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

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  • 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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  • Lewin-Solomons, S.B., 2000. "The Plural Form in Franchising: A Synergism of Market and Hierarchy," Cambridge Working Papers in Economics 0027, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0027
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