The choice of organizational form The case of franchising
We examine companies that franchise some units and centrally operate (‘own’) others. The agency problems confronting these two organizational forms are analyzed. Testable hypotheses are developed. The empirical results support the notion that owning versus franchising reflects a trade-off among agency-related problems. The cost of monitoring store managers appears to be especially important in the own/franchise decision. The level of repeat business and initial investment requirements per unit also appear to be important.