Toward a New Definition of Impact

Abstract

Discussions of impact in the hotel industry are almost always couched in negative terms. When a franchisor expands in a market where it already has franchisees, the automatic assumption is that the existing operators will be hurt. Such is not always the case. Well-chosen expansions have augmented demand for given chains in some markets. In addition to its effect on existing franchisees, impact involves the strategic issues of overall chain expansion, penetration, and market dominance. If chains cannot expand, they will stagnate and lose ground to competing chains that are expanding. Even when incremental impact may be negative, a single numerical threshold that triggers finding of negative impact will not work in all situations because each market is different. Consequently, franchisors and franchisees should work together to create a definition of impact that prevents damage to existing operators but also considers the effects on the franchisor of failing to expand.