The Expectation of Continuity Effect and Franchise Termination Laws: A Behavioral Perspective

Benoliel, Uri

doi:10.1111/j.1744-1714.2009.01074.x

Cited by 9 publications

(9 citation statements)

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“…The primary reason that franchisees and their associations tend to disfavor liberal termination rights for franchisors is that they fear franchisor opportunism (e.g., Benoliel, ). For example, franchisee associations argue that franchisors have strong interests in terminating franchisees who are not producing the royalty levels that the franchisor believes can be extracted from a particular location.…”

Section: Bargaining Power Effectsmentioning

confidence: 99%

“…Franchisees also fear that franchisors can be motivated to opportunistically terminate a franchisee who is organizing a franchisee association, or is otherwise viewed as “non‐cooperative” or as “a troublemaker.” These kinds of fears have been fed by a long history of contentious lawsuits over terminations that franchisee associations and other franchisee advocates actively publicize (e.g., Benoliel ). Franchisee concerns are also heightened by the fact that it is usually difficult for outside observers to know who was acting opportunistically in a given act of termination.…”

Section: Bargaining Power Effectsmentioning

confidence: 99%

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Franchisee Associations as Sources of Bargaining Power? Some Evidence

Argyres

Bercovitz

2015

Economics Manag Strategy

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The empirical literature in economics and strategy on contract structure, including on franchise contract structure, has been largely based on agency and transaction cost theories. The effects of bargaining power have been much less studied. This paper considers the role of independent franchisee associations in franchising relationships as a means to test for the presence of bargaining power effects. We find that the presence or absence of a franchisee association is significantly related to each of three key contractual and relationship characteristics: contract duration, noncompete stringency, and terminations/nonrenewals. This suggests that bargaining power should be accounted for in studies of contract structure and relationship outcomes.

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Section: Bargaining Power Effectsmentioning

confidence: 99%

Section: Bargaining Power Effectsmentioning

confidence: 99%

Franchisee Associations as Sources of Bargaining Power? Some Evidence

Argyres

Bercovitz

2015

Economics Manag Strategy

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“…Although the business growth of franchising is expected to move in a positive direction for market continuity to remain in place, the intensity of the effect will usually differ for the franchisor as much as for the franchisee, due to possible opportunistic behaviours by one or the other party. Both the franchisor and the franchisee, however, have an expectation of continuity, generated by the mutual perception of a continuous economic relationship (Benoliel, 2009;Facanha, Resende, Cardoso, & Schr€ oder, 2013).…”

Section: Introductionmentioning

confidence: 99%

The effects of management and environmental factors on franchise continuity

Ayup-González

Monge

Carrilero-Castillo

2019

Economic Research-Ekonomska Istraživanja

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There is abundant evidence that franchises boost the economies of developed and emerging market economies. In Mexico, for example, despite its limited growth, the franchise system is dynamic. Over the past three decades, the inconsistent continuity of the global franchise business format may also be noted. The aim here is to analyse the factors linked to franchise continuity in the Mexican hospitality sector by applying panel data methodology to a sample of 253 hospitality sector chains between 2002 and 2016. The results showed that franchised outlets, proven and improved know-how, and market factors, under conditions of endogeneity, maintained a positive effect on the continuity of the franchise business format.

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“…This is reflected in an increased likelihood of the franchisor initiating litigation and a decreased likelihood of it settling for anything less than its full claim. In relationship law regimes, franchisors can attempt to terminate franchisees only with good cause (Benoliel 2009). Although relationship law statutes were created to ensure continuity of the relationship and to protect franchisees from termination at the whim of the franchisors, they also have two potentially unanticipated outcomes.…”

Section: Impact Of Regulationmentioning

confidence: 99%

“…Although these laws are long-standing (both were enacted in 1974), such regulation of franchising has always been controversial. Whereas supporters of regulation laud the transparency and the “franchisee day in court” elicited by such laws (Benoliel 2009), its detractors cite the high cost of compliance and the additional burden it imposes on the franchisor's task of quality assurance (Brickley, Dark, and Weisbach 1991; Klein 1980).…”

mentioning

confidence: 99%

Conflict Management and Outcomes in Franchise Relationships: The Role of Regulation

Antia,

Zheng,

Frazier

2013

Journal of Marketing Research

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Franchise relationships are prone to conflict. To safeguard the rights of individual franchisees, several states have legislated greater franchisor disclosure (registration law) ex ante and/or franchisor “termination for good cause” (relationship law) ex post. The impact of regulatory oversight on franchisor–franchisee conflict, however, remains unclear. Relying on agency theory arguments, the authors first assess the influence of the regulatory context, both by itself and in combination with the franchise ownership structure, on the incidence of litigated conflict. Conditional on litigation, they also predict the impact of franchise regulation on both the parties’ litigation initiation and resolution choices and the resulting outcomes. The authors test the hypotheses using a unique multisource archival database of 411 instances of litigation across 75 franchise systems observed over 17 years. The results indicate that the regulatory context, by itself as well as in combination with the franchise ownership structure, significantly shapes parties’ conflict management choices. The authors also find evidence of a trade-off between prevailing in the particular conflict and achieving franchise system growth objectives.

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The Expectation of Continuity Effect and Franchise Termination Laws: A Behavioral Perspective

Cited by 9 publications

References 0 publications

Franchisee Associations as Sources of Bargaining Power? Some Evidence

Franchisee Associations as Sources of Bargaining Power? Some Evidence

The effects of management and environmental factors on franchise continuity

Conflict Management and Outcomes in Franchise Relationships: The Role of Regulation

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