The Structure of Decision Rights in Franchising Networks: A Property Rights Perspective

Mumdžiev, Nada; Windsperger, Josef

doi:10.1111/j.1540-6520.2011.00440.x

Cited by 52 publications

(53 citation statements)

References 80 publications

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“…Applied to an HRM context, responsibility for the management of human resources is typically delegated by the franchisor without much regulation to individual franchisees, despite the common assumption that in franchise systems, virtually every aspect is regulated via contract in order to ensure system-wide standardization (Grünhagen et al 2013). There may be variation between franchise systems as regards the level of franchisee HR autonomy (Grünhagen et al 2013); however, several studies have found that franchisees generally have quite significant HR autonomy in their units 1 Burgers et al 2010;Mumdžiev and Windsperger 2011;Truss 2004;Windsperger 2004). The major reasons for this franchisee HR autonomy are to maintain franchisee satisfaction and motivation (Truss 2004), and to avoid legal risks for the franchisor ).…”

Section: Introductionmentioning

confidence: 99%

Best fit, best practice, or stuck in the middle? The impact of unit ownership on unit HR performance in franchise systems

2015

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Franchising is an important form of entrepreneurial wealth creation in many retailing and service industries. Since Human Resource Management (HRM) is a critical factor in such industries, it is important to understand how franchisees-as semi-autonomous entrepreneurs-deal with HRM in their units and how this ultimately affects performance at the unit level. However, the very few studies linking franchisee HRM behaviors to performance have not included multi-unit franchising (MUF) as a type of unit ownership. Given the ever-increasing popularity of MUF and the unique characteristics of MUFs, this represents an important knowledge gap. We aim to fill this gap by building a theoretical framework on how the type of unit ownership affects unit HR performance within franchise systems. Building on agency, resource and entrepreneurship perspectives, we propose that units owned by single-unit franchisees (SUFs) and small MUFs (i.e., franchisees with a very small number of units) adopt a 'best fit' system regarding HRM, whereas company-owned units (COs) and units owned by larger MUFs (i.e., franchisees with a large number of units) typically adopt a 'best practice' system. Each system has its own advantages and disadvantages, which results in two contrasting propositions regarding their effects on unit performance. Moreover, we expect the units owned by medium-size MUFs to have the lowest performance since they are 'stuck in the middle' regarding their HRM system.

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Section: Introductionmentioning

confidence: 99%

Best fit, best practice, or stuck in the middle? The impact of unit ownership on unit HR performance in franchise systems

2015

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“…As for the problems associated with the risk sharing (RS) that must support the parties, franchisors should delegate more decision rights when it is difficult to replicate the intangible resources to reduce opportunistic behavior (free-riding) (Mumdžiev and Windsperger 2011). To reduce the likelihood of the premature termination of the contract (hold-up), a guarantee could be feasible that allows the franchisee to belong to other professional groups or gives territorial continuity to the franchisee to enable collateral activities to be pursued (Chu and Liu 2010).…”

Section: Discussionmentioning

confidence: 99%

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

Sanfelix¹,

Puig²

2018

cuadernosgestion

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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.

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“…Both of these policies have been suggested by the literature to be peripheral aspects of business and suitable for delegating to franchisees (Michael 1996;Bradach 1998;Windsperger 2004;Yin and Zajac 2004;Mumdziev and Windsperger 2011;Winter et al 2012;Ater and Rigbi 2015). Moreover, Ater and Rigbi (2015) showed that both policies might serve similar purposes.…”

Section: Franchisor Control Over Pricing and Advertising Policiesmentioning

confidence: 99%

Antecedents of early terminations in franchising: franchisor versus franchisee cancelations

López-Fernández

López‐Bayón

2017

Small Bus Econ

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Franchisors capitalize on franchisee entrepreneurial capacity to grow. However, enabling franchisees to develop their ventures may damage system consistency. This dilemma makes conflict particularly prevalent in the field of franchising. Nevertheless, prior research has reported an incomplete picture of factors leading to serious disagreement and premature termination in franchise partnerships. We address this gap, first, by adding the entrepreneurial autonomy of franchisees as a relevant but underexplored source of conflict and, second, by providing a more fine-grained analysis of franchisors' versus franchisees' drivers of termination. Specifically, we focus on the controversial issues of pricing and local advertising policies and analyze how expanding franchisees' entrepreneurial autonomy in these decision areas is related to contract terminations depending on who ended the relationship (the franchisor or a franchisee). The study also highlights less controversial requirements and conditions (e.g., upfront investments, franchisor experience …) that may reduce early terminations. Our empirical objectives are met by using survey data from a sample of franchisor companies. The results show how the performance outcomes of entrepreneurial autonomy differ depending on the decision area in which it is exercised. Results also throw light on the consequences of various critical franchise policies that may be masked if both types of termination (franchisors vs. franchisees) are considered together.

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The Structure of Decision Rights in Franchising Networks: A Property Rights Perspective

Cited by 52 publications

References 80 publications

Best fit, best practice, or stuck in the middle? The impact of unit ownership on unit HR performance in franchise systems

Best fit, best practice, or stuck in the middle? The impact of unit ownership on unit HR performance in franchise systems

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

Antecedents of early terminations in franchising: franchisor versus franchisee cancelations

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