26 Sep After reading the case Ethical Branding in Franchising: Implications for Brand Values and Corporate Culture’ by Gringarten & Fernández-Calienes, pages 35-49,?write a case study us

3     Ethical Branding in Franchising

Implications for Brand Values and Corporate Culture

Antonella Capriello and Rohail Hassan

Introduction

Branding is an essential element of any franchise agreement, as a brand is a fundamental asset that enables franchise firms to differentiate themselves from competitors (Caves & Murphy, 1976). As Zachary, McKenny, Short, Davis, and Wu (2011) explain, franchise branding is also instrumental in maintaining the internal cohesion of the franchising network through the dissemination of common values. Nyadzayo, Matanda, and Ewing (2011) assert that marketing and branding activities rely on the franchisees’ abilities and help franchise to understand, interpret, and share the brand values.

The European Code of Ethics for Franchising highlights that franchising entails not only legal obligations but also ethical obligations with implications on brand values and chain policies (Adler, 2009). The tendency of franchisor and franchisee behaviors toward opportunism requires strengthening ethical policies to perverse cooperation and cohesion in franchising networks (Brookes, Altinay, & Aktas, 2015). Ethical branding and Corporate Social Responsibility in franchising have even more fundamental implications on non-financial performance (Kim & Pennington-Gray, 2017) and may accrue positive perceptions toward a brand with the resulting effects on franchisees’ perceptions (Lee et al., 2016). Additionally, Dant, Grünhagen, and Windsperger (2011) underline the emerging discussions on social responsibility in franchising, which summarize the concept of environmental initiates with potential benefits on corporate reputation.

This chapter proposes a conceptual framework for ethical branding in franchising and the outline of the chapter is as follows. With a focus on ethical issues, Section title (Brand Relationship Management and Ethical Issues) describes the factors influencing brand relationship management, Section title (Franchisor Support and Training) identifies the variables affecting brand citizenship behaviors, and Section title (Information and Knowledge Sharing) discusses the implications on brand relationship quality, while Section title (Brand Architecture, Market Areas, and Distribution Channels) presents the elements that influence brand equity. Section title (Power Relationships and Opportunism) concludes with the conceptual framework for ethical branding.

Brand Relationship Management and Ethical Issues

In the franchisee channels, brand relationships reflect the development and management of the franchisor–franchisee relationship. Key franchising challenges include establishing a franchising network where franchisors foster cooperation, creative actions, and ethical behaviors in franchisees. Literature indicates the variables that influence the brand relationship management construct as information sharing, franchisor support (Terry, 1993), and social interactions (Morgan & Hunt, 1994). Analyzing emerging ethical issues, this section considers the specific variables that affect the nature of brand management relationships.

Franchisor Support and Training

In identifying the processual antecedents of perceived channel conflict in franchising, Weaven, Grace, Frazer, and Giddings (2014) point out franchisees have high expectations with regard to prospective income and franchisor support in relation to marketing and promotional assistance. In the light of transaction cost perspective (Williamson, 1975), Spinelli and Birley (1996) state that franchisee satisfaction–dissatisfaction of the franchisor service provision determine the subsequent behaviors. More specifically, dissatisfied franchisees may involve in unethical behaviors (e.g., reducing service quality or refusing to adopt system standards), failing to meet contractual stipulations and misrepresenting revenues (Grace, Weaven, Frazer, & Giddings, 2014; Morrison, 1997). This behavior will have a negative impact on brand image and inevitably generates litigation with potential implications on the relationship and its termination (Weaven, Grace, Dant, & Brown, 2010).

In a relational exchange perspective, the franchisor’s network of relationships is central to sustaining joint constructive dialogue and problem-solving, as franchisors and franchisees perform together to cocreate value (Grünhagen & Dorsch, 2003). From a theoretic resource dependency perspective, Harmon and Griffiths (2008) confirm that franchisees assess the value of the resources and services provided in the context of alternative investment opportunities, since franchisees may deem franchisor support inadequate with implications on the franchising relationship trust (Watson & Johnson, 2010).

Information and Knowledge Sharing

Franchising relies on mechanisms to encourage information sharing to assist franchisees in achieving their goals (Mohr & Spekman, 1994), as franchisees require information in connection with expertise and the promised benefits associated with the franchising operations. Based on the ideas of Tikoo (2002), the franchisor has a key role in collecting, synthesizing, and sharing information throughout the entire network. Communication problems and disputes are more persistent and problematic with the shift from founding franchisor to the professional manager (Dant, 1995).

Knowledge sharing is instrumental in brand reputation processes and organizational learning (Koza & Dant, 2007). The dissemination of information may reduce channel members’ potential frictions in the goal alignment of the franchise system (Dant & Nasr, 1998).

Brand Architecture, Market Areas, and Distribution Channels

Brand relationship management as a construct includes brand architecture with implications on the product and service provision capacity (Nyadzayo et al., 2011). In light of geographical pressure, brand architecture should also include the design of franchise regions and market zones (Cox & Mason, 2007), since the identified structure has a significant effect on the survival of the system and performance. Cox and Mason (2009) argue that franchisors generally refine and restructure existing territories and market areas with consequences for existing franchisees. Fock (2001) states that the re-designing of the franchise territories could be a significant source of conflict among franchisor and franchisee, reflecting specific ethical issues in connection with the newly designed areas. To attract initial franchisees, Cox and Mason (2009) express the opinion that the franchisor grants exclusive rights to a territory, whilst in the absence of exclusive territorial rights, franchisees may view new franchising outlets in the same area as encroachment. With the development of omni-channel strategies, franchisors need to refocus the content of the franchising agreements. This aspect represents an emerging ethical issue in terms of governing online and offline outlets limiting a potential source of conflict (Pagano & Pardo, 2017).

Power Relationships and Opportunism

Despite the mutual incentive to perform well in a franchising agreement, a two-sided opportunism threat may apparent in the franchisor and franchisee relationship (Lafontaine, 1992). Opportunistic behaviors are harmful and can reduce both wealth creation and distribution in the franchising network with relevant implications on the brand values and reputation building processes (Wathne & Heide, 2000). According to Gassenheimer, Baucus, and Baucus (1996), opportunism can manifest when parties operate in physically different locations, often entailing

,

CASE ANALYSES (3 pages maximum):

Students are to use the Case Analysis Outline – suggested format – in the syllabus (see below) to review each assigned case.

I. Case Analysis Outline – Suggested Format

(a) Overview of major issues – describe the challenges/problems/issues outlined in the case. This section should be clear and succinct. You can make use of bullet points to describe the issues.

(b) Applications of key themes – elaborate what you have learned from the assigned case by directly relating/connecting the case to concepts and themes described in the different chapters.

(c) Analysis

Situational Analysis

External Environmental Analysis (Outside of the organization)

Economic, Social, Political, Technological opportunities and challenges

Internal Environmental Analysis (Specific to the organization)

Organization’s internal strengths, weaknesses, opportunities, and external threats

Describe the firm’s product, pricing, distribution/place, and promotion strategy (if applicable)

Market Analysis

Description of the target market including primary customers/target market

In analysis, you can also put down your own thoughts and opinions about the issues/challenges described in the case. You can bring in outside information (such as the latest news, articles, references to any calculations, charts, diagrams or graphs*). If applicable, you can also answer any questions at the end of each case. These questions can also be used as a guide to develop the other sections of your case summary/write-up.

(d) Recommendations

Development and Evaluation of Strategic Alternatives, Recommendation of the better Alternative, Implementation Techniques for Recommended Alternative (How, when, where, why).

Please note: If any of the above outline points are not applicable to your case, you can skip those points in your case write-up.