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Multi-unit franchise system performance: An organizational economics analysis

Abstract:

Previous studies have not examined the performance of multi-unit franchise systems. The paper addresses this research gap by investigating franchisor performance of multi-unit franchise system from an organizational economics perspective by using data from Germany and Switzerland. According to the agency theory they show that under a strong brand name free-riding risk may be reduced through MUF and hence MUF positively influences the performance the systems. In addition, the data support the transaction cost hypothesis that environment uncertainty is negatively related to the performance of MUF systems. Furthermore, using property rights theory, they show that intangible local market assets are negatively and intangible system-specific assets are positively associated with MUF performance. Finally, the results indicate that decentralization of decision making has a positive performance effect on MUF systems.