Abstract
Ensuring the effectiveness of the franchise system relies on establishing an optimal contractual relationship between the franchisor and the franchisee, which can be achieved through an optimal franchise fee structure. Previous theoretical models have emphasized the franchisors’ role in determining the franchise fee; however, empirical evidence has yielded inconclusive results, due to overlooking industry heterogeneity and using inadequate measures of franchisors’ effort. This study aims to empirically validate the relationship between franchisors’ efforts and franchise fees, specifically focusing on the restaurant industry based on its unique characteristics, including a relatively low average royalty rate and high financial risks. The study’s findings suggest that, unlike other industries, restaurant franchisors actively offer operational and financial support to increase the gross royalty rate. The motivation behind this support may be the insufficiency of ongoing fees in the restaurant industry to generate profits and the relatively high financial risk faced by restaurant franchisees.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
