Examining Control and Autonomy in the Franchisor-Franchisee Relationship

Abstract

This article examines the franchisor-franchisee relationship from two theoretical perspectives - agency theory and exchange theory. Taking the case of the fast-food industry in Israel, the research focuses on control and autonomy in a domestic hamburger chain - Burger Ranch - and two international chains - McDonald's and Burger King. The findings led to the design of a model that illustrates several aspects, such as the concept of franchising, the size and age of the chain, and the range of the contract, that relate to control and autonomy. The combination of agency theory and exchange theory enables us to focus on control and autonomy as multidimensional concepts, and to present various possibilities for judiciously balancing them. The case indicates that in some respects (e.g. master franchisee), the two global chains are more similar to each other than to the domestic chain. However, in other respects (e.g. size, growth rate), the domestic and one of the two global chains show more similarities than differences. The findings indicate different forms of integration of control and autonomy in the three chains.