Effects of Marketing Decisions on Brand Equity and Franchise Performance

Abstract

The purpose of this study is to provide a way of pursuing a balanced profitability between franchisors and franchisees leading to the sustainability in franchising. Based on a belief that the formation of brand-centric relationship is vital for the success of franchising system, we constructed a model that examines the relationships between marketing decisions, brand equity, and the financial performances of franchisors and franchisees. We used actual data of the Korean franchise chains, including measures of channel intensity and advertising and promotional activities as franchise marketing decisions as well as the profitability of franchisors and franchisees for the analysis. The results of analysis show that while advertising and promotion expenditure has a positive impact on the performances of both franchisors and franchisees, the number of stores does not influence them in the same way. This indicates that their interests may conflict. This study suggests that marketing decisions can be utilized as a means of achieving balanced profitability that would benefit the sustainability in franchising between franchisors and franchisees.