Valuing Exclusivity from Encroachment in Franchising

Suresh K. Nair, Surinder Tikoo and Shuguang Liu

Journal of Retailing, 2009, vol. 85, issue 2, 206-210

Abstract: Conflict is created when business format franchisors penetrate existing markets with new outlets that increase system-wide sales, but negatively affect the sales and profits of existing franchisees. Territorial exclusivity contracts are used to manage channel conflict in such situations. We present a model to value territorial exclusivity from the perspective of both the franchisor and the franchisee. We show that under certain circumstances there is positive value to the franchisor by including the exclusivity clause in the contract and to the franchisee by purchasing this exclusivity. When this happens, the likelihood of franchisor–franchisee encroachment-related conflict is reduced.

Keywords: Encroachment; Exclusivity; Channel conflict; Franchising (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:85:y:2009:i:2:p:206-210

DOI: 10.1016/j.jretai.2008.07.004

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