INFLUENCE OF TRUST TOWARDS FRANCHISEE FRANCHISOR RELATIONSHIP

Transcription

1 INFLUENCE OF TRUST TOWARDS FRANCHISEE FRANCHISOR RELATIONSHIP JOHN 1 Dr. A. RAJAMOHAN 2 1 PhD Research Scholar, Bharathiar University, Coimbatore. 2 Professor MBA, Department of Business Administration, Annamalai University. ABSTRACT Franchising system is expanding at wast range in today business implication. An exchange perspective of franchising recognizes that both the franchisor and franchisee in developing and maintaining sustainable relationships. Trust plays a major role sustain the franchisee franchisor relationship. So the research is based on the franchisee trust towards the franchisor in franchise system for study. The researcher has used the descriptive research method for this study and a sample of 345 franchisee respondent from Chennai. To simplify the research the researcher used convenience sample for collecting the information from the respondents. The information is collected using questionnaires, consisting of closed ended and multiple choices. The collected data are analysed and interpreted using percentage analysis. The results are obtained from a series of detailed interviews in franchisee franchisor trust. The conclusion is that the trust level between partners is high. Keywords Franchisee trust, Franchise system, Relationship and Partners INTRODUCTION Franchise is a system of distribution through which the owner of product approaches independent businessmen in selected territories, appoint them as sole franchisee for particular areas and encourage them to distribute the product within the area assigned. The owner called as franchisor retains control over the technique or style with which the product is merchandised. The franchisees are given certain areas and as per the contract the franchisees are expected to promote the sale in a specific manner. The franchisor provides equipment, gives his brand name, undertakes publicity, provide managerial and technical assistance. The franchisee has to adopt selling techniques and see that maximum sale is promoted through his local network. Franchising represents a unique form of entrepreneurship because it systematically reduces the uncertainty that normally exists between independent entrepreneurs (a venture and its suppliers, for example) by leveraging trust among interdependent entrepreneurs within the same venture (franchisors and franchisees). Consequently, franchising represents a system of entrepreneurship that is particularly reliant upon interpersonal and intraorganizational trust. In this way, trust in a franchising context functions as the bond that reinforces the contractual alignment of interests between the relational parties of a franchise, thereby ensuring mutually profitable outcomes. The objective of this study is to investigate a possible relationship between franchisee satisfactions towards franchisor. LITERATURE REVIEW Franchisees acquire an increasing ability to operate autonomously as they learn the franchise business in more established relationships (Tikoo, 2002). As the value of the franchisor to the franchisee deteriorates, it becomes more difficult to sustain trust levels. As the franchise grows with increasing numbers of franchisees, the physical distance between franchisor and average franchisor grows, with franchisors having less capacity and inclination to monitor all of their franchisees closely icmrrjournal@gmail.com

2 to ensure conformity to formal contract. Recognizing the constant threat of conflict with their franchisees, franchisors ultimately resort to managing their relationships at a distance, by encouraging compliance through relational forms of governance requiring trust. Trust can be defined as franchisee confidence in accepting a calculated level of risk with the franchisor (Coleman, 1990), allowing franchisees to cope with vulnerability in their relationships with their franchisors. This calculation of trust is based on criteria of trustworthiness. Previous models of trust in channels research have identified competency and integrity as potential criteria (Davies and Prince, 2005; Dickey et al., 2007; Mayer et al., 1995). The importance of franchisee trust is that it is likely to be reciprocated by the franchisor, leading to direct salutary effects within the relationship. Nonetheless, franchisees may need to rely more on integrity for guiding their expectations regarding their franchise relationships. Expectations of appropriate behavior reflective of integrity can often be interpreted and inferred from the terms specified in franchise contracts. These expectations are then qualified over the evolving relationship through successive encounters and interactions, where appropriate behaviors can be gauged as role obligations are fulfilled (Scheer and Stern, 1992) and as constructive collaboration are demonstrated (Larzalere and Huston, 1980). In the absence of tangible outcomes that would facilitate assessment, the identification of appropriate and expected behavior amounts to judging the processes from which business decisions derive. Perceptions of processes have been shown to impact on the quality of exchange relationships, reflecting procedural justice theory (Lind and Tyler, 1988). Just procedures provide a means of indirect control over a decision when direct control is not possible (Thibaut and Walker, 1975). This is because just procedures offer cues of what can be expected for further outcomes. Selnes (1998) argues that trust is a value that represents a higher conceptual level than satisfaction, while satisfaction is an important source of trust. The logic is that satisfaction is a manifestation of the other party's capacity to fulfill relational norms, and this generates trust. Franchising is a relationship normally characterized by a high relational norm of solidarity, where the parties are likely to develop a strong reputation for trust.trust is a central construct in relationship marketing (Morgan & Hunt, 1994). Others areas in which it is recognised as a key construct are service marketing (Moorman, Zaltman, & Deshpande, 1992), industrial marketing (Hakansson, 1982), selling partnerships (Smith & Barclay, 1997), supplier relationships (Ganesan, 1994), sales relationships (Doney & Cannon, 1997) and customer relationships (Jap, 2001). Trust in the exchange partner increases the security that the partner s actions will have positive results, which produces greater satisfaction (Anderson & Narus, 1990; Farrelly & Quester, 2005; Mohr & Spekman, 1994; Siguaw, Simpson, & Baker, 1998; Smith & Barclay, 1997). Furthermore, if there is no trust in the partner, the relationship will lead to poor results and dissatisfaction (Gundlach, Achrol, & Mentzer, 1995). Although the causal ordering of trust and satisfaction is a controversial issue, most empirical evidence favours considering satisfaction as a consequence of trust (Duarte & Davies, 2004). Studies of relationship marketing have considered trust as an essential element for relationship success (Hunt, Lambe, & Wittmann, 2002; Morgan & Hunt, 1994). However, trust may be active or latent in different phases of the relationship development process (Wilson, 1995) icmrrjournal@gmail.com

3 OBJECTIVE OF THE STUDY The prime objective of the study is to find out the influence of trust towards franchisee franchisor relationship to achieve the main objective. The study focuses on the following sub objectives. 1. To find out the level of integrity on franchisee by franchisor. 2. To find out the franchisor reputation towards franchisee. SCOPE OF THE STUDY The study includes the survey of the franchisee in order to measure the characteristic of franchisee. It is confined to fifty (75) samples due to lack of time and fund at the disposal of the researcher. RESEARCH METHODOLOGY Research Research is an art of scientific investigation. According to Redman and Mory, research is a systematic effort to gain knowledge. (1923). Research methodology is a way to systematically solve the research problem. It is a plan of action for a research project and explains in detail how data are collected and analysed. Research Design A research design is an arrangement of condition for collection and analysis of data in a manner that aims to combine relevance to research purpose with economy in procedure. (Claire selltiz, 1962) The type of research used in this study is descriptive in nature. Descriptive research describes the related factors in franchise system, the characteristics of a group or individuals or situation. Data Collection Both primary and secondary data are used in this study. The primary data is collected from 345 franchisee through questionnaire method. The collected data are taken for analysis and percentage method is used for analyzing the data. Secondary data are from journals and publication. Sample Size We determine the sample size as 345 to strengthen the study. Sample design The data has been collected from different franchisee in and around Chennai. Samples of 345 respondents are selected from Chennai for the study. Convenient sampling method is used. Tools Used INTERCONTINENTAL JOURNAL OF MARKETING RESEARCH REVIEW The tools used in this study are mean value to rate the factors in trust, Factor Analysis is done to reduce the number of variables into minimum manageable variables, frequency and percentage analysis has been used icmrrjournal@gmail.com

4 TABULATION AND ANALYSIS TRUST OF FRANCHISE RELATIONSHIP The following are the Trust recognized by Franchisee to strengthen the Relationship in organizations. ORDER OF VARIOUS TRUST RECOGNISED The extent of various satisfaction realised by the franchisee are measured by five point Likert Scale with value 1 for Strongly Disagree, value 2 for Disagree, value 3 for Neither Agree nor Disagree, value 4 for Agree and value 5 for Strongly Agree. The mean value of the various trust realised is given in the following table. Table -Order of various Trust Factors recognized Trust Factors Mean Value Rank My franchisor keeps promises IV My franchisor is always honest with me II My franchisor is truly interested in my success VI My franchisor is trust worthy III My franchisor is always faithful I My franchisor has high integrity X My franchisor has a good reputation in the industry VII My franchisor very reliable V My franchisor is an excellent source of accurate information IX I have confidence in my franchisor VII The above table shows the Order of various Trust recognised by franchisee. Trust with franchisor faith is the first Trust Factor recognised by Franchisee for strengthen the relationship the highest mean value of This shows that the franchisor faith helps to increase franchisee relationship. Franchisor honest are the next trust factor felt with the mean value of This shows franchisor honesty has lead to the part of relationship value. The next in the order are trust worthy with the mean value of Trust helps franchisee to streamline relationship whereby leading to overall Performance.When mean values are observed closely it shows that the mean values of Trust like High integrity, Good reputation, accurate information, Confidence are between 3.0 & 3.5 which can be considered closer to value 3. This discloses that these are recognised by franchisee at a very normal level. The remaining Trust, Keeps promises, Interested in success, Very reliable are have mean value greater than or equal to 3.5 which can be considered closer to value 4. It reveals that these Trust Factors are strongly recognised by the franchisee to strengthen the relationship. FACTORISATION OF VARIOUS OPERATIONAL EFFICIENCIES Factor Analysis is done to reduce the number of variables into minimum manageable variables. The factor analysis is used to reduce the data collected on 10 variables (i.e.) the various trust factor recognised by implementing e-procurement, into smaller number of manageable variables by exploring common dimensions available among the variables. The suitability for factor analysis is icmrrjournal@gmail.com

5 tested using two analysis namely KMO test and Bartlett s test of Sphericity. The Kaiser-Meyer-Olkin Measure of Sampling Adequacy is a statistic which indicates the proportion of variance in the variables which might be caused by new factors. High values generally indicate that a factor analysis may be useful with the data. If the value is less than 0.50, the results of the factor analysis probably won t be very useful. Table -KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy..598 Bartlett's Test of Sphericity Approx. Chi-Square 965 Df 45 Sig The above table shows that the KMO value is which indicates that the factor analysis is useful with the data. The chi-square value for Bartlett s test of Sphericity is 956 and the significant value is which is significant at 99 percent level of confidence. The variables which are having Eigen values greater than one are taken for further analysis. For the purpose of extraction, Principal Component Analysis is used and for the rotation Varimax rotation is used which is the standard rotation method. Table-4.20 gives the complete information of deducted factors and the percentage of variance explained by them. Table -Variance explained by Factors S. No Factors Eigen Value % of Variance Explained Cumulative % 1 Factor Factor Factor The total variance explained by the three factors with Eigen value greater than 1 is 54 percent; remaining variance is explained by other variables. The Factor 1 explains percent of the total variance and occupies the pivot position. This factor alone forms the major trust factor recognised. The variables which are included in each factor are given in table Table -Rotated Component Matrix Trust Factor Faithful.880 Confidence.760 Keeps up promise.747 Reliable.252 Factor Honest.891 Trust worthy.845 Accurate information.695 Truly interested.673 High integrity.517 Reputations icmrrjournal@gmail.com

6 From the factor analysis three factors are extracted from original ten variables. Four variables (Trust Factor) are grouped under the first factor; another two variables are included in the second factor and four variables in the third factor. The first factor can be named as Faithful; the second factor can be called as Honest and the third factor as Reputation. The various Trust Factor recognised which are included in the each factor along with their loadings are given below. Faithful Honest Table -Factor loadings of trust factor Factors Components of Factors Factor Loading Reputation Faithful.880 Confidence.760 Keeps up promise.747 Reliable.252 Honest.891 Trust worthy.845 Accurate information.695 Truly interested.673 High integrity.517 Reputations.400 FREQUENCE AND PERCENTAGE ANALYSIS FOR TRUST FACTOR Trust level of Faithful, Honest and Reputation factors were collected with the help of five scales. For the purpose of convenience the researcher has reduced the scale into three point based on rating values. Table -Factor analysis of Trust Factor Factors Frequency % Frequency % Frequency % Faithful Factor Honest Factor Reputation Factor The above table shows that, 48 percentage of the response lie in the higher region of rating value , 33.4 percentage lie in the middle region rating value and 18 percentage lie in the rating value for the Faithful factors. The table shows that, 53 percentage of the response lie in the higher region of rating value , 31.5 percentage lie in the middle region of rating value and 15.5 percentage lie in the rating value for the Honest factors. In Reputation factor 46 percentage of the response lie in the middle region of rating value , 35.7 percentage lie in the higher region rating value and 18 percentage lie in the rating value icmrrjournal@gmail.com

7 FINDING OF THE STUDY The Trust factor which influence franchisee relationship are franchisor promise, trust worthy, high integrity, faithful, reliable and confidence with franchisor. The mean value shows that franchisor faith with franchisee ranks first followed by franchisor honesty with franchisee.the frequency analysis shows that 48 percent of franchisee are strongly agree that faithful factors influence franchisee relationship, 53 percentage of franchisee are strongly agree that honesty factor are influence franchisee relationship and 46 percent of franchisee are moderately agree that reputation factor influence franchisee relationship. Factor analysis is used to factor the variable into three factor.each factors are names as Faithful factor as first factor, for the second factor Honesty factor and Reputation factor for third factor. SUGGESTIONS Franchise relationship on overall performance can be enhanced only if trust factor of franchise. Hence the franchise has to concentrate on trust related factor truly developing faith over franchisee and be prompt on franchisee. To strength the franchise relationship the trust related factor have to concentrates more they are interest over franchisee growth, high integrity on the partner, provide accurate information and maintain confidence them. Only by effective maintains of trust over franchise will enhance these overall performance. CONCLUSION The franchise system of business is started growing at a greater extent. Entrepreneurs should realize this fact and look forward to gain the best from this business option. This paper strongly suggests that trust among partners are very important for the smooth functioning of the franchise system. On the whole all the parties in the franchise system have to reduce the conflict level for better understanding among them. This study concludes that the level of franchisee trust towards franchisor is high. But Reliable and High integrity with franchisee is very low that can be increased by proper communication system. Further Research could be made on commitment and strength of relationship between franchisee and franchisor REFERENCEs Anderson, J.C., & Narus, J.A. (1990). A model of distributor firm and manufacturer firm working partnerships. Journal of Marketing, 54(January), Coleman, J., Foundations of Social Theory. Harvard University Press, Cambridge, MA. Davies, M.A.P., Prince, M., Dynamics of trust between clients and their advertising agencies advances in performance theory. Academy of Marketing Science Review 11 (1), 1 32 Dickey, M.H., McKnight, D.H., George, J.F., The role of trust in franchise organizations. International Journal of Organizational Analysis 15 (3), Doney, P., & Cannon, J. (1997). An examination of the nature of trust in buyer seller relationships. Journal of Marketing, 61(April), Duarte, M., & Davies, G. (2004). Trust as mediator of channel power. Journal of Marketing Channels, 11(2/3), Farrelly, F.J., & Quester, P.G. (2005). Examining important relationship quality constructs of the focal sponsorship exchange. Industrial Marketing Management, 34(3), icmrrjournal@gmail.com

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