Complementarities in organizational design of franchising networks

Abstract

This study investigates complementarities between components of the organizational design of franchising networks. We examine three components of governance, rarely distinguished as such in previous studies involving franchising: Allocation of decision rights, performance measurement and incentives. We also analyze interdependencies between these variables. In particular, interdependencies seem more evident between the incentive system and the allocation of decision rights to franchisees, and between the incentive system and performance measurement. We also provide evidence of the role of three franchisee characteristics in franchising’s organizational design: Multi-unit ownership, age of the relationship, and geographic distance. Implications for chain management are provided.