Anecdotal evidence suggests that franchisors use multiunit franchising to reward franchisees. In this paper, we model multiunit franchising as the reward in a tournament-one solution to the franchising agency problem. We use a unique database of 68 restaurant franchisors and find support for the tournament model. Franchisors that seek franchisees with managerial experience and franchisors that build routines to share knowledge use more multiunit franchising. Also, franchisors that grow faster use more multiunit franchising than franchisors that grow more slowly, suggesting that faster-growing franchisors use multiunit franchising as a reward in a tournament to reduce agency problems.Organizations that use franchising are now a central part of the U.S. economy. As of 2005, there were more than 909,000 franchise establishments in the United States, and these establishments provided more than 11 million jobs and an output of more than $880 billion (International Franchise Association [IFA], 2009;Shay, 2009). Franchising is also growing across the globe. According to the IFA, 61% of its members operate internationally, 16% depend on international revenue for 25-30% of their total revenue, and 75% of its membership plans to begin or increase franchising operations overseas. In the most prominent industry using franchising, the U.S. quick-service (or "fast-food") industry, there are now more than 167,000 franchises, which account for more than 3 million jobs, payroll of $34.2 billion, and sales of $152.1 billion (IFA). For innovators and entrepreneurs in the service sector, franchising is a crucial strategy for accessing and assembling resources for growth.In a franchise chain, one entrepreneur, the franchisor, develops a production technology and a trademark and licenses the right to use that technology and trademark to a local Please send correspondence to: William