Franchising

Abstract

Franchising is a contractual business arrangement between franchisor and franchisees that combines efficient back‐office operations provided by a franchisor with effective customer‐facing activities managed by the individual franchisee. It is considered a hybrid form of organization and is believed to evolve over time. Franchisees are considered entrepreneurs that run their own business and have certain rights, notably, the right to set their own prices. Franchise systems often employ a multi unit franchising strategy and operate as so‐called plural form. A key managerial challenge for franchise systems is to balance tight control of franchisees with allowing them sufficient autonomy to capitalize on their local knowledge and entrepreneurial motivation.