The effect of organizational form on quality: the case of franchising

  title={The effect of organizational form on quality: the case of franchising},
  author={Steven C. Michael},
  journal={Journal of Economic Behavior and Organization},
  • Steven C. Michael
  • Published 14 January 2000
  • Economics
  • Journal of Economic Behavior and Organization
The organizational form of franchising has been shown to yield higher profits and faster growth through reducing agency costs. Why then does anyone not franchise? In this paper, I argue that the diffuse residual claims of the franchise system reduce overall system quality, and that this problem is inherent in the nature of franchising. The theory is tested by examining evidence from both the restaurant and the hotel industries, including chains that franchise and ones that own all of their… Expand

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