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International Franchising Practices in Mexico: Do Franchisors Customize Their Contracts?

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  • Francine Lafontaine
  • Joanne E. Oxley

Abstract

The contracting practices of franchisors outside their domestic market have received little attention in the empirical literature on franchising to date, largely because of lack of data. We exploit a novel data set that allows us to describe the contracts offered by a number of US and Canadian franchisors operating in Mexico and also compare them to contracts employed at home. Our analyses reveal a series of stylized facts that we hope will prove useful in guiding future empirical and theoretical research on contracting and especially on cross-border contracting practices. These are as follows: (1) The overwhelming majority of franchisors seeking franchisees in Mexico offer exactly the same contract to potential Mexican franchisees as that employed in the home market; (2) Among those franchisors that already have established outlets in Mexico, nearly half use the exact same fees in Mexico and at home; (3) The majority of those franchisors that make changes only alter the fixed fee component of the contract; (4) There is no evidence that franchisors use franchising more or less in Mexico compared to home as an alternative to royalty rate customization-in fact, the extent of franchising (versus company-owned units) of these firms in Mexico is not different systematically from that observed in their domestic market or worldwide; and (5) There is no evidence of increased customization over time-if anything, the evidence suggests increased similarities in contracting practices over time. Copyright 2004 Blackwell Publishing, 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 13 (2004)
Issue (Month): 1 (03)
Pages: 95-123

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Handle: RePEc:bla:jemstr:v:13:y:2004:i:1:p:95-123

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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Cited by:
  1. Muriel Fadairo & Cintya Lanchimba Lopez, 2012. "Signaling the value of a business concept : Evidence from a structural model with Brazilian franchising data," Working Papers 1228, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Muriel Fadairo & Cintya Lanchimba, 2012. "Signaling the value of a business concept : Evidence from a structural model with Brazilian franchising data," Working Papers halshs-00735573, HAL.
  3. Jell-Ojobor, Maria & Windsperger, Josef, 2014. "The Choice of Governance Modes of International Franchise Firms — Development of an Integrative Model," Journal of International Management, Elsevier, vol. 20(2), pages 153-187.
  4. Rozenn Perrigot & Thierry Pénard, 2012. "Determinants of E-commerce adoption by franchisors: Insights from the U.S. market," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201206, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  5. Benito Arruñada & Manuel González-Díaz & Alberto Fernández, 2004. "Determinants of organizational form: transaction costs and institutions in the European trucking industry," Industrial and Corporate Change, Oxford University Press, vol. 13(6), pages 867-882, December.
  6. Matthew Ellman, 2006. "Specificity Revisited: The Role of Cross-Investments," Journal of Law, Economics and Organization, Oxford University Press, vol. 22(1), pages 234-257, April.
  7. Lluís Bru & Ramon Faulí-Oller & Joel Sandonís, 2011. "Partial price discrimination by an upstream monopolist," SERIEs, Spanish Economic Association, vol. 2(2), pages 217-231, June.

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