International Business & Economics Research Journal – August 2009

Volume 8, Number 8

The Franchising Decision: The Perspective Of The Franchisee In The Hospitality Industry
Ramon Diaz-Bernardo, Instituto de Empresa Business School, Spain

ABSTRACT Franchising is a major trend in the hotel industry. Despite the fact that almost two-thirds of branded hotels in the U.S. are franchised, there is a lack of empirical research on franchising in the hospitality industry. In this article, I reviewed one of the most relevant lines of research in franchising literature, usually referred as creating franchising systems, and we have concentrated on analyzing the reasons and motivations to use franchising from franchisee perspective within the hospitality industry. The paper identifies the main reasons for choosing franchising for franchisees, explores what are the most valued characteristics of franchising, and gives some guidelines on how to make the franchising offer more appealing to potential franchisees in the hotel industry. Keywords: Franchising, Hotels, Franchisor, Franchisee

INTRODUCTION

A

franchise system is a collaboration agreement between two independent business partners, the franchisor and the franchisee, whereby the franchisor allows the franchisee the right to use his brand name, products and services, and specific know-how in exchange for direct or indirect payments to the franchisor by the franchisee. In other words, the franchise system consists of multiple organizations that are legally independent, economically interdependent, and operationallyindistinguishable to consumers (Parsa 1996). The success of the franchise system is reflected in its spectacular growth figures. In the U.S., where the franchising system began in the early 20th century, there are over 3,000 companies involved in franchising, accounting for over 10% of GDP and an