Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry
This paper estimates the difference in compensation between company-owned and franchisee-owned fast food restaurants. The contrast is of interest because contractual arrangements give managers of company-owned outlets less of an incentive to monitor and supervise employees. Estimates based on two data sets suggest that employee compensation is slightly greater at company-owned outlets than at franchisee-owned outlets. The earnings gap is 9 percent for assistant and shift managers and 2 percent for full-time crew workers. Furthermore, the tenure-earnings profile is steeper at company-owned restaurants. These findings suggest that monitoring difficulties influence the timing and generosity of compensation. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 106 (1991)
Issue (Month): 1 (February)
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