Retail outlet location decision maker – franchisor or franchisee?

This study focuses on a unique retail outlet location decision‐making problem found in business format franchising industries. The problem is derived from the latent conflict in the relationship between franchisor and franchisees. An empirical study was carried out to compare benefits of two different outlet allocation decision modes: centralised planning mode (locations allocated by the franchisor) and decentralised planning mode (franchisees given autonomy to select the location of their own outlets). Research findings revealed that the decentralised location decision mode is more beneficial to the franchise system with a lower level of customer loyalty.