Monitoring Policy and Organizational Forms in Franchised Chains

33 Pages Posted: 21 May 2009

See all articles by Thierry Pénard

Thierry Pénard

Université de Rennes 1 - Faculte de Sciences Economiques; Armorican Mole for Research on the Information Society and Uses of the Internet; Centre de Recherche en Économie et Management (CREM)

Emmanuel Raynaud

INRA SADAPT and Centre ATOM (U. of Paris I)

Stéphane Saussier

IAE - University of Paris I Sorbonne

Date Written: May 21, 2009

Abstract

One recurring theme that emerges from empirical studies on franchising is the coexistence of franchised and company-owned units within the same chain. This paper supports the idea that mixed chains or dual distributions are efficient organizations when both the behavior of managers and the nature of local markets are costly to observe. We also show that partial monitoring, i.e. when the franchisor monitors only a subset of its outlets, represents an optimal monitoring policy. Finally, we discuss the impact of information technologies and outlet location on monitoring policy and how it may affect the proportion of franchised and company-owned units within the mixed chains.

Keywords: dual distribution, franchising, monitoring, asymmetric information

JEL Classification: D23, L14, L22

Suggested Citation

Pénard, Thierry and Raynaud, Emmanuel and Saussier, Stephane, Monitoring Policy and Organizational Forms in Franchised Chains (May 21, 2009). Available at SSRN: https://ssrn.com/abstract=1408166 or http://dx.doi.org/10.2139/ssrn.1408166

Thierry Pénard

Université de Rennes 1 - Faculte de Sciences Economiques ( email )

7, Place Hoche
35000 Rennes
France

Armorican Mole for Research on the Information Society and Uses of the Internet ( email )

France

Centre de Recherche en Économie et Management (CREM) ( email )

7 place Hoche
Rennes, Bretagne 35065
France

Emmanuel Raynaud

INRA SADAPT and Centre ATOM (U. of Paris I) ( email )

16 rue Claude Bernard
75231, Paris cedex 05
France

Stephane Saussier (Contact Author)

IAE - University of Paris I Sorbonne ( email )

21, Rue Broca
Paris, 75005
France

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