Laurels or Thorns of Trust? How Embeddedness Moderates the Exchange‐Satisfaction Relationship in Franchising

Exchanges in franchise systems are embedded in the level of trust that exists in franchisee–franchisor relationships. Although trust is essential in business relationships, it can unfold a negative side effect on the appreciation of exchange in these relationships as hidden costs of trust. We rely on exchange as defined in social exchange theory (SET) to study the effect of franchisor–franchisee exchange on franchisee commitment to the franchise system and franchisee satisfaction under different levels of trust. Our findings based on franchisee data from German‐speaking countries (Austria, Germany, and Switzerland) highlight that the direct effect of exchange on franchisee satisfaction is moderated negatively by trust. The findings show that as trust increases, the effect of exchange on franchisee satisfaction decreases. We argue that the reason for this negative role of trust is associated with higher relationship embeddedness, which inhibits the franchise partners from seeing the (full) value of relational exchange, resulting in decreasing positive effects of exchange on satisfaction. This study contributes to the social exchange theory of franchise relationships by showing that although higher trust is a positive force in relationships, it can decrease the perceived value of exchange for relationship outcomes due to the overembeddedness of the franchisor–franchisee relationship.