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This study aims to reveal how the organizational structure (vertical integration vs. franchising) of 308 stores in a Spanish fashion retail franchise chain affects their performance measured through two key performance indicators commonly used in this industry, namely, labor productivity and service quality ratings. We also appraise the moderating role played by the servant leadership of franchisees and managers of company-owned outlets to explore its influence on the relationship between organizational structure and store performance.

We have used multivariate analyses to study the research questions, with a panel dataset of quarterly store-level data for the period January–December 2022.

Vertically-integrated stores record lower labor productivity than franchised ones. This impact is lower in stores run by individuals high in servant leadership than in those run by individuals low in it. Franchised outlets also record lower ratings in service quality than vertically-integrated stores, and this negative impact is weaker in stores run by individuals high in servant leadership.

Nothing has thus far been published on the moderating effect of servant leadership in the relationship between the organizational structure of different stores and their outcomes in franchise systems.

This research seeks to discover how the organisational form (franchising vs vertical integration) of 384 fashion stores belonging to a Spanish franchise chain influences unit-level performance measured through three key indicators commonly used in the retail literature: sales per square metre, sales per employee and service quality scores.

The authors have analysed this research question using bivariate and multivariate analyses, with a panel dataset that includes quarterly establishment-level data covering the period from January 2018 to December 2019.

The aggregated data initially reveal weaker outcomes among franchised establishments. However, after controlling for other variables related to the fashion stores and their local markets, the authors have found that franchised establishments record higher sales both per square metre and per employee than vertically integrated stores. The findings also reveal that franchised establishments record lower service quality scores than their company-owned counterparts.

Nothing has been published on the differences between franchising and company ownership in terms of establishment-level performance in fashion retailing.