The evolution of ownership patterns in franchise systems

Abstract

Two sets of competing theories have been proposed to explain the existence of franchising; one set based on resource constraints and another on incentives issues. As individual franchise systems mature, these theories predict different patterns in the evolution of the mix of franchised and company-owned outlets. In this paper, we report the results of an empirical study of franchise system evolution. The findings generally support the incentives-based rationale for franchising, but they also support a modified resource constraint theory, one which recognizes the synergistic effects of dual distribution.