Franchisors'choice between royalties and fixed fees evidence from Brazil

Eugênio José Silva Bitti (), Cintya Lanchimba and Muriel Fadairo ()
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Eugênio José Silva Bitti: School of Economics, Business Administration and Accounting University of São Paulo, Brazil Av. Bandeirantes 3900 - Monte Alegre – CEP 14040-905 Ribeirão Preto - SP
Muriel Fadairo: Univ Lyon, UJM Saint-Etienne, GATE L-SE UMR 5824, F-42023 Saint- Etienne, France

No 1731, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: In franchise contracts, the royalty rate and the fixed entrance fee are the main monetary clauses defining the payment scheme between the franchisor and the franchisee. In the traditional agency view, the presence of distant outlets leads the franchisor to choose a payment mechanism designed to provide incentives to the franchisee; that is, a low royalty rate associated with a high fixed fee. Based on a unique panel dataset, we provide evidence that, in the Brazilian context, spatial dispersion has the opposite impact, with interesting practical and research implications.

Keywords: contract design; brand strategy; agency theory; distance (search for similar items in EconPapers)
JEL-codes: C12 L14 M21 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Franchisors' choice between royalties and fixed fees evidence from Brazil (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1731

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