Multi-unit versus single-unit franchising: assessing why franchisors use different ownership strategies |
| |
Authors: | Roberto Sánchez Gómez Isabel Suárez González Luis Vázquez |
| |
Affiliation: | 1. Sección de Organización de Empresas , University Carlos III de Madrid, Facultad de Ciencias Sociales y Jurídicas , C/Madrid 126, 28903 , Getafe , Spain robertosanchez@usal.es;3. Departamento de Administración y Economía de la Empresa , University of Salamanca , Campus Miguel de Unamuno, s/n, edificio FES, 37007 , Salamanca , Spain |
| |
Abstract: | The aim of this article is to examine what factors underlie the choice of organisational form when franchisors add new franchised units to their networks. Franchisors may grant new units to existing franchisees (multi-unit franchising (MUF)) or to new franchisees (single-unit franchising). We find that this choice depends on the existence of contractual problems (namely adverse selection and moral hazard) and several network characteristics influence the magnitude of these problems. In particular, we found a positive relationship between the intensity of the use of MUF and network size, geographical concentration of the units of the network, and industries where customers tend to be non-repetitive. |
| |
Keywords: | multi-unit single-unit franchising free-riding shirking adverse selection |
|
|