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Are Franchises Bad Employers?

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Author Info
Peter Cappelli
Monika Hamori
Abstract

Franchise jobs are often described as representing the epitome of the "low road" approach to managing employees: high turnover, little training, deskilled jobs, and little employee involvement, practices often seen as unsophisticated. Research on franchise operations suggests, however, that the basic operating principles and practices of franchises tend to be more sophisticated than those of equivalent independent operators. We might therefore expect their employee management practices to be more advanced as well, challenging the stereotype of franchise jobs. We use data from a national probability sample of establishments to examine the relationship between franchise status and employment practices. While descriptive statistics suggest that franchise operations use low road practices, once industry, size, and other control variables are included in the analysis, franchise operations appear on important dimensions to offer better jobs with more sophisticated systems of employee management than similar non-franchise operations.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13327.

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Date of creation: Aug 2007
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Handle: RePEc:nbr:nberwo:13327

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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References listed on IDEAS
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. Gil A. Preuss, 2003. "High performance work systems and organizational outcomes: The mediating role of information quality," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 56(4), pages 590-605, July.
  2. Combs, James G. & Ketchen, David Jr. & Hoover, Vera L., 2004. "A strategic groups approach to the franchising-performance relationship," Journal of Business Venturing, Elsevier, vol. 19(6), pages 877-897, November. [Downloadable!] (restricted)
  3. Rubin, Paul H, 1978. "The Theory of the Firm and the Structure of the Franchise Contract," Journal of Law & Economics, University of Chicago Press, vol. 21(1), pages 223-33, April.
  4. Knott, Anne Marie & McKelvey, Bill, 1999. "Nirvana efficiency: a comparative test of residual claims and routines," Journal of Economic Behavior & Organization, Elsevier, vol. 38(4), pages 365-383, April. [Downloadable!] (restricted)
  5. O. Brown Jr., William, 1998. "Transaction costs, corporate hierarchies, and the theory of franchising," Journal of Economic Behavior & Organization, Elsevier, vol. 36(3), pages 319-329, August. [Downloadable!] (restricted)
  6. Krueger, Alan B, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 75-101, February. [Downloadable!] (restricted)
  7. 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)
  8. Hennessy, David A., 2004. "Property Rights, Productivity, and the Nature of Noncontractible Actions in a Franchise System," Staff General Research Papers 11750, Iowa State University, Department of Economics.
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  9. John Godard, 2001. "High performance and the transformation of work? The implications of alternative work practices for the experience and outcomes of work," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(4), pages 776-805, July.
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