Franchise relationship quality: micro‐economic explanations

Abstract

Examines the behavioural implications of the three main micro‐economic explanations – resource constraint, agency theory and search cost theory – for franchising. Reviews these theories, along with the empirical evidence found to support them. Highlights the implications of each explanation upon relational quality using four relational characteristics drawn from Macneil. Uses the characteristics of power balance, anticipation of trouble, sense of unity and presentation of costs and benefits. Argues that since the motivation to franchise depends upon the specific strategy employed by the franchisor, then relational quality will legitimately differ according to franchisor strategy. Describes a model drawn by linking strategic direction, franchise motivation and relational quality. Some illustrative propositions are derived from the model. Discusses the implications of the theory for both researchers and managers.