IDEAS home Printed from https://ideas.repec.org/a/eee/jouret/v85y2009i2p206-210.html
   My bibliography  Save this article

Valuing Exclusivity from Encroachment in Franchising

Author

Listed:
  • Nair, Suresh K.
  • Tikoo, Surinder
  • Liu, Shuguang

Abstract

Conflict is created when business format franchisors penetrate existing markets with new outlets that increase system-wide sales, but negatively affect the sales and profits of existing franchisees. Territorial exclusivity contracts are used to manage channel conflict in such situations. We present a model to value territorial exclusivity from the perspective of both the franchisor and the franchisee. We show that under certain circumstances there is positive value to the franchisor by including the exclusivity clause in the contract and to the franchisee by purchasing this exclusivity. When this happens, the likelihood of franchisor–franchisee encroachment-related conflict is reduced.

Suggested Citation

  • Nair, Suresh K. & Tikoo, Surinder & Liu, Shuguang, 2009. "Valuing Exclusivity from Encroachment in Franchising," Journal of Retailing, Elsevier, vol. 85(2), pages 206-210.
    • Handle: RePEc:eee:jouret:v:85:y:2009:i:2:p:206-210
    DOI: 10.1016/j.jretai.2008.07.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022435908000547
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jretai.2008.07.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Francine Lafontaine & Kathryn L. Shaw, 1999. "The Dynamics of Franchise Contracting: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 1041-1080, October.
    2. Arturs Kalnins, 2004. "An Empirical Analysis of Territorial Encroachment Within Franchised and Company-Owned Branded Chains," Marketing Science, INFORMS, vol. 23(4), pages 476-489, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joseph Pancras & S. Sriram & V. Kumar, 2012. "Empirical Investigation of Retail Expansion and Cannibalization in a Dynamic Environment," Management Science, INFORMS, vol. 58(11), pages 2001-2018, November.
    2. Lukito Adi Nugroho, 2017. "Real options valuation of franchise territorial exclusivity," Cogent Business & Management, Taylor & Francis Journals, vol. 4(1), pages 1262490-126, January.
    3. Cintya Lanchimba, 2013. "Optimal Monetary Provisions in Plural Form Franchise Systems; A Theoretical Model of Incentives with Two Risk-Averse Agents," Working Papers halshs-00830899, HAL.
    4. Boulay, Jacques & Caemmerer, Barbara & Evanschitzky, Heiner & Duniach, Krista, 2020. "Multi-unit franchising from franchisor and franchisee perspectives: Antecedents, performance outcomes, and the optimal mini-chain size," Journal of Business Research, Elsevier, vol. 113(C), pages 49-58.
    5. 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.
    6. Brown, James R. & Dant, Rajiv P., 2009. "The Theoretical Domains of Retailing Research: A Retrospective," Journal of Retailing, Elsevier, vol. 85(2), pages 113-128.
    7. Cintya Lanchimba, 2013. "Optimal Monetary Provisions in Plural Form Franchise Systems ; A Theoretical Model of Incentives with Two Risk-Averse Agents," Working Papers 1321, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    8. Axel Rodríguez & Vicente Caballer & Natividad Guadalajara, 2011. "Assessing the intangibles transferred in franchise businesses," Service Business, Springer;Pan-Pacific Business Association, vol. 5(1), pages 29-46, March.
    9. Vivian Zheng, Xu & Jenny Ji, Li & Su, Chenting, 2020. "Mitigating the Negative Effects of Regional Clustering in Franchising: The Roles of Governance Mechanisms," Journal of Retailing, Elsevier, vol. 96(3), pages 434-444.
    10. Blut, Markus & Backhaus, Christof & Heussler, Tobias & Woisetschläger, David M. & Evanschitzky, Heiner & Ahlert, Dieter, 2011. "What to Expect After the Honeymoon: Testing a Lifecycle Theory of Franchise Relationships," Journal of Retailing, Elsevier, vol. 87(3), pages 306-319.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guo, Shiau-Ling, 2023. "The governance implication of the geographic concentration of franchise activities for franchise relationships," Journal of Business Research, Elsevier, vol. 157(C).
    2. Salvatore Piccolo & Markus Reisinger, 2011. "Exclusive Territories and Manufacturers' Collusion," Management Science, INFORMS, vol. 57(7), pages 1250-1266, July.
    3. Itai Ater & Oren Rigbi, 2007. "Price Control In Franchised Chains: The Case Of McDonald's Dollar Menu," Discussion Papers 06-022, Stanford Institute for Economic Policy Research.
    4. S. Verbieren & M. Cools & A. Van den Abbeele, 2008. "Franchising. A Literature Review on Management and Control Issues," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(4), pages 398-443.
    5. 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.
    6. Scott Shane & Venkatesh Shankar & Ashwin Aravindakshan, 2006. "The Effects of New Franchisor Partnering Strategies on Franchise System Size," Management Science, INFORMS, vol. 52(5), pages 773-787, May.
    7. Yue Chen & Sai-Ho Chung & Shu Guo, 2020. "Franchising contracts in fashion supply chain operations: models, practices, and real case study," Annals of Operations Research, Springer, vol. 291(1), pages 83-128, August.
    8. Itai Ater & Oren Rigbi, 2015. "Price control and advertising in franchising chains," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 148-158, January.
    9. Etienne Pfister & Bruno Deffains & Myriam Doriat-Duban & Stéphane Saussier, 2006. "Institutions and contracts: Franchising," European Journal of Law and Economics, Springer, vol. 21(1), pages 53-78, January.
    10. A. Yeşim Orhun & Sriram Venkataraman & Pradeep K. Chintagunta, 2016. "Impact of Competition on Product Decisions: Movie Choices of Exhibitors," Marketing Science, INFORMS, vol. 35(1), pages 73-92, January.
    11. Ying Fan & Kai-Uwe Kühn & Francine Lafontaine, 2017. "Financial Constraints and Moral Hazard: The Case of Franchising," Journal of Political Economy, University of Chicago Press, vol. 125(6), pages 2082-2125.
    12. Francisco Javier Rondan-Cataluña & Antonio Navarro-Garcia & Enrique Carlos Diez-De Castro & Carlos Javier Rodriguez-Rad, 2010. "Reasons for the expansion in franchising: is it all said?," The Service Industries Journal, Taylor & Francis Journals, vol. 32(6), pages 861-882, December.
    13. Li, Jin & Hu, Zening & Shi, Victor & Wang, Qian, 2021. "Manufacturer's encroachment strategy with substitutable green products," International Journal of Production Economics, Elsevier, vol. 235(C).
    14. Gonzalez-Diaz, Manuel & Arrunada, Benito & Fernandez, Alberto, 2000. "Causes of subcontracting: evidence from panel data on construction firms," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 167-187, June.
    15. Josef Windsperger, 2003. "Complementarities and Substitutabilities in Franchise Contracting: Some Results from the German Franchise Sector," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(3), pages 291-313, September.
    16. Arturs Kalnins, 2004. "An Empirical Analysis of Territorial Encroachment Within Franchised and Company-Owned Branded Chains," Marketing Science, INFORMS, vol. 23(4), pages 476-489, September.
    17. Jakub Kastl & Marco Pagnozzi & Salvatore Piccolo, 2018. "Selling information to competitive firms," RAND Journal of Economics, RAND Corporation, vol. 49(1), pages 254-282, March.
    18. Antonio Navarro García & Enrique Carlos Díez de Castro & Francisco Javier Rondán Cataluña, 2006. "Franchisor Types In Portuguese Franchising," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 97-114.
    19. Vazquez, Luis, 2007. "Determinants of contract length in franchise contracts," Economics Letters, Elsevier, vol. 97(2), pages 145-150, November.
    20. Francine Lafontaine & Joanne E. Oxley, 2004. "International Franchising Practices in Mexico: Do Franchisors Customize Their Contracts?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 95-123, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jouret:v:85:y:2009:i:2:p:206-210. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-retailing .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.