We first describe how the actors in the case study systems perceive their business format design to affect their achievement of positive results with franchising overall. We then analyze how actors feel that their pursued positioning, support services and level of control contribute to these experienced effects, as well as what dynamics explain these perceived effects.
The experienced effects of the business format design in healthcare franchising
Consistent with differences in the design of the business format of the three case study systems, actors across systems differ in their perceptions of how their business format contributes to the achievement of positive results with franchising. Generally, the actors feel that their business format mainly either stimulates the achievement of positive results or has no impact. Only some perceive that the design of their business format hinders their financial performance, as well as the quality of care and work satisfaction in one system (see Table
3).
Table 3
Perceived influence of the business format on the achievement of various results within franchises over time*
1 | Franchisee and manager | +/0 | +/0/- | +/0 | + | +/0/- | +/0/- |
Professional | +/0 | +/0 | 0 | n.a. | +/0/- | +/0/- |
2 | Franchisor | + | First years: -, now: + | + | + | + | n.a. |
Franchisee and manager | +/0 | +/0/- | +/0 | n.a. | + | +/0 |
Professional | +/0 | +/0 | +/0 | n.a. | + | +/0 |
3 | Franchisor | + | First years: -, now: + | + | + | + | n.a. |
Franchisee and manager | + | +/0/- | + | n.a. | + | +/0 |
Professional | 0 | 0 | 0 | n.a. | + | +/0 |
As can be expected, franchisors primarily perceive positive effects of their business format design in achieving the types of results important to them: growth, competitive advantage, survival, quality of care, and financial performance after the initial years of establishment. Franchisees perceive stimulating effects as well, but they also see more negative or lack of effects. The franchisees in system 3 - who, in contrast to the other systems, all started a new unit with the use of the business format - are the most positive overall. Except for work satisfaction, for which some experience no effect, and for financial performance, for which some observe no or a hindering effect, the franchisees report experiencing only stimulating effects of their business format in achieving positive results. Some of the franchisees of system 2 - who engage the business format as an ‘additional tool’ in their organization - also do not see a contribution to their competitive advantage and survival. The same applies to system 1, but here, some also perceive a hindering effect on achieving a high quality and work satisfaction, mainly during the initial years of the establishment of the franchise. Unit managers and professionals primarily perceive similar effects as the franchisees. This is not surprising as they work with the same business format and many professionals also fulfill a role as franchisee or unit manager. Therefore, we use the term `unit actor’ to commonly refer to franchisees, unit managers and professionals, when a finding applies to all of them.
Positioning toward customers: perceived influences on results
How franchises position themselves toward customers is perceived to play an important part in the results of franchising. Specifically, the brand name strength and the concept play significant roles.
Strength of the brand
The respondents consistently reported that a strong brand name is advantageous, particularly through providing a strong position toward health insurers and the (local) government. A strong brand name legitimizes the preservation of financing for the franchised care, which basically increases the likelihood of survival, positive financial performance for units, and competitive advantages. Nevertheless, a strong brand name provides no guarantee for financing in a regulated healthcare environment with changing policies and regulations. A strong brand name is also believed to stimulate the quality of care and the work satisfaction because it provides a sense of belonging and additional motivation to perform well: ’It is nice to belong to something, you carry out a message together, and you have a strong brand name behind you that you need to keep strong together, work hard to keep that brand name strong, that nothing happens that will harm the brand.- (franchisee system 3). Consequently, when a brand name is strong (as in system 3), it is regarded as a valuable resource and as a major reason for purchasing a franchise. When a brand name is not yet sufficiently strong in the perceptions of the unit actors (as in system 2), it is felt that the business format could offer more advantages. The actors initially expected that they would also gain by attracting more clients with their brand. However, this assumption appeared not entirely true for systems 1 and 2 due to production limits forced by insurers and the government to contain costs and because healthcare insurers continued purchasing care of all healthcare providers in the hospital and mental healthcare sector rather than purchasing larger volumes of care of only a selection of better-performing healthcare providers. As a franchisee of system 1 puts it, ’We designed [our franchise formula] based on content but also particularly on strong logistics and service because we were convinced that patients will vote with their feet when we deliver high quality care and that the market will come to us, as is normal in a market where you do a better job than others. But we do not have a normal market.’ Despite the advantages of branding, franchisees also consider branding as a risk because the mistakes of others can also affect them. However, no respondent considers this risk to outweigh the advantages.
Concept
Consistent with the theoretical framework, documents and interviews highlighted the importance of a concept including health care services that are valued by clients, purchasers (e.g., insurers), and referring providers. It seems that clients are attracted to a franchise because they like the concept, not particularly because it is a franchise. In system 1, respondents report that many clients found the optimistic approach, specialized treatment programs and office-like interiors to be attractive, and clients of system 3 were said to value the idea of a small-scale family-like atmosphere in a nice house where clients live as normal a life as possible. However, the cases show that governmental and political influences in healthcare can lower the demand or viability of the franchise, even if clients value the concept; system 1 received lower demand after the introduction of a financial contribution for clients, intended budget cuts for care for the intellectually disabled would have resulted in the discontinuance of new units, and production limits in hospital care reduced the possibilities of helping more patients. The concept also partly determines whether (potential) unit actors find the franchise attractive. The franchisees and a part of the professionals of system 1 liked the idea of specialized evidence-based care provision, while others disliked this idea and resisted changing their work methods; some even left. Hospitals and doctors found the idea of preserving the entire spectrum of eye-care and striving for excellence attractive. Many unit actors in system 3 were attracted to the idea of providing care in an autonomous unit after being disappointed in regular institutions.
Thus, the positioning component of the business format plays an important role in how franchises are valued. However, the support services and control systems in the business format should support realizing this positioning in practice. Therefore, the remainder of this section focuses on how support and control affect the achievement of positive results.
Support services: perceived influences on results
Interviews, documents and observations consistently indicated that appropriate support services in regard to quality, type and amount facilitate the achievement of positive results with franchising. What exactly is appropriate partially differs for different types of results, for unit actors with different attitudes, skills and ages, for different types of franchise (fractional or stand-alone) and healthcare services, and for different perceived levels of contractual payments. We elaborate on these findings below.
A certain level of support services is perceived to positively relate to strategic, organizational, professional and client-related results for several reasons. First, for the franchisor, the provision of such support helps them to grow, create competitive advantages and survive by retaining and attracting unit actors to the system. Second, for franchisees, the support involves less risk and a stronger positioning in an environment of increasing competition and budget cuts from the government and insurers. Particularly for those franchisees that start up a new unit (system 3), the support also decreases the resources needed: ’If you do it by yourself (‘)a) you need the financial resources, and b) you are far more vulnerable and you need to find out everything by yourself. And when something happens, you have nothing to rely on; you have no back-up.’ Third, unit actors feel that such support helps them to deliver high-quality, efficient care with less burden to themselves because they have to spend less resources in determining appropriate work methods: ’We could learn our lessons, we knew where we had to go, and we had the tools to do it.’ (professional system 1). Moreover, when ample support in non-care related activities is provided by the franchise, unit actors have to spend less resources in execution. As a franchisee of system 3 describes it, ’I do not have to spend too much time with non-care-related tasks, such as quality policies, but I can spend ample time providing care. I find that I now already spend too much time doing administration (‘) Imagine the time that is spent when you have to do it all by yourself.’ Fourth, the cases show that the knowledge and experiences embedded in the support services accelerate improvement and implementation in local units because it is not necessary to ’reinvent the wheel everywhere’ and it persuasively shows the unit actors better working methods by peers. Fifth, the support steers the behavior of unit actors toward desirable performance levels and a uniform presentation, which is perceived to help stimulate quality of care, survival and competitive advantage.
However, from the perspective of both the franchisors and unit actors, the amount of support should not be too large. First, for the franchisor, extensive support requires a great deal of overhead, rendering the franchise relatively inefficient and expensive. As the franchisor of system 3 puts it, ’We need to remain efficient; we want to keep our overhead at 4.5%. So that implies that you must also dare to let it go.’ When the franchise system ages, more support can be provided with the same level of overhead, owing to greater experience and more developed services. According to the franchisor of system 2: ’We notice that over time our investments in new franchisees become lower. You can do it much more efficiently. You have much higher standards and ready-to-use material.’ Second, excessive support can hinder the quality of care, efficiency, competitive advantage, and work satisfaction in situations where local adaptation is important, such as in services that are complex and/or require customization and in units in which the franchised practices are added to existing and non-franchised practices (fractional model). The support then contains non-feasible and non-valuable practices for local units. As a franchisee of system 2 explains: ’By adding your own input, you keep it with your own culture, your philosophy, what fits within your own [unit].’ Third, extensive support can lead to the resistance and dissatisfaction of unit actors, particularly when it is presented as fixed and obligatory in a professionalized healthcare system like system 1. Unit actors then experience the support as a set of external work methods that they did not invent or own, feel violated in their autonomy, and feel that their opinions and capacities are not taken seriously. As several professionals of system 1 describe: ’The question was, do you unthinkingly copy it. In other words, you do not have to think anymore; you can do it this way, while people also felt the need to participate in thinking about the developments,’ and ’Who says that they know it better?’ Ultimately, the desirable level of support depends on the extent to which unit actors want to bring in their own ideas. As a franchisee of system 2 stated: ’You have the feeling that it is partially something of your own because you have collaborated on developing it.’
The positive effects of support are experienced only when the support is perceived to be of the appropriate type and quality, while the negative effects are aggravated when the type and quality is perceived to be inappropriate. Some support types are generally perceived to be helpful in achieving positive results across all systems: the operations manual, performance measurement and benchmarking, a franchisor representative (account manager), and support that aids in profiling for clients, insurers and the government in an increasingly competitive and complex environment (e.g., via website, lobby, and folders). For other support types, the perceived appropriateness differs for the two types of franchise organizations: whereas support in process improvement was valued by existing organizations that have become franchisees (system 1 and 2, fractional type), support in building rent, a bank loan, and a shared administration system was felt to be most important by franchisees that started up as a new unit (system 3, stand-alone type). The appropriate type, quality and amount of support also differs across unit actors within the same system. Actors that differ in their performance levels, length of stay, and skills and attitudes have varying needs. Starting and less skilled unit actors primarily find support in starting up their units or implementing the formula helpful for realizing positive results. Older and higher-performing ones are more interested in marketing, profiling, maintenance, and continuous knowledge exchange, and also desire a lower amount of support: ’I know that I can call them when I need them. And that is enough. You can do it more by yourself.- (franchisee system 3). In addition, some unit actors find it sufficient to share knowledge through the operations manual, the franchisor account managers, and professional scientific bodies. Others find facilitation of knowledge sharing meetings one of the most important tools in making a franchise cooperation valuable to professional healthcare organizations: ’Those program councils with [professionals], they are very stimulating groups. People really like to participate in that. It is a very important medium of knowledge exchange for us. That is the place where it all happens.’ (franchisee system 1). Unit actors also differ in whether they find training to be a valuable support type. Given these differences in the evaluation of support types, unit actors within the same system cannot all be satisfied in the same ways.
Franchisors and franchisees also evaluate the ultimate effects of the support services in relation to the level of contractual payments. From both the franchisor and franchisee perspectives, the contractual payments must enable the franchisor to provide high-quality support, develop improvement and innovations to maintain the value and competitiveness of the support services, and ensure brand recognition. When the franchisees perceive that they obtain inappropriate support in return for the level of contractual payments paid, they evaluate the overall contribution of the business format to their satisfaction and financial performance negatively. As the use and valuation of support services varies across unit actors within the same franchise system as a consequence of the variation in age, performance, attitudes and skills, so does the perceived reasonableness of contractual payments. In all of the systems, some of the franchisees express doubt about the worth of their payments, ’It is a lot of money that you pay, if you use that money yourself you can also accomplish much things’, and fees have been a frequent topic of discussion. This discussion also regularly includes a discussion about the `ethical’ nature of asking fees in a societal sector like healthcare. Others within the same system feel that their payments are reasonable and are ultimately paid back by the efficiency gains of the support obtained, reducing the costs of healthcare overall, ’When you see our turnover and you can use the (…) support. If you see what they have achieved in those few years (…) In relation to that, you can be satisfied. And that you have to pay for it’if I were to try to achieve that by myself, I would not have succeeded.’
Level of control: perceived influences on results
Largely in line with our theoretical framework, our analysis shows that a certain level of control helps to ensure that actors deliver services as defined by the positioning component, either through the selection of new franchisees or through standardized instructions and centralized decision-making. Furthermore, our respondents in healthcare highlighted the importance of a certain level of monitoring and enforcement in this endeavor. However, excessive control appears to have a hindering effect on the achievement of positive results with franchising. Several process dynamics explain why both very high and very low levels of control are thought to have a negative effect. The most appropriate level of control seems partially situation-dependent. We elaborate on these findings below.
Control through the selection of new franchisees
Actors in all of the systems feel that a stricter selection of potential franchisees - either via a strict procedure or via self-selection through providing extensive information about the franchise - stimulates the achievement of a strong competitive position and high client satisfaction. It is thought to do so because consistently high performance levels can be better guaranteed. As the franchisor of system 3 describes: ’I think that you have to set high standards for which franchisees you want to include in your system, and even then it sometimes can go wrong with a franchisee (…) You want to have as much success as possible for your [clients].’ Through enlarging the chance of having suitable franchisees with the right expectations, stricter selection is also felt to stimulate franchisee satisfaction. As less satisfied and lower performing franchisees require greater time investments from the franchisor, stricter selection also stimulates the efficiency of support provision. However, the beneficial effects of strict selection can contrast with achieving competitive and efficiency advantages through system growth, a goal that benefits from less control. Like a franchisee of system 3 illustrates: ’At one moment, the speed of growth…with 20 new locations a year, you need to have 20 franchisees. Tensions arise. And then you actually select franchisees too easily; you select people that you regret in retrospect.’ An initial focus on growth can then complicate the achievement of consistent quality levels and a uniform formula implementation. As the franchisor of system 2 stated: ’When it is a franchise that everybody can join, what does it say then, that you are a member of the franchise? Because we want to position ourselves as a network that provides excellent care, and you say that all locations provide that excellent care.’
Control through standardized operating instructions and centralized decision-making
The case study systems differ in their level of standardized operating instructions for care and non-care activities as well as in the level of centralized decision-making (see Table’
1). The franchisors and unit actors from these varying systems reach a consistent conclusion: both extensively high and low levels of standardization and centralized decision-making are disadvantageous, although the optimal level differs across systems and result types. As our analysis indicates that the process dynamics underlying the role of standardization and centralized decision-making are largely similar, we describe the role of these two control elements in one section.
A certain level of standardization and centralized decision-making of both care and non-care processes is thought to facilitate the achievement of competitive advantages, survival and quality of care by steering the behavior of unit actors toward desirable, solid performance levels and uniform presentation throughout the system: ’Franchisees also say, I’d love to know what we must do and arrange at minimum, that my [unit] is OK, but that of my neighbor-franchisee is OK as well, because when something goes wrong there I have a problem too, we work with the same brand name.’ (franchisor system 3). Therefore, unit actors request more control when they perceive it as being too low, like in system 2: ’You want to guarantee that when I arrive at a [franchise] location, I should get the same service, the same access, the same quality of care; you have to decide upon that with each other. It cannot be that you come to one place’. (…) This is what we want to guarantee; this is what we deliver.’ Such a uniform presentation and predictable performance is felt to be particularly important when the franchise positions itself toward customers with predictable, efficient services, as in system 1, or when it is the desire of purchasers. More standardization and centralized decision-making also help stimulate the quality of care, work satisfaction, efficiency, competitive advantage, and survival by reducing the resources unit actors have to spend on choosing and applying appropriate and innovative work methods, allowing a stronger focus on the actual care provision. As the franchisor of system 3 stated: ’As a franchisor we are very good in deciding and organizing everything around the unit and [franchisee], to make their unit work. And we select the franchisees on their suitability for care provision, in that respect they can do whatever they want.’ Additionally, standardization and centralized decision-making stimulate results because they ensure a shared basis between units that makes system-wide adaptation, knowledge sharing, and performance monitoring relatively easier and more efficient.
However, the level of standardization and centralized decision-making should not be too high. For franchisors, extensive control leads to inefficiencies on the system-level as a consequence of the overhead and bureaucracy required. Moreover, it can harm growth because many professionals do not feel attracted to systems that they perceive as leaving little room for their own ideas, even if this feeling does not reflect reality, as in system 2: ’You give away a part of your right to say, and our physicians wanted to stay independent. They do not like the [franchisor] telling them what to do. The question of whether the franchise would improve our care delivery has hardly been a topic of discussion. It was quite easy: our physicians wanted to keep their autonomy and independence.’ (potential franchisee in a newspaper). On the unit level, extensive standardization and centralized decision-making restricts local adaptation. This hinders creating local competitive advantages, quality of care, efficiency and work satisfaction when customization to the customers’ needs is pivotal, according to the positioning component in the business format or the characteristics of the healthcare service: ’It is so personal what happens; care is such an individual, personal thing that you really need to have freedom to have an impact’ (franchisor system 3). Excessive franchisor control also hinders achieving these positive result types when local adaptation of the franchised practices to the characteristics of the local unit is important, such as in units that offer both franchised and non-franchised services (fractional franchise type) or units that differ in size. The franchise then becomes an inefficient bureaucracy that wastes staff and money in developing and implementing products that are not valuable and feasible in the local context, like in the initial years in system 1: ’They (…) said that everything needed to be done exactly as they did it in the [original] unit. But I cannot implement the same row of care pathways as they have there when I do not have as many care professionals as they have. That is impossible.’ These characteristics can also lead to dissatisfaction among unit actors and resistance to change among professionals because they may feel that they have insufficient autonomy, that their ideas and expertise are unimportant or not taken seriously, and/or that they are no longer owners of their work. Such a situational misfit ultimately reduces the actual steering possibilities and uniformity of the formula.
In all, the findings suggest that higher levels of centralized decision-making and standardization are advantageous for topics that apply to the entire system and are thus more efficient to arrange centrally, as well as for those topics that are important for a uniform image or to realize the intended positioning toward customers. The levels should be lower for topics that require local adaptation to fulfill the customers’, professionals’ and local unit’s needs.
Control through monitoring and enforcement
All our case study systems monitor the quality and/or financial performance of units to reveal whether they perform as intended (e.g., via audits, benchmarking, measuring client satisfaction and waiting times). Both franchisors and unit actors argue that such monitoring is always important for results because it provides valuable opportunities for learning and steering. However, particularly when support and control levels are lower, monitoring is felt to be important for competitive advantage, financial performance and the survival of the franchise because the monitoring results then provide an opportunity to show the attributes and performance of the franchise to the outside world.
Once the monitoring instruments identify a gap, not all systems can easily force adequate performance or the use of standards across units; system 1 and 2 have relatively low possibilities of doing this, and system 3 has some possibility. The franchisor of system 2 argues that their low ability in this regard makes it harder to create competitive advantages and to quickly improve the quality and efficiency in the units, ’There are no sanctions when a [franchisee] does not want to do something, then we say `it’s a pity that you have not achieved that goal’, but it has no consequences. (…) Learning from business, you can do more with that.’ Respondents feel that the healthcare culture, in combination with the involvement of professionals, makes it harder to employ such a hard franchisor-franchisee relationship. However, various actors argue that even if there are possibilities to force in the context of less professionalized and complex healthcare services, persuasion is a better choice. As the franchisor of system 3 stated: ’When a franchisee goes beyond what we find acceptable, then you have to be able as a franchisor to have a conversation, to talk about the real purpose of providing care within this formula, so that the franchisee says `oh yes, I have been so stupid’. If you succeed in that, that is much more valuable than just saying `this is not what we are doing here’ and withdraw his contract.’