بررسی عوامل موثر بر توسعه هتل های زنجیره ای از طریق فرانچایزینگ بین المللی

This study proposes and tests an agency-based organizational model of internationalization through franchising in the hotel sector. Using data obtained from a Franchisor Questionnaire 2001–2008, we analyzed a panel of 117 observations of 17 U.S.-based hotels. Our analysis reveals that a hotel franchisor's decision to internationalize through franchising is positively related to the percentage of franchises, the ratio of franchised units to the total number of units. The article contributes to the literature by empirically modeling international franchising of hotels, which present unique characteristics among franchising companies, with a high investment capital requirement, maturity in the product life cycle, and a high level of standardization and globalization of operations. The unique characteristics of individual chains and their segment in the industry are particularly important, as revealed by both data analysis and expert opinion.

In the U.S. economy the service sector has undergone tremendous growth in the past several decades, with the hospitality industry one of the major contributors to this fast-paced growth (Ketchen et al., 2006). Unlike most other service sectors, the hotel industry is generally capital-intensive and its logistics and supply chain can be as complex as those in manufacturing operations (Chen and Dimou, 2005). For hotel companies, this can be a big obstacle to an equity-based expansion model in various markets, particularly in the international market. Thus, it raises the issue of the importance of the internationalization process through franchising as a non-equity-based expansion strategy. Franchising provides scope for rapid international expansion for hotel companies and has the potential to overcome many of the cultural, linguistic, technical, legal, and employment problems commonly associated with internationalization (Abell, 1990). Hotel chains prefer to use non-equity forms of organization for international expansion and operations mainly due to cost-efficiency concerns. Non-equity-based agreements, such as franchising, are the most common forms of organizational structure for market entry (Contractor and Kundu, 1998) among hotel and motel chains, partly because setting up a hotel requires a large amount of capital. In other words, the hotel and motel industry is capital-intensive, requiring a big financial up-front outlay to establish facilities. Franchising provides an opportunity for hotels to lower the risks and the level of investment to expand. Franchising also allows hotel and motel franchisors to share the costs of expansion with the franchisees, who typically pay the start-up costs, initial fees, and ongoing royalties. In return, the franchisees obtain brand-name recognition, economies of scale, and managerial expertise from the franchisors. Contractor and Kundu (1998) propose that a competitive advantage can be derived by separating knowledge-based expertise from capital ownership. A franchise is a way to transfer tangible and intangible expertise with limited capital risks. The hotel industry, in particular, is different among other service franchisors, justifying a separate examination. Using chow tests to compare organizational determinants of internationalization, Alon (1999) found that hotels are significantly different from retail and business services franchises’ internationalization. Franchising related costs are highest in terms of the required capital investment for hotels. Total investment required by Choice Hotels International ranges from $2.3 to 14.6 million, InterContinental Hotels Group (IHG) $2–20 million, Motel 6, $1.9–2.3 million, and Hilton 53.4–90.1 million, to give a few examples.1 In contrast, most other service franchising industries require less than $1 million for start-up costs. The high capital requirement raises the risk of international investment and the needed bonding between franchisee and franchisor inherent in the agency relationship. Hotels have decoupled the ownership of property from the ownership of intellectual assets and have extensively used non-equity modes of entry internationally to defray expansion with minimum risk. However, internationalization through franchising can be a complex process affected by many forces, particularly organizational factors and market conditions. Although previous research has examined factors contributing to internationalization through franchising as an entry mode in the manufacturing industry (e.g., Baker and Dant, 2008 and Gatignon and Anderson, 1988) and among fast food and service franchisors (e.g., Ni and Alon, 2010), this study narrows the research gap by explaining the internationalization of franchising systems in the hotel industry by both empirically testing a theory-driven model and corroborating the model with in-depth interviews of industry practitioners. In particular, this study attempts to identify and understand the impacts of organizational factors and market-condition variables on the decision of hotel companies to enter international markets through franchising within a framework of agency-based theory. This study uses Burton and Cross’ (1995) definition of international franchising. They define international franchising as “a foreign market entry mode that involves a relationship between the entrant (the franchisor) and a host country entity, in which the former transfers, under contract, a business package (or format), which it developed and owns, to the latter” (p. 36). This definition is suitable because our study does not differentiate between the various modes of international franchising. It focuses on the decision to internationalize through franchising, regardless of the mode of entry. In other words, franchising is a business relationship whereby a franchisor permits a franchisee to use its brand name, product, or business system in a specified and ongoing manner in return for a fee (Felstead, 1993). This method is commonly distinguished from other international market entry modes, such as leasing agreements or management contracts that are not included in the current study.

Using the framework of agency theory, the current study proposes and tests an agency-based organizational model of internationalization through franchising in the hotel sector. This study contributes to the extant literature on international franchising by examining empirically the hotel franchising sector. It also tests other agency theoretic hypotheses linking franchising to hotel internationalization. On the practical side, this work highlights franchising factors associated with hotel internationalization through franchising and provides practical guidance as to when to seek international hotel franchising. The results of the data analysis support some of the proposed hypotheses; more importantly, several findings are especially interesting and intriguing. These will be highlighted in the following section. The study results indicate that franchise experience and the franchise percentage are positively related to a hotel franchisor's decision to internationalize. By and large, this is consistent with previous research which reveals that a lack of franchising experience leads to high organizational uncertainty, making the monitoring of performance both challenging and costly, and thus hampering the internationalization endeavor. This international experience is especially important for hotel companies since franchising in the hotel sector presupposes a heavy investment in sunk costs in the process of developing the franchise package. It is also possible that a hotel company with limited international experience may find it more difficult to attract and select qualified franchisees. This finding was observed and supported by Informant B stated that without an established franchising base, international franchising may present incremental hurdles in comparison to domestic franchising. In contrast, with an established domestic franchise base, the challenges of international franchising may be diluted. Related to the positive impact of franchise experience, past studies have suggested that hotel franchisors with strong franchising monitoring skills are more likely to seek international franchisees. Informants B and C both pointed out that although franchising can be a strategy for expansion at specific times for hotel companies possessing high monitoring skills, the “high degree of franchising” may be more reflective of the brand strength, the company's strategy, and the hotel operator's needs at the time than the monitoring skills. Often times, franchising is a way to expand the brand in areas where it has not been able to expand on its own. Citing Marriott as an example, Informant B stated that he did not believe that the arm's-length relationship and slightly different locations were the drivers as much as the specific locations of the company's expansion. For example, Marriott's expansion plan has been to establish the brand in gateway cities and then to expand beyond based on market feasibility, be it through franchising or ownership. In Europe, due to its relatively low brand recognition, Marriott has not used franchising as an expansion strategy; instead, it has acquired established international brands to achieve international growth and expansion. The results reveal that a hotel company's decision to go international is negatively related to size (operationalized as the scale of U.S. operations), although it is not statistically significant with a p-value about 0.10, which contradicts mainstream research findings. Although a positive impact is expected for multi-unit franchising, little support is provided by the data analysis. In the hotel internationalization process, size is usually regarded as having a positive effect on franchising practices, mainly because large hotel companies have more resources to allocate to the franchising process and a higher resilience to failure should the system fail. Presumably, this may also have an impact on management risk perception in that larger hotel companies will experience less of an impact of financial risk, which is oftentimes reflected by the franchising cost. However, previous research findings on the relationship between firm size and the decision to expand is inconsistent, and sometimes even contradictory (Azevedo and Silva, 2001). It may be the case that it is not the hotel size per se that determines whether to internationalize through franchising, but the characteristics of the particular transaction that will influence the decision. This has to be taken into consideration when different hotel market segments representing different levels of asset specificity expand internationally (Rodriguez, 2002). As a result, hotel companies choose to use differing entry strategies when expanding to international markets. For example, Chen and Dimou (2005) argue that services are usually more basic in budget and mid-scale hotels in comparison to upscale hotels. In this case, the services provided and the required skills from management and staff are limited and can be reduced to standard operating procedures and transferred to a third party via a franchise package. However, for high-end luxury hotels, the provision of service requires highly skilled employees to guarantee the level of service to meet brand expectations. In this process, the transfer of knowledge is more complicated since this type of knowledge cannot easily be translated into standard operating procedures. As argued by Valikangas and Lehtinen (1994), franchising is commonly associated with problems of accountability and control. As a result, it is less suited to services characterized by high degrees of intangibility and of consumer/producer interactions and it is more suited to generic services that evolve around a recognized brand name, a basic standard performance, and a wide network of service units. When it is translated into hotel internationalization, Dev et al. (2002) observe that franchising is more popular in the economy or middle market, whereas management contracts are more popular in the luxury market. They argue that the trend to choose a management contract becomes stronger as the size of the hotel increases and quality competence becomes an important source of competitive advantage. However, when quality is not an important source of competitive advantage, management contracts are less preferred and the use of franchising is more likely as the hotel size increases. As a result, regardless of size, franchising is not a commonly sought after entry mode in upper hotel market segments, compared, for example, with management contracts. The decision can also be affected due to quality assurance and free-riding control. For example, high control modes of expansion are considered to be less risky with respect to quality depreciation. Furthermore, free riding is more likely to occur when the value of a brand name is high, thus requiring higher degrees of control. Again, regardless of size, if they decide internationalize, higher quality brand hotels will be more likely to choose a highly controlled, highly integrated entry mode rather than a franchising arrangement. It was noted in the interviews with the three industry informants that in addition to all the factors identified in the model testing that affect a hotel company's likelihood of going international, brand might play an important role in determining what strategies are adopted when internationalizing. Informant A cited Hilton Hotel Corporation's franchising strategies with their economy brand Hampton Inns in international markets as an example. Although the brand (i.e., Hampton Inns) has more than 1400 hotels and nearly 172,000 rooms under the Hilton brand umbrella, it is largely unknown outside of the United States. Hilton's management decided to arm the economy brand (along with Doubletree and Embassy Suites) with full equity of the Hilton name itself, and renamed the Hampton brand “Hampton by Hilton” outside of the United States. He justified this strategy by commenting that “while all three brands are well known within the United States, the Hilton name – one of the most recognized in the hospitality industry worldwide – is far better known in Canada and Latin America, representing a supreme opportunity for Doubletree, Embassy Suites, and Hampton Inns to be better recognized in those areas by virtue of their Hilton affiliation.” As a result, they added “by Hilton” to certain brands that are rapidly expanding into new markets abroad. This strategy was adopted in their merger with Hilton International to enhance the goal of becoming the premier global hotel franchising company. These strategies will afford Hilton a good opportunity to further diversify its income with the internationalization of its highly successful portfolio of brands through franchising and a multi-unit area development agreement. The three case studies – Ramada, Best Inn and Candlewood – that departed from the empirical results deserve a closer examination. While Candlewood showed a greater interest in international expansion via franchising, Best Inn and Ramada showed less willingness for such expansion. Ramada, established in 1954, only started to franchise in 1990. It has almost 900 properties, but only about 7.9% of them are international and only in Canada, the closest culturally and geographically to the USA, where the company is based. Ramada's properties concentrate in California, Florida and Texas. By developing a strong US-based strategy, Ramada was able to compete with other chains effectively in the North American market. Best Inn, on the other hand, has another set of competencies. It specializes in the budget part of the market and has carved niche among ethnic entrepreneurs as franchisees. The low cost strategy developed by the company for American consumers and the franchisee recruitment strategy, suited for American conditions, has discouraged its management from pursuing riskier, more remote locations for expansion. Candlewood, on the other hand, is part of the InterContinental Hotels Group and has the backing of a large conglomerate with massive experiences abroad. IHG also owns Holiday Inn, Crown Plaza and InterContinental Hotels and Resorts, all of which, have strong international assets. Sharing of knowledge and resources has helped propel Candlewood into the international marketplace. While this study uncovers some of the determining factors of internationalization of hotel franchising, it is not without limitations. The study only focuses on key organizational variables in predicting hotel internationalization through franchising, and does not consider other factors that might create different dynamics in the process of international franchising, such as market-specific characteristics and other situational factors. It is easily conceivable that the franchising process is market-sensitive and as a result market characteristics play an important role in affecting franchising operations. These factors may include, among others, the market segment, the degree of control, either by the hotel industry sector or by government policy, the risks and costs of entry, and similarities of cultural norms and business. In addition, other situational factors potentially will be important in affecting how hotel franchising is carried out in a certain market, such as the maturity and stability of the financial market of the host country, the level of technology infrastructure development in the market, and the overall economic and financial conditions in the target market. Although there is anecdotal evidence in a number of case studies in different markets (e.g., Vianelli and Alon, 2007), there are no systematic studies examining the impact of market-specific dynamics and other situational factors on international hotel franchising. Whereas this line of research draws heavily on two major theoretical underpinnings: transaction cost theory (Williamson, 1985) and agency theory (as adopted in this study), a more holistic approach using a wider theoretical spectrum, such as the eclectic model expounded by Dunning (1981) should be encouraged to integrate both internal and external perspectives to explain hotel internationalization. Efforts in this direction in future research will be both worthwhile and rewarding. From a theory development perspective, hotel internationalization research generally needs to move from normative descriptions and formulaic assessments to a more in-depth, internalized, and processed-oriented understanding. Although this study ventures into efforts to corroborate model testing results with in-depth industry experts interviews, additional work should be encouraged to discover richer market-specific factors in internationalization that challenge the assumptions that business is business and management is management whenever it occurs and wherever it is practiced (Boddewyn, 1999). Obviously, more internalized qualitative research will avoid the parochialism and determinism observed in quantitative studies. In addition, joint efforts by researchers in different industrial sectors, particularly the service industry, will contribute to more comparative studies that will enhance our understanding of internationalization strategies across industries and will help shape and refine the agenda for future research in hotel internationalization.