Franchising: Firms, Markets, and Intangible Assets

Caves, Richard E.; Murphy, William F.

doi:10.2307/1056250

Cited by 579 publications

(391 citation statements)

References 9 publications

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“…6 As Rushmore and Baum (2001) discuss, it is very costly for a parent company to monitor individual hotels under franchise agreements. The principal-agent problem that arises between franchisors and franchisees has been explored in past research on the hotel industry (Michael 2000;Kosová, Lafontaine, and Perrigot 2010) and in many other contexts (Caves and Murphy 1976, Rubin 1978, Mathewson and Winter 1985, Holmstrom and Milgrom 1991, Sappington 1991. In this study, we focus not on agency problems that arise in the franchisor-franchisee relationship, but rather on agency problems that arise due to the more limited supervision of employees in company managed hotels (i.e., those under management contract and those that are company owned and operated) relative to franchised hotels.…”

Section: A Ownership and Management Structure In The Hotel Industrymentioning

confidence: 99%

Agency and Compensation: Evidence from the Hotel Industry

Freedman

Kosová

2012

Journal of Law, Economics, and Organization

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We examine the relationship between employee supervision and compensation by taking advantage of the structure of the hotel industry, in which many chains have both company managed and franchised properties. Given that supervision is less rigorous at company managed establishments, we estimate differences in wages and human resource practices not only across company managed and franchised hotels within chains, but also within individual hotels as they change organizational form. While we cannot rule out the use of efficiency wages, our results suggest that agency problems affect the timing of pay and employers' propensity to use performance-based incentives. We examine the relationship between employee supervision and compensation by taking advantage of the structure of the hotel industry, in which many chains have both company managed and franchised properties. Given that supervision is less rigorous at company managed establishments, we estimate differences in wages and human resource practices not only across company managed and franchised hotels within chains, but also within individual hotels as they change organizational form. While we cannot rule out the use of efficiency wages, our results suggest that agency problems affect the timing of pay and employers' propensity to use performance-based incentives.

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Section: A Ownership and Management Structure In The Hotel Industrymentioning

confidence: 99%

Agency and Compensation: Evidence from the Hotel Industry

Freedman

Kosová

2012

Journal of Law, Economics, and Organization

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“…Indeed, marketers treat the magnitude of the per-outlet sales as one of the key yardsticks for measuring the relative performance of a chain compared with other chains in the same market. For scholars, the economic literature on retailing and service has treated the average sales per outlet/unit/establishment as one of the key performance measures for a chain (see, e.g., Caves and Murphy 1976;Martin 1988;Lafontaine 1992). Also, having two performance metrics would be helpful because the potential mechanisms through which early a market are a product of the number of outlets and average sales per outlet, the decomposition resembles the literature on decomposition of market-share elasticities (Cooper and Nakanishi 1988) and decomposition of sales elasticities into elasticities of category purchase timing, brand choice, and purchase quantity (Gupta 1988;van Heerde, Gupta, and Wittink 2003).…”

Section: Introductionmentioning

confidence: 99%

First-Mover Advantage Through Distribution: A Decomposition Approach

Nishida

2017

Marketing Science

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Whereas the extant literature on entry-order e¤ects establishes that …rst entrants often earn higher market shares ("market-share advantage"), the literature on distribution suggests increased distribution has a positive e¤ect on sales. Can distribution help us better understand entry-order e¤ects on market shares? This paper examines how the …rst entrant in a geographical market achieves a market-share advantage through distribution. For this purpose, I propose a simple method of decomposing sales into physical distribution and sales performance. The data come from a manually collected panel on six major Japanese convenience-store chains from 47 geographical markets between 1991 and 2007. Using an instrumental variable approach to deal with the potential endogeneity of entry order, I …nd the market-share advantage for the …rst chain brand is positive. Speci…cally, the physical distribution, measured by the number of outlets in a market, drives most of the advantage. This paper further …nds the density of own outlets is nonmonotonically related (inverted U) to sales performance per outlet, suggesting dynamic outlet expansion faces a trade-o¤ between business-stealing e¤ects within a chain ("cannibalization") and advertising e¤ects through repetition.

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“…Such stipulations usually include a franchise fee, which is a fixed amount paid at the beginning of the relationship, and regular commissions, which comprise royalties and advertising fees and are usually established as a percentage of the franchisee's sales (Caves & Murphy, 1976;Rubin, 1978). We are therefore discussing what is called a share contract.…”

Section: Financial Conditionsmentioning

confidence: 99%

Provisions to Be Negotiated in Franchise Contracts: The Case of Spanish Chains

Solís-Rodríguez¹,

González-Dı́az²

2016

JBAR

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This paper focuses on franchise contract design, identifying different provisions to be included in contracts and testing the contractual heterogeneity in the number of provisions across chains. Analyzing 74 Spanish franchise contracts, we identify 157 different provisions and document notable differences in contract design. Furthermore, we observe that franchise agreements are unbalanced: contracts cover franchisees' obligations more than franchisors' obligations. This asymmetry can be explained because franchise contract is the basic tool for the franchisor to attenuate franchisees' opportunism. However, franchisees may use alternative safeguards such as franchisor reputation. Finally, we also observe that there are provisions that modify others, changing their literal meaning. Given that such interactions have hardly been studied, more research is needed to measure how they modify parties' rights and obligations.

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Franchising: Firms, Markets, and Intangible Assets

Cited by 579 publications

References 9 publications

Agency and Compensation: Evidence from the Hotel Industry

Agency and Compensation: Evidence from the Hotel Industry

First-Mover Advantage Through Distribution: A Decomposition Approach

Provisions to Be Negotiated in Franchise Contracts: The Case of Spanish Chains

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