Purpose: Diversification is a strategy to secure competitive advantage, improve performance, and survive. Diversification studies have been conducted in various fields such as motivation and performance.
Diversification is actively taking place in the...
Purpose: Diversification is a strategy to secure competitive advantage, improve performance, and survive. Diversification studies have been conducted in various fields such as motivation and performance.
Diversification is actively taking place in the franchise industry, but research on the diversification of franchisor is lacking. Therefore, in this study, we analyzed the influence of franchisor characteristics on diversification and how the characteristics of franchisors affect diversification according to the number of franchise brands owned by the franchisor. Furthermore, the impact of the diversification of franchisor on performance was analyzed.
Research design, data, and methodology: Regression analysis was conducted to analyze the effect of franchise characteristics on franchisor diversification. Next, in the effect of franchise characteristics on diversification, the moderating effect of the number of franchise brands owned by the franchisor was analyzed. In addition, the impact of the diversification of franchisor on performance was analyzed. As an additional analysis, the characteristics of franchisor according to the survival period of franchise brands and the difference in average sales of existing and new franchise brands after franchise brand expansion were compared. For this purpose, the information disclosure data from 2015 to 2020 registered for franchise business transactions with the Fair Trade Commission was used and analyzed.
Results: As a result of a regression analysis to confirm the effect of franchisor's characteristics on diversification, the franchise business period has a positive effect on franchisor business diversification.
However, the results of regression analysis using the number of franchise brands owned by the franchisor as a moderating variable showed different results. As the number of franchise brands owned by a franchisor increases, the positive impact of franchise business period, number of stores, and assets on franchisor diversification increases. As a result of analyzing the impact of franchisor diversification on performance, it was found that franchisor diversification has a positive effect on franchisor performance. However, it was found that the effect of the increase or decrease of the franchise brand owned by the franchisor on the performance of the franchisor was not significant.
Conclusions: The study provides the following practical implications. First, by using the number of franchise brands owned by the franchisor as a moderating variable, it was confirmed that the characteristics of the franchisor had a different effect on diversification. Through this, it was revealed that the number of franchise brands owned by a franchise headquarters is important in the diversification analysis of franchisor. Second, it was revealed that diversification of franchisees has a positive effect on performance, and that simple franchise brand expansion alone cannot improve franchise performance.