Franchising as a plural system: A risk-based explanation

Thomas Bürkle and Thorsten Posselt

Journal of Retailing, 2008, vol. 84, issue 1, 39-47

Abstract: Empirical studies show that most franchise systems consist of both franchisee-owned and franchisor-owned units. We contribute a new theory that explains why such a mixture exists, using a model that focuses on the franchisor's optimal risk allocation. The costs of risk and controlling franchised units explain the varying fraction of franchisee-owned to total selling units, and the incentive to franchise decreases with an increasing fraction of franchisee-owned to total selling units, as well as with decreasing costs of control. Our explanation for these plural systems is consistent with the ownership redirection hypothesis.

Keywords: Franchising; Plural systems; Optimal mixture of franchised and system leader-owned units; Insurance; Risk premium (search for similar items in EconPapers)
JEL-codes: D81 M31 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022435908000080
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:84:y:2008:i:1:p:39-47

DOI: 10.1016/j.jretai.2008.01.004

Access Statistics for this article

Journal of Retailing is currently edited by A. Roggeveen

More articles in Journal of Retailing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().