New challenges in franchisor-franchisee relationship. An analysis from agency theory perspective

Abstract

Agency theory has been widely used in the franchising literature. This theory analyzes the contract relationships between the principal and agent and has been mostly applied to franchising in traditional sectors (e.g., restaurants, retailing, or travel agencies) where the processes and procedures can be easily standardized. Recently, there has been a spectacular development of high-intensity knowledge sectors, especially in the health sector (dentists, opticians, physiotherapists etc.), where many companies choose franchising to expand the network and improve the survival rates of franchisees, although this strategy goes against the traditional view of the agency theory. In this work, we propose to study this “new agency problem”, using the franchising business model as our research field. The know-how in high-knowledge-intensive sectors is difficult to codify and transfer, and it opens new possibilities for resource-based and intellectual capital perspectives to explain how knowledge assets are built into contracts in franchisor-franchisee relationships. Using resource-based theory and an intellectual capital perspective, we develop propositions on how to handle the knowledge transfer more efficiently. From this point of view, we propose an interorganizational dynamic contract to provide a more efficient knowledge transfer, thereby contributing to the success of the franchise networks as well as reducing the failure rates of franchisees’ outlets.

Agency issues in franchising electricity distribution companies: inter-organizational and multi-level study

“…Based on the findings from the case, it could be argued that power distribution franchisee has the potential to contribute in bringing down inefficacies by adding to human resources, revenue generation and faster services to consumers in society they serve. However, drawing consistency with the literature, the extent of success of a franchise system largely depends on the coordination, regularity in communication and risk sharing of the contracting parties (Ceric, 2012;Watson and Johnson, 2010;Navarro and Puig, 2017;Bergh et al, 2019;Jang and Park, 2019;Aguiar et al, 2021). Even though franchisee is operating, it is crucial for the franchisor to cooperate, monitor and coordinate with the franchisee.…”

“…This implies growing monitoring costs persuade franchisor to adopt a stronger incentive mechanism for aligning the interests of franchisees with the interests of the principal. However, the agency theorists have been raising the challenge of information asymmetry in an agency relation responsible for the agency problems of moral hazard (post-contract) and adverse selection (pre-contract) (Jensen and Meckling, 1976;Eisenhardt, 1989;Combs et al, 2004;Watson and Johnson, 2010;Navarro and Puig, 2017;Elango, 2019;Balsirani et al, 2020). There have been recommendations by prior researchers on addressing the challenge to reduce the differences in motivations of the contracting parties.…”

“…However, the agency theorists have been raising the challenge of information asymmetry in an agency relation responsible for the agency problems of moral hazard (post-contract) and adverse selection (pre-contract) (Jensen and Meckling, 1976; Eisenhardt, 1989; Combs et al. , 2004; Watson and Johnson, 2010; Navarro and Puig, 2017; Elango, 2019; Balsirani et al. , 2020).…”

Pengaruh Kepemilikan Institusional, Kepemilikan Manajerial, Ukuran Direksi, Proporsi Dewan Komisaris Independen dan Komite Audit Terhadap Penghindaran Pajak

“…Agen dipekerjakan melalui tugas tertentu kepada prinsipal dan bertanggung jawab atas tugas yang diberikan oleh prinsipal. Prinsipal berkewajiban untuk memberikan kompensasi kepada prinsipal atas jasa yang diberikan oleh principal (Sanfelix & Puig, 2018). Hal ini bertujuan agar principal tidak melakukan berbagai upaya untuk memenuhi kebutuhannya terkait kompensasi.…”

Seguro Garantia em Infraestrutura no Brasil: Perspectivas de Custos de Transação e Teoria da Agência

“…Os custos de agência nascem devido à (a) separação entre propriedade e controle, (b) diferentes preferências de risco, (c) assimetria de informação e (d) riscos morais. Jensen e Meckling (1976) estabelecem que os custos de agência são representados pela soma dos custos de elaboração e formalização dos contratos, os custos de fiscalização do agente, do título e aqueles associados à perda residual (Navarro Sanfelix & Puig, 2018). Segundo Williamson (2002), a complementaridade entre as abordagens da TA e da TCT está associada a questões de governança: enquanto a primeira concentra o estudo nos fenômenos ex-ante à contratação, a última tem um foco maior nos aspectos ex-post à concretização da troca (Silva, 2006).…”