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Network uniformity and risk of reclassification of the franchise contract

Rozenn Perrigot (Graduate School of Management, University of Rennes 1, Rennes, France; ESC Rennes School of Business, Rennes, France and Center for Research in Economics and Management (CREM CNRS), Rennes, France)
Guy Basset (Graduate School of Management, University of Rennes 1, Rennes, France and IGA School of Management, Casablanca, Morocco)
Danièle Briand (Faculty of Law and Political Science, University of Rennes 1, Rennes, France)
Gérard Cliquet (Graduate School of Management, University of Rennes 1, Rennes, France)

International Journal of Retail & Distribution Management

ISSN: 0959-0552

Article publication date: 7 October 2014

767

Abstract

Purpose

Network uniformity is crucial in franchising, but an excessive number of imposed constraints to maintain this uniformity jeopardizes a franchisee’s independence and too much independence given to franchisees jeopardizes franchise network uniformity. So, how to find an equilibrium and avoid the reclassification of a franchise contract as a branch manager contract or as an employment contract with all its related consequences? The paper aims to discuss these issues.

Design/methodology/approach

The research is based on a multiple cases approach. The four complementary cases deal with Yves Rocher (cosmetics and body/face care), Bata (shoes), Fiventis (real estate, life insurance and tax-sheltered savings products), and France Acheminement (express transportation), all analyzed in the French context.

Findings

A franchise contract can be reclassified as a branch manager contract if there is economic dependence or as an employment contract if there is a legal subordination relationship. These reclassifications have not only financial consequences, but also an impact in terms of image.

Research limitations/implications

The research is based on secondary data. Collecting data along with interviews of franchisors and franchisees would be beneficial.

Practical implications

The research is of specific interest to franchisors, franchise experts and lawyers in terms of minimizing the possible risks of facing such types of reclassification of franchise contracts. It can also inform franchisees who may be running their businesses under such conditions.

Originality/value

This paper uses a business and law approach in order to analyze the paradox of network uniformity and franchisee autonomy and raises the question of “how to find equilibrium?”

Keywords

Acknowledgements

The authors sincerely acknowledge France’s National Research Agency (reference: ANR-12-BSH1-0011-01 – ANR FRANBLE) and Human Sciences Institute in Brittany (reference: MSHB-FRANNET), as well as the sponsors of the Center in Franchising, Retail & Service Chains for their valuable support.

Citation

Perrigot, R., Basset, G., Briand, D. and Cliquet, G. (2014), "Network uniformity and risk of reclassification of the franchise contract", International Journal of Retail & Distribution Management, Vol. 42 No. 10, pp. 884-901. https://doi.org/10.1108/IJRDM-06-2013-0129

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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