The Economics of Franchising
Cambridge University Press, Apr 11, 2005 - Business & Economics - 350 pages
This 2005 book describes in much detail both how and why franchising works. It also analyses the economic tensions that contribute to conflict in the franchisor-franchisee relationship. The treatment includes a great deal of empirical evidence on franchising, its importance in various segments of the economy, the terms of franchise contracts and what we know about how all these have evolved over time, especially in the US market. A good many myths are dispelled in the process. The economic analysis of the franchisor-franchisee relationship begins with the observation that for franchisors, franchising is a contractual alternative to vertical integration. Subsequently, the tensions that arise between a franchisor and its franchisees, who in fact are owners of independent businesses, are examined in turn. In particular the authors discuss issues related to product quality control, tying arrangements, pricing, location and territories, advertising, and termination and renewals.
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advertising fees antitrust average Baskin-Robbins Blair brand Burger King business-format franchising Chapter chisees chisors company-owned competitive consumers court customers dealers decisions demand develop distribution Domino’s Pizza duration earn economic encroachment established example exclusive territories exit fast-food firm’s firms fran franchise agreement franchise contract franchise licenses franchise opportunities franchise relationship franchise system franchised chains franchised outlets franchised units franchisee’s franchisors and franchisees growth incentive increase inputs investment issue Journal Kaufmann Kodak Lafontaine Little Caesar Enterprises marginal cost market power maximize maximum resale price McDonald’s moral hazard non-renewal number of franchisors operate optimal output owners ownership payments percent period potential profit maximizing profits proportion purchase renewal requirements resale price maintenance restaurant retail royalty rates sales revenue sectors sell Specifically successive monopoly Table termination trademark traditional franchising tying U.S. Census Bureau USDOC vertical integration