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The Balance of Power in Franchising

Author

Listed:
  • Atz, Ulrich

    (Bocconi University)

  • Eliason, Blake

    (University of Utah)

  • Lipsitz, Michael

    (University of Pennsylvania)

  • Norlander, Peter

    (Loyola University Chicago)

  • Pinto, Sérgio

    (OECD)

  • Steinbaum, Marshall

    (University of Utah)

Abstract

We measure how the contractual balance of power between franchisors and franchisees has shifted over 2009-2024 by analyzing a large corpus of Franchise Disclosure Documents and surveying over 300 franchisees. Coding more than 20 provisions across 4,500 chains, we find that franchisee autonomy declined systematically: exclusive territories fell from a majority of chains to around 20\%, while restrictions on pricing, sourcing, product offerings, and post-term competition each rose to near-universal prevalence. Franchisees appear not to have been compensated for this loss of autonomy: franchise fees rose with franchisor control, chain growth did not increase, and complaint rates to the Federal Trade Commission did not decline. We additionally find that chains that adopt franchisor-favoring provisions became 2-5 percentage points more likely to be acquired by private equity within five years. We interpret this finding as one plausible explanation for reductions in franchisee autonomy.

Suggested Citation

  • Atz, Ulrich & Eliason, Blake & Lipsitz, Michael & Norlander, Peter & Pinto, Sérgio & Steinbaum, Marshall, 2026. "The Balance of Power in Franchising," IZA Discussion Papers 18660, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18660
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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