Franchising as a plural system: A risk-based explanation |
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Authors: | Thomas Bürkle |
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Institution: | a Human Resource Management, University of Cooperative Education (Hessische Berufsakademie), FOM (Fachhochschule für Oekonomie und Management), Gräfstr. 69, 60486 Frankfurt am Main, Germany b Retailing and Service Management, University of Wuppertal, Gaussstr. 20, 42097 Wuppertal, Germany c Fraunhofer MOEZ, Städtisches Kaufhaus, Neumarkt 9-19, 04109 Leipzig, Germany |
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Abstract: | Empirical studies show that most franchise systems consist of both franchisee-owned and franchisor-owned units. We contribute a new theory that explains why such a mixture exists, using a model that focuses on the franchisor's optimal risk allocation. The costs of risk and controlling franchised units explain the varying fraction of franchisee-owned to total selling units, and the incentive to franchise decreases with an increasing fraction of franchisee-owned to total selling units, as well as with decreasing costs of control. Our explanation for these plural systems is consistent with the ownership redirection hypothesis. |
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Keywords: | M31 D81 |
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