The role of contract, information
systems and norms in the
governance of franchise systems
Jacques Boulay
ESSCA School of Management, Angers, France
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.
Keywords Franchising, Contracts, Information systems, Governance,
Distribution channels and marketing
Paper type Research paper
Introduction
Franchise systems are characterized by the existence of information asymmetries, goal
conflicts and power games between channel members that can fuel the development of
opportunistic behaviour among franchisees. As in any channel relationship, such
behaviour can be detrimental to system performance. It also requires franchisors to
expend considerable resources on control and monitoring procedures (Kidwell et al.,
2007; Wathne and Heide, 2000; Joshi and Arnold, 1997).
To limit franchisees’ opportunistic behaviour, franchisors rely on two main types
of control: a “personal” type of control through franchise consultants or managers
who act as intermediaries between the franchisor and his franchisees and whose
missions are to motivate and monitor franchisees while providing information; a more
“impersonal” form of control through the enforcement of various control mechanisms
such as the franchise contractual agreement, the implementation of IS and the
The current issue and full text archive of this journal is available at
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IJRDM
38,9
662
Received July 2009
Revised March 2010
Accepted March 2010
International Journal of Retail &
Distribution Management
Vol. 38 No. 9, 2010
pp. 662-676
q Emerald Group Publishing Limited
0959-0552
DOI 10.1108/09590551011062420