The Economics Of Franchising

This 2005 book describes in much detail both how and why franchising works. It also analyses the economic tensions that contribute to conflict in the franchisor-franchisee relationship. The treatment includes a great deal of empirical evidence on franchising, its importance in various segments of the economy, the terms of franchise contracts and what we know about how all these have evolved over time, especially in the US market. A good many myths are dispelled in the process. The economic analysis of the franchisor-franchisee relationship begins with the observation that for franchisors, franchising is a contractual alternative to vertical integration. Subsequently, the tensions that arise between a franchisor and its franchisees, who in fact are owners of independent businesses, are examined in turn. In particular the authors discuss issues related to product quality control, tying arrangements, pricing, location and territories, advertising, and termination and renewals.

Franchising networks are experiencing great success in international business organization. Few books try to explain the characteristics of these networks. Contrary to the existing literature this book tackles more theoretical problems related to governance, organization, knowledge management, contract design, incentive and regulation issues both from the economic and management view point. It delivers new theoretical and empirical results regarding plural forms, contract design, and knowledge and strategic management issues. Its purpose is to offer researchers and practitioners new theoretical and empirical insights in one of the most important economic phenomenon at the beginning of the 21st century: Franchising networks as organizational arrangement for growth and internationalization of firms.

The Economic Effects of Franchising is based on a report generated for United States Senate Small Business Committee in 1970 entitled, "Impact of Franchising on Small Business." This original report resulted in lengthy hearings of franchising issues and opportunities, focusing on the fast food industry. Ozanne and Hunt continued researching the focus of this work and completed their studies in 1971 to produce The Economic Effects of Franchising for Congress and the public. This work discusses, step by step, from researching the franchise and its characteristics, to signing a franchise agreement and training its employees, and the revenue generated to owning a franchise. URBAN B. OZANNE is Professor Emeritus at Florida State University in Tallahassee, Florida. Professor Ozanne wrote The Economic Effects of Franchising with Shelby D. Hunt in 1971. In 1968, Ozanne wrote the article entitled, "Adoption Research: Information Sources in the Industrial Purchasing Situation," with Gilbert A. Churchill, which was published in Marketing and the New Science of Planning by the American Marketing Association. SHELBY D. HUNT is the Jerry S. Rawls and P. W. Horn Professor of Marketing at Texas Tech University, Lubbock, Texas. He has written numerous articles on competitive theory, macromarketing, ethics, channels of distribution, philosophy of science, and marketing theory. For his contributions to theory and science in marketing, he received the 1986 Paul D. Converse Award from the American Marketing Association, the 1987 Outstanding Marketing Educator Award from the Academy of Marketing Science, the 1992 American Marketing Association/Richard D. Irwin Distinguished Marketing Educator Award, and the 2002 Society for Marketing Advances/Elsevier Science Distinguished Scholar Award.

Hundreds of potential entrepreneurs investigate franchising every year, but this enormous business opportunity remains hugely misunderstood. Franchising: Pathway to Wealth Creation delivers that guidance, from start to finish.

Fundamentals of Franchising is charged with useful definitions, practical tips, and expert advice from experienced practitioners. Written specifically to help lawyers and non-lawyers brush up on franchise law, this practical guide examines franchise law from a wide-range of experiences and viewpoints. Each chapter is written by two experienced practitioners and provides you with a well-rounded overview of franchise law and alerts you to issues that may require further research or expertise.

Previous research on the institutional structure of franchising networks (Bri- ley et al. 1991; Lutz 1995; Shane 1998; Lafontaine and Shaw 1999, 2005; - fuso 2002; Penard et al. 2003a,b) does not explain the governance structure of the franchising firm as an institutional entity that consists of two interrelated parts: Residual decision rights and ownership rights. The latter includes not only residual income rights of franchised outlets but also residual income rights of franchisor-owned outlets. Previous studies primarily examines the incentive, signalling and screening effects of fees, royalties and other contractual pro- sions from the point of view of organizational economics (see Dnes 1996 for a review) without taking into account the interactions between residual decision and residual income rights as interrelated parts of the governance structure. This paper fills this gap in the literature. According to the property rights view, de- sion rights should be allocated according to the distribution of intangible kno- edge assets between the franchisor and franchisee and ownership rights should be assigned according to the residual decision rights. Since ownership rights are diluted in franchising networks, the dilution of residual income rights of fr- chised outlets is compensated by residual income rights of company-owned o- lets. Under a dual ownership structure, company-owned outlets compensate the disincentive effect of low royalties for the franchisor, and low royalties strengthen the investment incentives for the franchisee.