Skip to main content
SpringerLink
Log in
Book cover

Economics and Management of Networks pp 13–29Cite as

Plural Form in Franchising: An Incomplete Contracting Approach

  • Chapter

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

Abstract

Plural form franchising is modeled from an incomplete contracting perspective. Complete franchising is the unique, efficient governance structure only when the plural form externality is limited and the costs of investment are low for both franchisees. Governance structure choice is irrelevant when the costs of investment are high for all franchisees, because no franchisee will invest. Finally, a plural form governance structure is the unique, efficient equilibrium in all other cases because the power allocated to independent franchisees makes them confident that they will be able to recoup their investments. Not locational or other differences between units are necessary for the emergence of plural form franchising, but positive externalities being specific for the plural form.

The paper has benefited from the comments during the EMNet 2005 conference at the Corvinus University of Budapest.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   84.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Bradach JL (1997) Using the Plural Form in the Management of Restaurant Chains. Administrative Science Quarterly 42: 276–303

    Article  Google Scholar 

  • Bradach JL (1998) Franchise Organisation. Harvard Business School Press

    Google Scholar 

  • Brickley JA, Dark FH, Weisbach MS (1991) An Agency Perspective on Franchising. Financial Management 20(1): 27

    Article  Google Scholar 

  • Caves RE, Murphy II WF (1976) Franchising: Firms, Markets, and Intangible Assets. Southern Economic Journal (Pre-1986) 42(1–4): 572

    Article  Google Scholar 

  • Cliquet G, Nguyen M-N (2004) Innovation Management Within the Plural Form Network. In Windsperger J, Cliquet G, Hendrikse G, Tuunanen M (Eds) Economics And Management of Franchising Networks. Physica-Verlag, Heidelberg

    Google Scholar 

  • Combs JG, Michael SC, Castrogiovanni GJ (2004) Franchising: A Review and Avenues to Greater Theoretical Diversity. Journal of Management 30(6): 907–931

    Article  Google Scholar 

  • Dnes AW (1993) A Case-Study Analysis of Franchise Contracts. Journal of Legal Studies 22: 367–394

    Article  Google Scholar 

  • Dnes A, Garoupa N (2005) Externality and Organizational Choice in Franchising. Journal of Economics And Business 57(2): 139–149

    Article  Google Scholar 

  • Franchise Funding Website (2004) http://www.Franchisefunding.Net/Fran_Industry_Info.Html

    Google Scholar 

  • Gallini NT, Lutz NA (1992) Dual Distribution and Royalty Fees in Franchising. Journal of Law, Economics, and Organization 8 (October): 471–501

    Google Scholar 

  • Green JR, Stokey NL (1983) A Comparison of Tournaments and Contracts. Journal of Political Economy 91: 349–364

    Article  Google Scholar 

  • Grossman S, Hart O (1986) The Costs and Benefits of Ownership: A Theory of Vertical Integration and Lateral Integration. Journal of Political Economy 94: 691–719

    Article  Google Scholar 

  • Hansmann H (1996) The Ownership of Enterprise. The Belknap Press of Harvard University Press

    Google Scholar 

  • Hart OD, Moore J (1990) Property Rights and the Nature of the Firm. Journal of Political Economy 98: 1119–1158

    Article  Google Scholar 

  • Hart O (1995) Firms, Contracts, and Financial Structure. Clarendon Press, Oxford

    Google Scholar 

  • Hendrikse GWJ, Windsperger J (2004) Introducing ‘Economics and Management of Franchising Networks’. In Windsperger J, Cliquet G, Hendrikse G, Tuunanen M (Eds) Economics and Management of Franchising Networks. Physica-Verlag, Heidelberg: pp 1–13

    Google Scholar 

  • Holmstrom B, Milgrom P (1991) Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership and Job Design. Journal of Law, Economics and Organization 7 (Special Issue): 24–52

    Google Scholar 

  • Holmstrom B, Milgrom P (1994) The Firm as an Incentive System. American Economic Review 84(4): 972–991

    Google Scholar 

  • Klein B (1980) Transaction Costs Determinants of Unfair Contractual Arrangements. American Economic Review 70(2): 356–362

    Google Scholar 

  • Lafontaine F (1993) Contractual Arrangements as Signalling Devices: Evidence From Franchising. Journal of Law, Economics, and Organization 9: 256–289

    Google Scholar 

  • Lafontaine F, Shaw KL (2005) Targeting Managerial Control: Evidence From Franchising. Rand Journal of Economics 36(1): 131–150

    Google Scholar 

  • Lazear EP, Rosen S (1981) Rank-Order Tournaments as Optimum Labor Contracts. Journal of Political Economy 89(5): 841–864

    Article  Google Scholar 

  • Lewin SB (1999) Innovation and Authority in Franchise Systems: An Empirical Exploration of the Plural Form. Working Paper, University of Cambridge and Iowa State University

    Google Scholar 

  • Lutz NA (1995) Ownership Rights and Incentives in Franchising. Journal of Corporate Finance 2: 103–131

    Article  Google Scholar 

  • Mathewson GF, Winter RA (1985) The Economics of Franchise Contracts. Journal of Law and Economics 28: 503–526

    Article  Google Scholar 

  • Mathewson GF, Winter RA (1994) Territorial Restrictions in Franchise Contracts. Economic Inquiry 32(2): 181–192

    Article  Google Scholar 

  • Michael SC (1996) To Franchise or Not to Franchise: An Analysis of Decision Rights and Organizational Form Shares. Journal of Business Venturing 11(1): 57

    Article  Google Scholar 

  • Norton SW (1988) An Empirical Look at Franchising as An Organizational Form. The Journal of Business 61(2): 197

    Article  MathSciNet  Google Scholar 

  • Oxenfeldt AR, Kelly AO (1968–69) Will Successful Franchise Systems Ultimately Become Wholly-Owned Chains? Journal of Retailing 44: 69–83

    Google Scholar 

  • Rubin PH (1978) The Theory of the Firm and the Structure of the Franchise Contract. Journal of Law and Economics 21: 223–233

    Article  Google Scholar 

  • Saloner G, Shephard A, Podolny J (2001) Strategic Management. Wiley

    Google Scholar 

  • Scott FA (1995) Franchising vs Company Ownership as Decision Variable of the Firm. Review of Industrial Organization 10: 69–81

    Article  Google Scholar 

  • Shapley LS (1953) A Value for N-Person Games. In Kuhn HW, Tucker AW (Eds) Contributions to the Theory of Games. Volume II of Annals of Mathematics Studies 28. Princeton University Press: pp 307–317

    Google Scholar 

  • Sorenson O, Sørensen JB (2001) Finding the Right Mix: Franchising, Organizational Learning, and Chain Performance. Strategic Management Journal 22: 713–724

    Article  Google Scholar 

  • Tadelis S (2002) The Market for Reputations as an Incentive Mechanism. Journal of Political Economy 92(2): 854–882

    Article  Google Scholar 

  • Williamson OE (1981) The Modern Corporation: Origins, Evolution, Attributes. Journal of Economic Literature 19: 1537–1568

    MathSciNet  Google Scholar 

  • Windsperger J (2004) The Dual Network Structure of Franchising Firms: Property Rights, Transaction Costs And Resource Scarcity Explanations. In Windsperger J, Cliquet G, Hendrikse G, Tuunanen M (Eds) Economics and Management of Franchising Networks. Physica-Verlag, Heidelberg

    Google Scholar 

  • Windsperger J, Yurdakul A (2005) Exploring the Relationship Between Knowledge Assets, Decision Rights and Ownership Rights: The Governance Structure of Franchising Firm. Working Paper, University of Vienna

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Rotterdam School of Management, Erasmus University Rotterdam, Rotterdam

    George Hendrikse & Tao Jiang

Authors
  1. George Hendrikse
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Tao Jiang
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. IGR-IAE, University of Rennes 1, 11 rue J. Macé CS 70803, 35708, Rennes, Cedex 7, France

    Gérard Cliquet

  2. Faculty of Business and Information Technology, Department of Business and Management, University of Kuopio, Mikrokatu 1F, 70211, Kuopio, Finland

    Mika Tuunanen

  3. RSM Erasmus University, Burg.Oudlaan 50, Room T8-56, 3062 PA, Rotterdam, The Netherlands

    George Hendrikse (Chair Economics of Organization) (Chair Economics of Organization)

  4. Center of Business Studies, University of Vienna, Brünner Str. 72, 1210, Vienna, Austria

    Josef Windsperger

Rights and permissions

Reprints and permissions

Copyright information

© 2007 Physica-Verlag Heidelberg

About this chapter

Cite this chapter

Hendrikse, G., Jiang, T. (2007). Plural Form in Franchising: An Incomplete Contracting Approach. In: Cliquet, G., Tuunanen, M., Hendrikse, G., Windsperger, J. (eds) Economics and Management of Networks. Contributions to Management Science. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-1758-4_2

Download citation

Publish with us

Policies and ethics

Search

Navigation