Contract duration and contractual learning: Evidence from franchising networks

Perdreau, Frédéric; Chaudey, Magali; Chanut, Odile; Fadairo, Muriel

doi:10.1002/mde.2899

Cited by 7 publications

(5 citation statements)

References 47 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Specific investments have a positive impact, while environmental uncertainty has a negative impact on contract length providing support to transaction costs arguments and safeguarding function of contracts ( H1 and H2 ). These results are consistent with previous studies (Saussier, 1999; Brickley et al , 2006; Vázquez, 2007; García-Herrera and Llorca-Vivero, 2010; Olmos, 2010, Perdreau et al , 2017). Brand name and intangible knowledge assets have a positive and significant impact on contract length, providing support to resource-based arguments and knowledge leverage function of contracts ( H3 and H4 ).…”

Section: Empirical Analysissupporting

confidence: 94%

“…The higher the franchisees' transaction-specific investments, the longer it would take to break-even. Similar hypotheses were tested empirically in the context of coal suppliers ( Joskow, 1987;Saussier, 1999) and franchising (Brickley et al, 2006;Vázquez, 2007;García-Herrera and Llorca-Vivero, 2010;Perdreau et al, 2017). I repeat the hypothesis to preserve the model's completeness.…”

mentioning

confidence: 83%

“…Franchisors usually offer contracts to franchisees on a "take-it-or-leave-it" basis, resulting in almost no-variance 714 IJRDM 47,7 within a franchise system (Shane and Foo, 1999) and little variance across time (Lafontaine and Shaw, 1999). Recent research challenges this assumption by showing that contract durations do change over time as a result of organizational learning (Perdreau et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Determinants, transactional alignment, and performance outcomes of franchise contract length

Gorovaia

2018

IJRDM

View full text Add to dashboard Cite

Purpose The purpose of this paper is to explore the determinants, transactional alignment and performance outcomes of franchise contract length using transaction costs theory (TCT) and resource-based theory (RBT). Design/methodology/approach The author hypothesizes that franchisors choose contract length according to TCT and RBT arguments. TCT explains the safeguarding function of contracts: the franchisors will offer longer contracts when franchisees’ specific investments are high and environmental uncertainty is low. RBT highlights the knowledge leverage function of contracts: the franchisors will offer longer contracts when the brand name and intangible knowledge assets are high. Franchise companies that design contract length aligned with transactional attributes will perform better. The author tests the misalignment hypothesis and comparative performance of franchise contracts by estimating two-stage least squares regression and Heckman two-stage procedure that control for endogeneity and self-selection. Findings Empirical data from the German franchise sector support the hypotheses. In addition to the safeguarding function, franchise contracts have an important knowledge leverage function. Longer contracts perform better due to the development of relational strategic assets and stronger commitment. Research limitations/implications Franchisors must offer longer contracts when specific investments of franchisees, brand name, intangible knowledge assets are high, and environmental uncertainty is low. Franchisors should invest in the development of relational strategic assets and offer longer contracts for the benefit of superior performance. Originality/value The study addresses the significant question of transactional alignment and comparative performance of franchise contracts. It empirically confirms the importance of RBT in explaining contractual choices and performance.

show abstract

Section: Empirical Analysissupporting

confidence: 94%

mentioning

confidence: 83%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Determinants, transactional alignment, and performance outcomes of franchise contract length

Gorovaia

2018

IJRDM

View full text Add to dashboard Cite

show abstract

“…We controlled for contract duration and franchisee initial investment. A long contract duration helps a franchisor build stability with franchisees, which may contribute to higher franchisor performance (Perdreau, Chaudey, Chanut, & Fadairo, 2018). Initial investment refers to the total expenditures incurred by a franchisee to open a franchised store.…”

Section: Measurement and Descriptive Statisticsmentioning

confidence: 99%

Terminating Franchisees: Does It Improve Franchisor Performance?

Kim

Min

2022

Journal of Management

View full text Add to dashboard Cite

Terminating franchisees is a challenging decision every franchisor faces, yet its effect on franchisor performance remains unknown. We examine the effect of franchisee termination on a franchisor’s profitability (i.e., return on asset) in this study. Applying agency theory to franchisee termination, we posit that termination enables a franchisor to uphold a chain’s uniformity among stores through the dual functions of enforcement and deterrence. Weighing the benefits against the costs of termination, we predict a contemporaneous effect and a long-term effect of franchisee termination on franchisor profitability. We then contextualize the contemporaneous effect of termination. We postulate the alleviating or exacerbating influences of three conditions—new franchisee addition, customer mobility, and chain maturity—that may change the importance of benefits or costs of termination. We test our predictions with multiyear census data on franchising in South Korea. The results support our predictions except for the moderating effect of customer mobility. We discuss limitations and further research directions as well as implications of the study results.

show abstract

“…It enables franchisees to benefit from the franchisor's brand name capital, training and support (Carney and Gedajlovic, 1991;Lafontaine et al, 2019;Norton, 1988). In return, franchisees make an upfront investment for the rights to the franchise, thereby creating an economic incentive to stay in the franchisor-franchisee relationship (Meek et al, 2011;Mignonac et al, 2015;Perdreau et al, 2018). Although there are shorter franchise agreements, franchise contracts are typically set to cover 10-to 20-year periods (Clarkin, 2008;Dant et al, 2011), yet many franchisor-franchisee relationships do not reach contract maturity date, not to even mention having franchise agreement renewals (Grünhagen et al, 2017;López-Bayón and López-Fernández, 2016).…”

Section: Introductionmentioning

confidence: 99%

Curbing franchisee failure: A systematic review of the empirical evidence

Dada

2021

Journal of Small Business Management

View full text Add to dashboard Cite

Franchisee failure is a major incidence that threatens the stability of franchise businesses globally. Yet there has been no synthesis of the empirical evidence in order to systematically understand the factors that increase the likelihood of franchisee failure. The diverse conceptualizations and discrepant causes of franchisee failure have resulted in a fragmented literature. Through a systematic review of the empirical literature, an all-inclusive model for curbing franchisee failure is developed -comprising the single and joint influencing factors. The evidence elucidates how to mitigate franchisee failure in order to optimize the prospects of franchisee survival.

show abstract

Contract duration and contractual learning: Evidence from franchising networks

Abstract: International audienc

Cited by 7 publications

References 47 publications

Determinants, transactional alignment, and performance outcomes of franchise contract length

Determinants, transactional alignment, and performance outcomes of franchise contract length

Terminating Franchisees: Does It Improve Franchisor Performance?

Curbing franchisee failure: A systematic review of the empirical evidence

Contact Info

Product

Resources

About