Delegation and autonomy in franchising

Abstract

This article provides evidence on the determinants of delegation of decision rights in franchise relationships. We suggest that the franchisor chooses the level of delegation to leverage the intangible assets of the franchisees and the franchisor and, simultaneously, to preserve the value of the brand name. While the empirical literature on franchising has studied these effects separately, we consider them together in a model on decentralization. The results show that the franchisee’s autonomy varies negatively with the franchisor’s intangible assets and brand name and positively with the inter-firm trust and the franchisees’ intangible assets. Finally, autonomy also varies negatively with the specific investments of the franchisees.