The Dark Side of Multi-Unit Franchising: The Drawbacks of Local Responsiveness

In attempting to solve agency issues associated with single-unit franchising and international adaptation issues with company-owned outlets, franchisors engage in multi-unit franchising. Extant research has examined the antecedents and positive outcomes of multi-unit franchising, but the dark side has largely been neglected. In a sample of 16 corporations that operate 25 brands from the period of 2005–2012, we examine how the density of multi-unit franchising impacts overall franchise system growth and internationalization growth. The results of our study show that multi-unit franchising negatively impacts franchise system growth and a franchise system’s internationalization efforts. While benefits of multi-unit franchising have been explicated by previous research, our results show that companies should be concerned about the long-term impact of multi-unit franchising and that there is indeed a dark side.