Purposeful franchising: Re-thinking of franchising rationale

Abstract

Despite the rapid adoption of the franchising concept, there is still a lack of understanding and a consensus on the theoretical determinant and creation of this business strategy. For the past four decades, the agency theory has been popularly used to explain the foundation of franchising. The paper concludes that there is a limitation in using the agency theory to explain the fundamental of franchising. The franchising phenomenon is not a simple array. The complete understanding of franchising practice may require an explanation involving more than one theory.