The primary purpose of this study was to explore a model that
examines the relationships among the external environment,
entrepreneurial strategy, mechanistic-organic structure and
financial performance of restaurant franchisors from the
perspective of franchisees. The final structural model indicated
that restaurant franchisees perceive that franchisors'
entrepreneurial strategy makes a highly positive contribution to
franchisors' financial performance. The external environment is
perceived to have a negative impact on franchisor's financial
performance. Franchisees also perceived that franchisor's
entrepreneurial strategy and mechanistic-organic structure could
have a significantly and mutually positive impact on each other.
The basic value of understanding entrepreneurial strategy is the
prediction of certain financial outcomes. Entrepreneurial strategy
proved to have a very significant impact on the franchisor's
financial performance from the perspective of restaurant
franchisees. However, franchisors' entrepreneurial strategy was not
always perceived to guarantee financial success because of the
negative impact of the external environment in the restaurant
franchising industry on financial performance. Furthermore,
restaurant franchisees perceived the franchisor's external
environment in the industry was unlikely to contribute to the
franchisor's entrepreneurial strategy or mechanistic-organic
structure. Restaurant franchisees viewed that a high level of
franchisors' entrepreneurial strategy had a mutual relationship
with their organic structure. It is significant in their perception
that their free-flowing relationship, authority, and communication
involvement in the franchisor's decision-making process establish
high levels of franchisors' entrepreneurial strategy. However,
franchisors' mechanistic-organic structure is not necessarily
perceived to influence franchisors' financial performance
positively. The indirect effect of mechanistic-organic structure on
financial performance through entrepreneurial strategy was not
perceived to be significant. Restaurant franchisees perceive that
franchisors' entrepreneurial strategy is driven by
mechanistic-organic structure in the franchising system, not by
external environmental change in the industry. It is very
understandable for franchisees to perceive this way, because
franchisees constantly provide franchisors with local environmental
information through franchising communication and relationship
channels. Restaurant franchisees compete with other restaurants in
many local markets, so that they are knowledgeable about
significant changes in the local environment. Restaurant
franchisees might perceive that the local environment is a more
critical issue to franchisors' entrepreneurial strategy than is the
general external environment in the industry. Thus, they might not
think of the external environment in the industry as important
enough to have an influence on entrepreneurial strategy and
mechanistic-organic structure, except on franchisors' financial
performance."