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Contract Mixing in Franchising as a Mechanism for Public‐Good Provision

Contract Mixing in Franchising as a Mechanism for Public‐Good Provision This paper is concerned with the coexistence of company‐owned units and franchised units in business format franchising and their different contractual arrangements. Drawing insights from case studies that indicate both the development and the maintenance of company‐wide brand names and unit‐specific sales activities are crucial to a franchise company, we construct a multitask model to account for such contract mixing in franchising. Intuitively, low‐powered contracts are offered to some managers to induce effort for brand‐name development and maintenance, while high‐powered contracts are offered to the remaining managers to elicit sales activity and capture the beneficial effect of the company brand name. Franchising can thus be viewed as an organizational agreement for production involving brand‐name products and services. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics & Management Strategy Wiley

Contract Mixing in Franchising as a Mechanism for Public‐Good Provision

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References (22)

Publisher
Wiley
Copyright
Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1058-6407
eISSN
1530-9134
DOI
10.1111/j.1430-9134.2000.00085.x
Publisher site
See Article on Publisher Site

Abstract

This paper is concerned with the coexistence of company‐owned units and franchised units in business format franchising and their different contractual arrangements. Drawing insights from case studies that indicate both the development and the maintenance of company‐wide brand names and unit‐specific sales activities are crucial to a franchise company, we construct a multitask model to account for such contract mixing in franchising. Intuitively, low‐powered contracts are offered to some managers to induce effort for brand‐name development and maintenance, while high‐powered contracts are offered to the remaining managers to elicit sales activity and capture the beneficial effect of the company brand name. Franchising can thus be viewed as an organizational agreement for production involving brand‐name products and services.

Journal

Journal of Economics & Management Strategy – Wiley

Published: Mar 1, 2000

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