The role of contract, information systems and norms in the governance of franchise systems

Abstract

Purpose

The purpose of this paper is to consider how different governance mechanisms affect the level of franchisees' compliance with their franchisor's directives. The research objectives are threefold: to investigate how franchisors can use explicit contracts and develop relational norms as governance mechanisms to prevent their franchisees from deviating from the franchise system directives; to show how information systems allow to control franchisees at a distance; and to throw light on the ways in which these three control mechanisms can play alternatively or simultaneously in the management of franchise relationships.

Design/methodology/approach

The paper takes the form of a multiple regression analysis with interaction effects of survey data collected from franchisees of various French franchise systems.

Findings

Overall, the results support an emphasis on contract and information systems in the management of the risks of “free riding” behaviour in franchise systems. The results indicate that formal control mechanisms are more efficient in the management of franchise systems whereas relational norms are less so. The results do not reveal that all combinations of control mechanisms are more efficient in disciplining agents. Recommendations will be used by franchisors to implement an effective control strategy.

Research limitations/implications

Future research should focus on replicating the findings using a contingency perspective. Cross‐cultural studies should also be carried out.

Originality/value

This paper applies to the governance of franchise relationships a research framework that validates the role of explicit contracts and information systems in the management of franchise systems.

Citation

Boulay, J. (2010), "The role of contract, information systems and norms in the governance of franchise systems", International Journal of Retail & Distribution Management, Vol. 38 No. 9, pp. 662-676. https://doi.org/10.1108/09590551011062420