Franchising as a plural system: A risk-based explanation
Thomas Bürkle and
Journal of Retailing, 2008, vol. 84, issue 1, 39-47
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: M31 D81 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (18) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:84:y:2008:i:1:p:39-47
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 Dana Niculescu ().