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Who should own it? An agency-based explanation for multi-outlet ownership and co-location in plural form franchising

Authors

  • Alexa A. Perryman,

    1. Neeley School of Business, Texas Christian University, Fort Worth, Texas, U.S.A.
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  • James G. Combs

    Corresponding author
    1. Culverhouse College of Commerce and Business Administration, The University of Alabama, Tuscaloosa, Alabama, U.S.A.
    • Department of Management and Marketing, Culverhouse College of Commerce and Business Administration, The University of Alabama, Tuscaloosa, AL 35487-0225, U.S.A.
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Abstract

Plural forms exist when managers use two owners to perform one activity. Franchising is a plural form explained by agency theory, however, the theory is unable to explain two franchisor actions: 1) allowing franchisees to own multiple outlets and 2) co-locating company-owned and franchised outlets. We use research that describes a symbiosis between company-owned and franchised outlets to extend agency theory and explain these actions. Our investigation of ownership patterns among 4,339 outlets of 16 plural form franchisors is consistent with our theory that multi-outlet franchising is cost efficient and that co-location occurs when franchisors fill market gaps left by franchisees. Copyright © 2011 John Wiley & Sons, Ltd.

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