Explaining franchisors’ choices of organization forms within franchise systems

When franchisors pursue different priorities, different agency problems become relevant, which drive the franchisors’ choices among various franchising organization forms. We use archival and key informant data from a multi-industry sample of 94 franchisors to examine franchisors’ choices of organization forms based on their goals for growth, uniformity and local responsiveness. Our results indicate that franchisors emphasizing high growth are more likely to use multi-unit rather than single-unit franchising and, within the multi-unit franchising form, they are more likely to use area development franchising than incremental franchising. Franchisors emphasizing uniformity instead of growth are more likely to use area development franchising, but those emphasizing local responsiveness are more likely to use incremental franchising. We discuss the implications of these results for franchising research and practice.