Contractual Design as a Determinant of Performance: Evidence from Franchising

Magali Chaudey () and Muriel Fadairo

International Journal of the Economics of Business, 2008, vol. 15, issue 1, 117-127

Abstract: This empirical note deals with the contractual design of relationships between producers and retailers. It provides evidence on the links between the features of vertical contracts organizing franchising networks and the performances of these networks. An agency perspective is used to understand the structure of contracts. We focus on the relevance of vertical restraints by the upstream firm to prevent retailers from free-riding in the distribution networks. From six frequent contractual provisions we distinguish two types of contracts according to the degree of constraint imposed on the franchisees. Econometric estimations carried out on this basis offer evidence consistent with the hypothesis that within franchising systems, more constrained contracts for retailers encourage better performance at the network level.

Keywords: Vertical Restraints; Franchising Network Performance; Agency Theory (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/13571510701830556

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