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Allocation of Authority in Franchise Chains

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  • Paulo Furquim de Azevedo

Abstract

This paper investigates the determinants of the allocation of formal and real authority in franchise chains. Differences in business features, such as the required standardization and monitoring costs, explain the allocation of authority between the franchisor and franchisees. These variables affect the trade-off between the risk of brand name loss and the gains in knowledge sharing and learning within the network. The higher the need for standardization, the higher the risk of brand name loss, and, consequently, the more likely the franchisor is to adopt an organizational design that confers more control over the decisions of franchisees, such as business format franchising. This paper presents an empirical analysis of 223 franchise chains that provides support to the hypothesis of a negative effect of the required standardization on the level of delegation.

Suggested Citation

  • Paulo Furquim de Azevedo, 2009. "Allocation of Authority in Franchise Chains," International Studies of Management & Organization, Taylor & Francis Journals, vol. 39(4), pages 31-42, January.
    • Handle: RePEc:taf:mimoxx:v:39:y:2009:i:4:p:31-42
    DOI: 10.2753/IMO0020-8825390402
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    Cited by:

    1. Richard S. Brown, 2017. "Franchisor market power and control rights in franchise systems: the case of Major League Baseball versus the Los Angeles Dodgers," Service Business, Springer;Pan-Pacific Business Association, vol. 11(1), pages 1-21, March.
    2. Nada Mumdžiev & Josef Windsperger, 2011. "The Structure of Decision Rights in Franchising Networks: A Property Rights Perspective," Entrepreneurship Theory and Practice, , vol. 35(3), pages 449-465, May.
    3. Josef Windsperger, 2013. "The governance of franchising networks," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 27, Edward Elgar Publishing.
    4. Anant Deshpande & David Tsai, 2021. "Managing a Mission-driven Franchise Organization: An Empirical Investigation of Organizational Practice and Individual Outcomes," Global Business Review, International Management Institute, vol. 22(2), pages 311-347, April.

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