Decaf or double shot? The strength of franchisor control over HRM in coffee franchises

• Author: David Peetz,Adrian Wilkinson,Ashlea Kellner,Keith Townsend
• Published date: 01 July 2014
• Date: 01 July 2014
• DOI: http://doi.org/10.1111/1748-8583.12020

Decaf or double shot? The strength of franchisor

control over HRM in coffee franchises

Ashlea Kellner,Keith Townsend,Adrian Wilkinson and David Peetz Griffith

University

Human Resource Management Journal, Vol 24, no 3, 2014, pages 323–338

The franchise relationship presents a unique composition of autonomy and control. Franchisee autonomy

is located somewhere between employed managers and independent business owners, while the franchisor

regulates core processes such as marketing and product development. While heavy franchisor control over

certain functions is customary and in fact integral to the franchise model, the delineation of HRM

responsibilities in the franchise relationship is less clear. Using qualitative data from three Australian

coffee chains, we examine the role of the corporate HR and the degree to which HRM activities are

centralised, and develop a typology of franchisor HRM control. We find substantial variation between

cases and demonstrate that it is the franchisor’s strategic decision to prioritise brand protection or

liability avoidance that ultimately determines whether their control over HRM can be described as ‘decaf’

weak or ‘double shot’ strength.

Contact: Dr Ashlea Kate Kellner, Department of Employment Relations and Human Resources,

Griffith Business School, 170 Kessels Road, Nathan, QLD 4111, Australia. Email:

a.kellner@griffith.edu.au

INTRODUCTION

The franchise model has transformed modern retailing and economic effects have been

experienced on an international scale. Although the contemporary approach to

franchising emerged only decades ago, it has quickly evolved into a highly effective and

widely adopted business strategy. A franchise is an organisational form defined by a long-term

agreement, where one party (the franchisor) grants the other party (the franchisee) the right to

market or distribute their product or service, trading under the company name. Franchising

claims to provide mutual gains for both parties to the contract, although the relationship is

typically tempered by an imbalance of power weighing in the franchisor’s favour (Hunt and

Nevin, 1974; Quinn and Doherty, 2000). For the entrepreneurial franchisor (a term often

describing the entire corporate office), the model allows a business to develop rapidly. The

franchisor benefits by leveraging franchisee capital and HRM capabilities, while sacrificing

some control and equity, in return for a (smaller) slice of a much larger pie. For franchisees, the

arrangement can offer the opportunity to enter an established business with a recognised

brand, and developed systems and support mechanisms, while still permitting a degree of

independence (Felstead, 1991, 1993). Franchise stores or ‘units’ may be managed by a franchisor

(‘company-owned units’) or franchisee, and the franchisee may own one (‘single-unit

franchisee’) or many (‘multiple-unit franchisee’).

The majority of franchises globally now operate a ‘business format’ franchising model.

Under this model, the franchisee adopts not only the franchisor’s product or service (as was the

case in early franchise systems), but a relatively complete format for conducting business

(LaFontaine, 1992; Castrogiovanni and Kidwell, 2010). The model facilitates a high degree of

franchisor control over daily activities such as marketing, product development and quality

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doi: 10.1111/1748-8583.12020

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 24 NO 3, 2014 323

© 2013 John Wiley & Sons Ltd.

Please cite this article in press as: Kellner, A., Townsend,K., Wilkinson, A. and Peetz, D. (2014) ‘Decaf or double shot? The strength of franchisor

control over HRM in coffee franchises’. Human Resource Management Journal 24: 3, 323–338.

control, ensuring greater consistency for the customer (Felstead, 1993). While centralisation and

control over core business activities are assumed fundamental to the franchise model, the

delineation of responsibility for HRM has received scant academic attention (Truss, 2004; Brand

and Croonen, 2010) and is the focus of this study. Using qualitative data from three Australian

coffee chains, this article examines the extent to which the HR department plays a strategic and

central role in HRM activities in franchises. We develop a typology illustrating that the

centralisation of control over HRM in franchises is heavily influenced by a strategic decision

concerning two associated risks: damage to the franchise brand reputation and liability for the

provision of incorrect employment advice.

FRANCHISING AND THE ROLE OF CORPORATE HR

The role of the corporate HR department in franchises is central to this article. While scholarly

research on the intersection between HRM and franchising is still in its infancy (Castrogiovanni

and Kidwell, 2010), a well-established literature on the HR department exists in more

traditional organisational contexts. Legge’s (1978) early work helped to classify and categorise

the role of the HR department as either deviant or conformist innovators, observing that

‘vicious circles’ can prevent HR moving from administrative to more strategic positions. While

authors agree that a successful HR department is one that occupies both tactical and strategic

roles (Storey, 1992; Ulrich and Brockbank, 2005), upper management doubts about the ability

of HR department managers to act as leaders and champions have restricted its progress

(Caldwell, 2003; Guest and King, 2004).

Such a reality was portrayed in perhaps one of the only studies exploring the role of the HR

department in franchises, published in this journal in 2004. Truss’ (2004) study investigated

HRM within four automotive manufacturing franchises governed by a single parent company.

In this organisation, the corporate HR department occupied a very limited and non-strategic

role, with HRM responsibility devolved down the line. While the HR department was confined

to developing policies and procedures, interpretation and implementation was decentralised to

lower level managers. Certain managers possessed a shared presumption that the central HR

department should not be involved in daily operations, with some going to lengths to avoid

all contact. Ultimately, the role of HR in this case was narrow and disparate, operating almost

in isolation from the rest of the organisation.

Truss’ study describes an HR department perceived to lack value or legitimacy by

management and stuck in a vicious circle, relegated to non-influential and routine tasks (Legge,

1978). Such a predicament, however, is not necessarily permanent, and Ulrich and Brockbank

(2005) detailed the various roads to occupying more desirable roles of ‘strategic partner’ and

‘HR leader’, while also acting as ‘functional expert’, ‘human capital developer ’ and ‘employee

advocate’. Overcoming traditional restraints and progressing into more strategic roles can hinge

on personal qualities of the HR manager, such as motivations to develop partnerships with key

personnel and to demonstrate leadership capabilities (Ulrich and Brockbank, 2005). Developing

authority, legitimacy and a degree of ‘corridor power’ over key organisational actors can affect

decision making at a higher level, elevating HR to a more strategic position (Monks and

McMackin, 2001; Storey, 2001).

The role and activities of the HR department are further complicated in firms with multiple

divisions or business units, such as franchises. In such organisations, discretion and control

over certain aspects of HRM may be devolved to business unit managers (Monks and

McMackin, 2001; Bartel, 2004). In multidivisional firms, decentralisation of control over HRM

has been linked to improvements in unit performance (Bartel, 2004), although others have

Franchisor control over HRM in coffee franchises

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 24 NO 3, 2014324

© 2013 John Wiley & Sons Ltd.