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This paper articulates the theoretical rationale for conflict in franchising, operationalizes conflict through the measurement of franchisee satisfaction and labels empirically supported stratified satisfaction levels. Two propositions are advanced in relation to the drivers of conflict in franchise systems. The first proposition is underpinned by relational exchange theory, which postulates that franchisee–franchisor goal congruence is important to the fulfilment of the alliance efficiencies which motivate inter‐organizational forms. Cooperation, communication, coordination and commitment, as perceived by the franchisees, are used in the context of a survey instrument to operationalize goal congruence. The second proposition involves franchisor‐provided services. Transaction‐cost analysis suggests that long‐term contractual relationships must be flexibly interpreted and governed if the relationship is to be maintained over a series of transactions. We propose that the transactional intersection of the franchise system is in franchisor‐provided services. The perceived importance and subsequent adequacy of delivery of these services established a tolerance zone within which transactions support and/or enhance the relationship between the franchisor and the franchisee. The empirical objectives of the study are accomplished utilizing a questionnaire sent to nine franchise systems, to which 621 franchisees responded. Three clear clusters of franchisee conflict emerged in near equal proportions. The propositions are supported and illustrated empirically and in CHAID tree diagram form.

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