From franchisee experience to customer experience: their effects on franchisee performance

Despite the importance of experience, the question of whether and how a franchisee's operating experience affects performance remains undertheorized. Taking a multi-unit franchisee owner's perspective, we unravel the performance effect of an owner's operating experience. We theorize on the differential effects of three facets of this experience: local experience, intensity of distant experience, and heterogeneity of distant experience. Bringing customers into franchising research, we propose customer satisfaction as a key intervening mechanism and customer diversity as a key contextual condition for the performance effect of an owner's operating experience. An analysis of 14,069 stores in the McDonald's chain over three years and of more than six million customer reviews shows that an owner's greater local experience and higher heterogeneity of distant experience improve, whereas higher intensity of distant experience impairs, store survival and sales growth through customer satisfaction. Those performance effects are moderated by the extent of customer diversity.