implications for India

Tushar Vaishnav

Hyatt Hotels and Resorts Worldwide, London, UK, and

Levent Altinay

Department of Hospitality, Leisure and Tourism Management,

Oxford Brookes University, Oxford, UK

Abstract

Purpose – The purpose of this paper is to provide insights on the franchise partner recruitment

process and decision-making criteria used to select partners. It aims to investigate the process and

parameters considered by franchisees in selecting potential international hotel organizations as

partners. The success of such choices influences growth of the firms and consequently affecting

industry and economy.

Design/methodology/approach – In-depth semi-structured interviews with owners, directors, vice

presidents and mangers of the franchisee organizations were deployed.

Findings – Findings suggest that partner selection is a multidimensional activity involving several

key stages. Indian franchisees use profitability, brand name, operations support as decision-making

criteria while selecting their partners.

Practical implications – Differences occur at various stages of partner selection. A proper

understanding of partner selection dynamics and careful consideration of criteria’s like culture,

organizational values, pricing, experience, etc. would result in a better building of relationship.

Originality/value – The paper highlights the complexity of the process and the decision-making

criteria from a franchisee’s perspective. From a practical perspective, it could be of value to future and

existing international hotel chains using franchising as a mode of expansion.

Keywords Franchising, Partnership, National cultures, India, International business

Paper type Research paper

Introduction

Saturation of the domestic market especially in most of the developed countries has

forced firms to explore new markets (Zhao and Olsen, 1997). Strategic alliances help

large firms to seek new market opportunities by reducing business risks. Various

alliances namely joint venture agreements, network arrangements, management

contracts or franchising assist organizations in coping with uncertain business

environment, international expansion and fierce market competition (Beverland and

Bretherton, 2001; Chathoth and Olsen, 2003).

Franchising is one of the most preferred strategies in international expansion (Olsen

et al., 1998). The concept of today’s modern franchising originated during 1919 in

California, USA (Housden, 1984). It is defined as a licensing agreement between the

franchiser and the franchisee, whereby the former grants the permission for the use of

his trademarks, ideas, patent or goodwill in lieu of royalty or some other consideration

by the franchisee (Mendelsohn, 1999). It is the non-equity and preferred mode of

ownership, which provides flexibility and significant economies of scale to the

worldwide operations (Contractor and Kundu, 1998). More and more hospitality

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52

Worldwide Hospitality and Tourism

Themes

Vol. 1 No. 1, 2009

pp. 52-65

q Emerald Group Publishing Limited

1755-4217

DOI 10.1108/17554210910949887