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Determinants of Multi-unit Franchising: An Organizational Economics Framework


Correspondence to: ESC Rennes School of Business, France. E-mail:


In this paper, we use organizational economics theories to explain the percentage of multi-unit franchisees within franchise chains. We use transaction cost theory, property rights view and agency theory to formulate three research hypotheses that are related to franchisees' transaction-specific investments, intangibility of system-specific assets and risk of franchisee free-riding, respectively. These hypotheses are tested in the French franchising context by using a sample of 138 franchisors. The empirical results are largely supportive of the hypotheses. We extend the franchising literature by arguing that the explanation of the franchisor's use of multi-unit franchising requires the combined application of different theoretical perspectives. Copyright © 2012 John Wiley & Sons, Ltd.