Determinants of contractual restraints in franchise contracting

Abstract

Although an efficient design of franchise contracts requires from the franchisor to choose a bundle of contractual restraints as safeguarding and control mechanism, previous research has not explored the antecedents of contractual restraints as a bundle of contractual clauses. To address this gap, the aim of this study is to explain the determinants of the most important contractual restraints (i.e., exclusive dealing, exclusive territory, tying, resale price maintenance, call option, leasing, alienation, and noncompetition clauses), using transaction cost and relational governance reasoning. The regression results based on primary data from German and Swiss franchise systems provide support of hypotheses.