Toward a Strategic Model of the Franchise Form of Business Organization

As an organizational form, franchising has evolved to the point where it now accounts for 38% of all retail sales in the U.S. This unqualified success of the franchise form can be attributed to its inherent strategic advantages. The most central of these strategic advantages is economies of scale. But scale, and the ensuing spatial preemption, are only attained through the acquisition of external financial resources and managerial agents. Once attained, scale economies and the enforcement of quality standards can lead to internal growth through an integrated low-cost and differentiation-based competitive advantage. (92 words)