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: USP - Universidade de São Paulo = University of São Paulo
Muriel Fadairo: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique

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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)
Date: 2017-10-17
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01618054v1
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Working Paper: Franchisors'choice between royalties and fixed fees evidence from Brazil (2017)
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