Franchisors’ Strategic Pricing Approaches for Franchise Fee Decisions and the Moderating Role of the Competitive Condition: Evidence from the Korean Franchising Market

Kyung-A Sun and Joonho Moon ()
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Kyung-A Sun: Department of Tourism Management, Gachon University, Seongnam 13120, Republic of Korea
Joonho Moon: Department of Tourism Administration, Kangwon National University, Chuncheon 24341, Republic of Korea

Administrative Sciences, 2023, vol. 13, issue 9, 1-14

Abstract: As franchising provides several benefits to both corporations and small business owners, a growing number of contracts have been written through which corporations offer the right to use their brand name and business model, and small business owners pay fees for accepting the offers. In this franchisor–franchisee market, the franchise fee plays a pricing role in the exchange between two parties. In this context, we investigate the influence of franchisors’ strategic pricing approaches (i.e., cost- and value-based approaches) on franchise fee decisions. Furthermore, by examining the moderating effect of the competitive condition on the relationships between pricing approaches and franchise fees, we uncover franchisors’ pricing practices in greater detail. The results show that both pricing approaches have significant influences on franchise fee decisions, and the competitive condition moderates the relationship between the value-based approach and franchise fees but does not moderate the relationship between the cost-based approach and franchise fees. The findings contribute to the franchising and pricing literature and to industry practitioners.

Keywords: cost-based pricing approach; value-based pricing approach; competitive condition; franchise fee decisions (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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