The Role of Trust in Franchise OrganizationsConceptual ModelModel Constructs and Their Relationship to Franchise PerformanceHypotheses: Antecedents of TrustH1a: The length of time spent as a franchisee will be positively related to franchisee trusting beliefs in the franchisor.Trust Building through Pereceived Mutual Commitment. Trust in any relationship, including franchises, is enhanced if parties are committed to the longevity of the relationship (Dodgson, 1993; Kelley, 1983). Contracts provide long-term commitment, but parties do better when they feel a commitment that goes beyond contractual obligations (Caldwell and Karri, 2005). Commitment builds trust by reducing uncertainty about fulfilling future interdependent needs. Thus, commitment provides a proxy for information about the future that builds trust (Axelrod, 1984). For example, work in game theory has found over and over that when players know they will continue to play with the other party, their trust is higher than otherwise (Axelrod, 1984). Committed parties know they can either cooperate or harm each other over time, so they tend to trust and cooperate out of mutual self-interest. This is what Axelrod calls the “shadow of the future” commitment that tends to build trust. Heide and Miner (1992) review game theory and evidence from organizational studies, which consistently shows that commitment to a future relationship builds trust. Heide and Miner found that anticipation of future interaction builds cooperation, a strong correlate of trust.Hypotheses: The Role of Trust in Reducing Opportunistic BehaviorHypotheses: The Role of Trusting Beliefs in Shaping Key Franchisee AttitudesResearch MethodUnit of Analysis and SampleMeasuresData AnalysisMeasurement Model ValidityStructural ModelDiscussionAntecedents of Trusting BeliefsLimitations and Additional Areas for Future ResearchImplications for PracticeConclusionTable 1Measurement modelConstructAnchorsItemMeanSDLoadingsWeightsAVEConstructICR.Figure 2Structural modelThe Role of Trust 1The Role of Trust in Franchise Organizations Michael H. DickeyDickey Analytics, LLCD. Harrison McKnightMichigan State UniversityJoey F. GeorgeFlorida State UniversityAbstractPurpose – This study examines how two types of trust affect five key franchisee attitudes/behaviors within a setting where franchisees have strong contractual ties to the franchisor. The five attitudes/behaviors are: identification and satisfaction with the franchisor, compliance and non-compliance with franchisor directives, and perceived relationship quality. These attitudes/behaviors were chosen because research has found each to affect franchise performance.Design/Methodology/Approach – Our model features two trusting beliefs which influence attitudes/behaviors. The study gathers US franchisee questionnaire data then analyzes the model using partial least squares techniques. Findings – Trusting belief-competence was found to reduce non-compliance with the franchisor, and also increase identification with the franchisor. Both trusting belief-competence and trusting belief-honesty were found to enhance satisfaction with the franchisor and perceived relationship quality. Neither of these two trusting beliefs was found to influence compliance with franchisor directives. Perceived mutual commitment appears to strongly influence both trusting beliefs, whereas length of time as a franchisee does not.The Role of Trust 2Research Limitations/Implications – The findings support relational contracting theory, showing that even within a contract, trust exerts a significant influence on vital franchisee attitudes. Other research shows these attitudes/behaviors influence franchise performance, though the present study does not measure performance.Practical Implications – The results suggest franchisee trust is key to the ongoing franchise relationship. Hence, franchisors should try to build franchisee trust. They can do so by enhancingmutual commitment and by supplying well-conceived new products and marketing campaigns.Originality/Value – This study clearly shows the value of franchisee trust and suggests several ways to build it.Paper type – ResearchKeywords – Trust, Commitment, Compliance, Franchise organizations, Identification, Intra-firmrelationships, Relational, ContractThe viability of franchising as an organizational form has been called into question by a number of researchers. On average, franchise organizations deliver poorer product quality (Michael, 2000), are less successful at coordinating marketing strategies (Michael, 2002), and advertise less (Michael, 1999) than their wholly company-owned competitors. The theoretical explanation offered is that franchisees have more incentive to “free ride.” In other words, to take advantage of the positive effects of others’ investments, such as product quality and advertising, while minimizing investments of their own (Brickley et al., 1991). “[T]he investment of any given franchisee ‘spills over’ to other franchisees across the chain, as mobile customers take theirexperience from one unit to another. In the presence of such spillovers, franchisees have an incentive to underinvest in advertising and quality” (Michael, 2002, p. 326). Despite franchisorThe Role of Trust 3efforts to monitor and control franchisee operations, such as inspection audits and contractually mandated financial and marketing reporting, free riding continues to be a threat to the competitive advantage offered by the franchise organizational form (Michael, 2000). Franchisees are not the only ones with an incentive to behave opportunistically. Some franchisors are purported to engage in questionable practices such as encroaching on franchisee territories (Schneider et al., 1998), misusing cooperative advertising funds (Luxenberg, 1986), using discriminatory product pricing (Emerson, 1998), and employing unfair contract terminations (Rau, 1992). Typically, franchisors possess substantially more bargaining power than their franchisee partners (Klein, 1980), which makes it possible for franchisors to “extract unfair concessions” from franchisees (Kumar, 1996, p. 92). Thus, we see that despite the use of contracts to safeguard exchanges, incentives for opportunism are high on both sides of the franchisee-franchisor equation. Not only are these incentives high, but opportunistic behavior appears to reduce long-term performance. For example, when a franchisor tries