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Maintaining Quality Standards in Franchise Chains

Author

Listed:
  • Esther Gal-Or

    (The Joseph M. Katz Graduate School of Business, 210 Mervis Hall, University of Pittsburgh, Pittsburgh, Pennsylvania 15260)

Abstract

In the present paper we identify those characteristics of the markets served by a franchise chain which determine the relative incentives of the owner of the chain to monitor the behavior of individual franchisees. We find that the owner has greater incentives to monitor the outlets that serve the relatively smaller markets and those that are subject to greater fluctuations in the state of the demand confronting them. We also find that the extent of competition with other chains has an ambiguous effect on the incentives to monitor the franchisees:

Suggested Citation

  • Esther Gal-Or, 1995. "Maintaining Quality Standards in Franchise Chains," Management Science, INFORMS, vol. 41(11), pages 1774-1792, November.
    • Handle: RePEc:inm:ormnsc:v:41:y:1995:i:11:p:1774-1792
    DOI: 10.1287/mnsc.41.11.1774
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    Citations

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    Cited by:

    1. Shaoling Chen & Susheng Wang & Haisheng Yang, 2015. "Spatial Competition and Interdependence in Strategic Decisions: Empirical Evidence from Franchising," Economic Geography, Clark University, vol. 91(2), pages 165-204, April.
    2. Shubhranshu Singh, 2017. "Competition in Corruptible Markets," Marketing Science, INFORMS, vol. 36(3), pages 361-381, May.
    3. Francine Lafontaine & Margaret E. Slade, 1998. "Incentive Contracting and the Franchise Decision," NBER Working Papers 6544, National Bureau of Economic Research, Inc.
    4. Jindal, Rupinder, 2011. "Reducing the Size of Internal Hierarchy: The Case of Multi-Unit Franchising," Journal of Retailing, Elsevier, vol. 87(4), pages 549-562.
    5. Kathryn Kloepfer & Gary J. Castrogiovanni, 2018. "Entrepreneurship: venture creation subprocesses, subdomains, and interfaces," International Entrepreneurship and Management Journal, Springer, vol. 14(3), pages 681-696, September.
    6. Piga, Claudio A. G., 2000. "Competition in a duopoly with sticky price and advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 595-614, May.
    7. Dant, Rajiv P. & Nasr, Nada I., 1998. "Control techniques and upward flow of information in franchising in distant markets: conceptualization and preliminary evidence," Journal of Business Venturing, Elsevier, vol. 13(1), pages 3-28, January.

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