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Resale pricing as part of franchisor know-how

Author

Listed:
  • Rozenn Perrigot

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Begoña López-Fernández

    (Universidad de Oviedo [Oviedo])

  • Guy Basset

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Olivier Herrbach

    (Institut d'Administration des Entreprises (IAE) - Bordeaux)

Abstract

PurposeAs franchisees are independent entrepreneurs, one important part of the business format that franchisors are not allowed to impose on their franchisees is resale prices. They are only allowed to indicate a recommended or a maximum price. This study aims to look further into the capabilities underlying the calculation of resale prices and suggests that price-setting is part of both the "business know-how" transferred to franchisees and the "organizational know-how," that is, capabilities developed and kept at the franchisor level.Design/methodology/approachThis study adopted a qualitative methodology with a total of 65 interviews, 19 with franchisors and 46 with franchisees, all operating in the French market.FindingsThe findings show that resale pricing is a process that involves know-how. The complexity of pricing leads to develop specialized and broad capabilities. The first type of know-how, i.e., business know-how transferred to franchisees, deals with operational implementation of recommended resale prices in the stores. The second type, i.e., organizational know-how, not transferred as a safeguard against opportunism, connects across other functions of the franchise chain such as R&D and communication.Originality/valueThis study confirms the existence and relevance of another kind of know-how apart from the business know-how that is transferred to the franchisees. Organizational know-how at the chain level, though often neglected, is a necessary determinant of sustaining a competitive advantage. This know-how is not transferred to the franchisees but contributes to the success and sustainability of the franchisor/franchisee relationship. Franchisors should thus work on improving their capabilities to better support their franchisees. Moreover, this study highlight the complexity and extreme importance of setting the right resale price.

Suggested Citation

  • Rozenn Perrigot & Begoña López-Fernández & Guy Basset & Olivier Herrbach, 2020. "Resale pricing as part of franchisor know-how," Post-Print halshs-02566446, HAL.
    • Handle: RePEc:hal:journl:halshs-02566446
    DOI: 10.1108/JBIM-05-2018-0145
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02566446
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    References listed on IDEAS

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