The Use of Up-front Fees, Royalties and Franchisor Sales to Franchisees in Business Format Franchising

  • Luis Vázquez
Part of the Contributions to Management Science book series (MANAGEMENT SC.)


This article provides evidence on the determinants of compensation provisions included in franchise contracts. The results support for both the optimal allocation of risk and double-sided moral hazard explanations for franchise contracts. The results also reveal that the value of both the initial and ongoing services provided by franchisors to franchisees strongly affects the compensation arrangements, which implies that a capital goal of these arrangements is to recover the costs of the services offered by franchisors.


Moral Hazard Business Format Retail Sector Continuous Service Royalty Rate 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2004

Authors and Affiliations

  • Luis Vázquez
    • 1
  1. 1.Department of Economics and BusinessUniversidad de SalamancaSalamancaSpain

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