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The Plural Form in Franchising: A Synergism of Market and Hierarchy

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Author Info
Lewin-Solomons, S.B.
Abstract

In a plural form, two or more organisational arrangements possess a synergism when used simultaneously. For example, rather than specialising, many chains contain a large proportion of both franchised and company-owned stores. By franchising some stores while they own others, franchise systems can achieve dynamic efficiency that would be impossible in a homogenous system. Chains value their franchisees because franchisees exercise initiative. However, unless a chain includes a sufficiently high proportion of company stores, it lacks proper incentives to evaluate innovations efficiently. Therefore, despite the dynamism of franchises, a chain must maintain a certain proportion of company stores.

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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0027.

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Date of creation: Dec 2000
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Handle: RePEc:cam:camdae:0027

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Gallini, Nancy T & Lutz, Nancy A, 1992. "Dual Distribution and Royalty Fees in Franchising," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 471-501, October.
  2. Katz, Barbara G. & Joel Owen, 1992. "On the existence of franchise contracts and some of their implications," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 567-593, December. [Downloadable!] (restricted)
  3. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
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  4. Lafontaine, Francine & Slade, Margaret E, 1997. "Retail Contracting: Theory and Practice," Journal of Industrial Economics, Blackwell Publishing, vol. 45(1), pages 1-25, March. [Downloadable!] (restricted)
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  5. Brickley, James A. & Dark, Frederick H., 1987. "The choice of organizational form The case of franchising," Journal of Financial Economics, Elsevier, vol. 18(2), pages 401-420, June. [Downloadable!] (restricted)
  6. Mathewson, G Frank & Winter, Ralph A, 1985. "The Economics of Franchise Contracts," Journal of Law & Economics, University of Chicago Press, vol. 28(3), pages 503-26, October.
  7. Lafontaine, Francine & Slade, Margaret E., 1996. "Retail contracting and costly monitoring: Theory and evidence," European Economic Review, Elsevier, vol. 40(3-5), pages 923-932, April. [Downloadable!] (restricted)
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  8. Norton, Seth W, 1988. "An Empirical Look at Franchising as an Organizational Form," Journal of Business, University of Chicago Press, vol. 61(2), pages 197-218, April. [Downloadable!] (restricted)
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  1. Sebastian Kranz & Shira B. Lewin-Solomons, . "Decision Structures in Franchise Systems of the Plural Form," Bonn Econ Discussion Papers bgse8_2008, University of Bonn, Germany. [Downloadable!]
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