Nowadays franchising has experienced rapid
international growth, because of international opportunities augmentation that
became evident in an unprecedented rate. The reason lies in the worldwide
economic integration that became possible through the diminishing of the trade
barriers among the countries. Concerning these changes, franchising chains are
expanding in all industrialized countries such as USA, China, Australia etc.,
but also in the European market. Yet, one of the most significant factors that
lead in the diffusion of franchising systems lies in the competitive landscape.
Franchisors are seeking competitive advantages, which most can be achieved
through innovation tactics. Innovation is not only for differentiating
yourself among the competitors but mainly for implementing new processes,
products, services for the expansion of your venture. It is apparent that
franchisors are in a constant pursuit for franchisees due to the fact that
expansion becomes true through the rise of the franchisee chain.
Innovation is the main reason behind the worldwide diffusion
the franchise systems. Innovation in franchising can refer to new kinds
of organisations within a chain, such as the combination of franchising and
company ownership in the same chain, the creation of new contracts etc. As for
the combination of franchising and company ownership, this new type of
organisation is under the name of ‘plural form (Bradach, 1997, 1998)’.
Plural form can offer many benefits to franchisors and franchisees, such as a
well planned management of the chain development, cost reduction, optimized
risk control, reactivity, uniformity and easier adaptation to the new emerging
obstacles in the market. Furthermore, franchisors thanks to innovation are
using a multi-channel strategy, by putting a commercial website to the
existing one. The multi-channel strategy is evident in several chains,
regardless of the field, sector or occupation.
In addition to
another new significant franchise system, the emergence of new kind of contracts
should be mentioned. Innovation also plays a key role here, owning to the fact
that franchisors can move onto the signing of different kind of contracts with
their franchisees. Yet, as Kaufman added, the franchisors are mostly using the multifranchising
contract, in which the franchisor has the ability to sign more than one
contracts with the same franchisee. Thus, in this new emerging franchising
system, the franchisee has the potential to run more than one franchising units
and the franchisor has conceded these rights to him (Kaufman and Dant, 1996). Commonly
this new franchise system is crucial for differentiating an offer of a
product/service, from another identical product or service that belongs to a
competitor. In this way, innovation in franchise system leads to the emergence
of new types that focus solely on distancing brands, products, services and
processes from existing ones.