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Brand Management in Franchise Organizations

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 Brand Management in Franchise Organizations

Leyland F. Pitt, Julie Napoli and Rian Van der Merwe, Curtin University of Technology
Michael T. Ewing, Monash University

Abstract

Brands and their management have occupied the minds and actions of practitioners and
marketing scholars since the latter part of the 19th century. Cognizant of the benefits a brand
can deliver, organizations have increasingly focused their marketing activities toward creating
and managing brands. Similarly, scholarly research has attended to comparable issues.
Frameworks designed to guide branding decisions have been proposed, with researchers
emphasizing the need to develop an appropriate brand identity, architecture, communications
strategy and method for monitoring brand performance. In this study, we examine the nature
of brand management within a franchising situation and offer a simple but powerful
instrument to measure and evaluate such practices. We conclude by offering some
prescriptions on the management of brands in a franchise environment, and also identify
opportunities for further research and practical application.

Introduction

Brands and their management have become a focal point of marketing practice and academic
study in recent years. There has been a great deal of controversy and discussion regarding
what brands are, what they do, how they can be valued, and how they should be managed
(Low and Fullerton 1994; Shocker et.al. 1994). Their future has been questioned by some
authors (Berthon, Hulbert and Pitt 1999; Sellers 1993), but other writers have sought to
reaffirm their centrality (Ambler 1996; Doyle 1990; Morris 1996), implicitly asking, “What is
the point of marketing without brands?”. As senior executives have become imbued with the
shareholder value philosophy, the importance of intangible assets has become apparent.
However the potential for harming shareholder value through inappropriate management of
brands is immense. Research in this area has predominantly drawn attention to the need for
developing brand identities, designing brand portfolios, managing brand extensions,
developing integrated marketing communication activities and, of course, measuring the value
of the brand (see Aaker 1997; Keller 1993; 1999; 2000; Loken and John 1993; Park and
Srinivasan 1994; Shocker, Srivastava and Ruekert 1994; Yoo and Donthu 2001). Moreover,
there seems to be a general agreement that successful brand management leads to successful
brands which in turn, contributes to high brand equity. Whilst such discussions have certainly
identified critical areas to be considered by brand managers, these studies are largely
academic in nature and in some ways, provide limited guidance to practitioners on the specific
tasks required to be ‘effective’ brand managers. The complexity of the situation is further
compounded in situations where responsibility for the management of the brand is diffused,
such as in franchise arrangements and international licensing agreements. This issue has in
part, been addressed by Keller’s (2000) Brand Report Card (BRC). This not only consolidates
many of the varying perspectives on brand management, but also offers a simple way for
managers to quickly gauge the effectiveness of their brand management activities. In this
article we explore the use of the BRC in a franchising situation. We briefly review the need
for a general perspective on brand management, and also the unique situation of brands in a
franchise environment. We then describe a study that incorporates the BRC as a simple but

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powerful instrument for the measurement of perceptions of brand management in a franchise
situation. We offer some prescriptions on the management of brands in a franchise
environment, and also identify opportunities for further research and practical application.

Brand Management: The Need for an Integrated Perspective

Developing and managing a strong brand in today’s market place is becoming an increasingly
difficult process. Brand proliferation (Berthon, Hulbert and Pitt 1999; Keller 1998; Richards,
Foster and Morgon 1998), media fragmentation (Keller 1998), the influx of information
technology (Berthon, Hulbert and Pitt 1999), increased competition and costs (Davis 1995;
Harvey, Rothe and Lucas 1998; Keller 1998; Richards, Foster and Morgon 1998), retailer
power and changing consumer values (Berthon, Hulbert and Pitt 1999; Harvey, Rothe and
Lucas 1998; Richards, Foster and Morgon 1998) have all contributed to the mounting
pressures placed on brands and the brand management system. Possibly as a result, academics
and practitioners alike have focused on specific aspects of brands and their management,
rather than give attention to the overall management of brands. For example, some researchers
have touted brand identity as the issue of cardinal importance (Aaker and Joachimsthalar
2000a; Blackston 2000; Fournier 1998; Harris and De Chernatony 2001; Keller, Heckler and
Houston 1998; Richards, Foster and Morgan 1998). Other observers have primarily
considered brand architecture (Aaker 1997; Aaker and Joachimsthaler 2000a; 2000b; Berthon,
Hulbert and Pitt 1999), whilst others have emphasized the need for creating a unique and
positive communication message about a brand and developing synergy and consistency
across all communications efforts (Boulding, Lee and Staelin 1994; Keller 2000). Some
scholars have argued for a holistic view on brands and for researchers and practitioners to
reconsider the processes and philosophies behind brand management (Harvey, Rothe and
Lucas 1998; Leder and Hill 2001; Low and Fullerton 1994; Richards, Foster and Morgan
1998). This body of work has attempted to clarify some of these issues as well as provide new
insights into the salient practices and processes involved in brand management. Only recently
however, has an attempt been made to integrate all the salient issues of brand management,
and a checklist developed for managers to assess how well they are doing on these issues
(Keller, 2000). This is vital to the long-term success and viability of a brand.

Obtaining feedback on the overall performance of brand management is important to any

branded and branding organization, regardless of the industry or market in which it operates.
However, it is especially true when the business structure of an organization is such that the
organization itself has limited control over the management of its brands, as is the case with
franchise operations. The process of brand management presents a unique challenge to
franchises in that: (a) responsibility for developing and managing a successful brand rests
with all parties involved in the agreement; (b) neither the franchiser nor franchisees has
complete control over the brand management process; (c) all parties are mutually dependent
on one another. This ‘co-dependence’ suggests that to achieve success, the branding activities
of franchise organizations should be especially well coordinated and integrated between all
parties involved in the management of the brand. Furthermore, franchise partners need to be
aware of the brand management activities for which they are responsible and ensure that these
activities are carried out accordingly (see Coughlan, Anderson, Stern and El-Ansari, 2001:
528- 565). Whilst this seems intuitively logical, few studies have explored this issue in any
depth. As such, the main objective of this paper is to identify the brand management practices
commonly adopted within franchise organizations and explore the relationship to brand
performance.

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 The Research: Instrument Conceptualization, Sample and Methodology

Based on the characteristics or dimensions that the world’s strongest brands share, Keller’s
(2000) BRC provides a systematic way for managers to assess their brand’s performance
along each ten dimensions. Within each of these dimensions, Keller raises further questions
that managers should address in the management of their brands. However, focusing just on
the ten general brand management statements, rather than the sub-statements, allows for a
quick, yet effective way of assessing an organization’s overall brand management approach.
For this reason, Keller’s BRC forms the basis of this study. In conceptualizing an instrument
to measure the perceptions of franchisees of the overall effectiveness of the management of a
brand, the ten attributes of strong brands identified by Keller (2000) were summarized into
statements that could then be scored on a Likert-type scale anchored on 1 (I strongly disagree)
through 9 (I strongly agree). In addition an overall statement on the firm’s management of its
brand, compared to competitors was used to assess overall quality of brand management, and
to act as an independent measure of the construct of band management effectiveness. Finally,
a statement assessing the respondent’s perception of the values of the brand franchise they
had bought into, relative to other franchise alternatives, was included. Both of these items
were measured on the same 9-point scale referred to previously. A large national franchiser
granted permission for franchisees to complete the questionnaire, on the understanding that
the data would be made available to the company. The questionnaires were distributed to the
172 participants who attended the annual conference for franchisees (out of a total of 195
franchisees), an explanation of the project was given, and their participation requested. On
collection of the questionnaires, 7 had not been completed, and 6 were only partially
completed, which meant that 159 questionnaires were used in the subsequent analysis. This
represents 81.5% of the total holders of the franchise.

Data Analysis

The alpha coefficient for the 10-item scale was also calculated, and this was 0.87. This
indicates that the scale used possesses acceptable internal consistency, as the alpha exceeds
the generally accepted commercial cutoff of .7. In general, franchisees perceive the brand to
be well managed on items 6 (the brand portfolio and hierarchy make sense) and 9 (the brand
is given proper support), with mean scores of 7.00 and 7.04 respectively, and less effectively
managed on item 3 (pricing according to perceived value), with a mean score of 6.03. All the
other items fell somewhere in-between. Overall, respondents generally agreed that the
franchised brand was well managed, and that for the same money, one could not purchase a
better franchised brand. In order to obtain a better understanding of the underlying structure
of the BRC, the 10 items were subjected to a principal components factor analysis, with
varimax rotation and employing the eigenvalues greater than one cutoff rule. The results of
this analysis are reported in Table 1. Two factors emerged, explaining 60.5% of the total
variance. From Table 1 it is quite clear that the 10 items of the BRC split quite neatly into two
components, which do seem to make intuitive sense. The first five items load together, and all
seem to tap into an external marketing environment composed of customers and competitors.
We labeled this dimension the external dimension of brand management. The last five items
all relate to factors within the organization, and we labeled this factor the internal dimension
of brand management. The mean performance on these dimensions (aggregated across the 9-
point scale was 6.34 and 6.89 respectively, seeming to indicate that the franchisees perceived
that the brand was being better managed internally than externally.

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 Table 1: Factor Analysis of the 10-item BRC Scale

Component
1 2
1. The brand excels at delivering the benefits customers truly desire .723 .298
2. The brand stays relevant to what customers want under current market .757 .272
conditions
3. The way we price our services under this franchise is based on .833 .098
customer perceptions of value
4. The brand is properly positioned against competitors in our .739 .222
marketplace
5. The brand is consistent in the marketplace – we don’t send out .758 .247
conflicting messages to customers
6. The brand portfolio and hierarchy make sense – every product and .402 .600
service we market is there for a reason and makes sense in our mix
7. The brand utilizes and coordinates a full repertoire of marketing tools .171 .746
and activities to build brand equity
8. Those responsible for managing the brand understand what the brand .342 .652
means to customers.
9. The brand is given proper support and that support is sustained over the .231 .766
long run.
10. In this franchise all the sources of brand equity are monitored. .089 .749
11. Overall, the brand is managed better, compared to our competitors
12. For the same amount of money, a franchisee could not buy a better franchised brand
than this one.

In order to establish the effects of the internal and external dimensions of brand management
on franchisees’ overall perceptions of brand management effectiveness versus competitors, as
well as to provide an indication of the convergent validity of the BRC, the dimensions were
regressed onto item 11 in Table 1. From this procedure, an R2 of .415 was obtained significant
at p<.05, indicating that a significant proportion of the variation in overall perceptions of
brand management effectiveness versus competitors is accounted for by the dimensions of
brand management contained in the BRC. However, it will also be noted from the analysis
that it is only the internal dimension that is a significant predictor (see Table 2). The
significance of the regression does provide a good indication of the convergent validity of the
BRC checklist. Further evidence of the convergent validity of the BRC checklist, as well as
insight into the effects of brand management on perceptions of franchise value were assessed
through multiple regression. The dimensions of the BRC were regressed on item 12 (in Table
1). The R2 in this instance is .28, significant at p<.05, which indicates that the dimensions of
the BRC checklist are important determinants of franchisees’ perceptions of brand value
versus alternatives (see Table 3). Further evidence of the convergent validity of the BRC
checklist is provided by this analysis. Again however, it is only the internal dimension of the
BRC that is a significant predictor, and not the external dimension.

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 Table 2: Multiple Regression – Dimensions on Overall Perceptions of Brand
Management

Model R R2 Adjusted R2 Std. Error of

the Estimate
1 .644 .415 .407 .93

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Beta t Sig.
1 Constant 1.369 .595 2.301 .023
External .0431 .091 .035 .474 .636
Internal .825 .099 .623 8.349 .000

Table 3: Multiple Regression – Dimensions on Overall Perceptions of Franchise Value

Model R R2 Adjusted R2 Std. Error of

the Estimate
1 .529 .280 .271 1.12

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Beta t Sig.
1 Constant 1.968 .717 2.744 .007
External .091 .110 .068 .826 .410
Internal .702 .119 .487 5.889 .000

Conclusions and Directions

In this brief paper we have demonstrated the application of a simple checklist based on
Keller’s BRC in a franchised brand environment. The checklist has been shown to possess
good internal consistency, or reliability, as well convergent validity. It could be used with
reasonable confidence to assess the effectiveness of brand management practices in a
franchised brand environment in particular, but is probably equally applicable in an overall
brand management situation. The BRC checklist could be used to gauge the perceptions of
large groups of managers in sizeable organizations. It would also be valuable to use the
checklist both as an outcome variable in the assessment of those issues that lead to effective
brand management, and also a predictor variable that is an antecedent to other important
organizational variables, such as market share, customer satisfaction and various measures of
financial productivity. It is perplexing that the findings of this study indicate that it is only the
“internal” dimension of brand management that is a significant predictor of overall brand
management effectiveness and overall franchise value. More research will need to be
undertaken to establish whether this is perhaps due to some kind of internal focus or
marketing myopia among the franchisees studied here, or whether indeed this situation
manifests itself in organizations generally. Nonetheless, it is clear that long-term survival will
require continued efforts toward building, managing and measuring brand success.

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