Learning, contractual capabilities, and contract duration changes in franchise networks

Abstract

Research has shown that although franchise contract duration tends to be stable, it does change from time to time; yet few studies have focused on such changes in contract duration. We propose hypotheses regarding changes in contract duration based on transaction cost theory and learning arguments, and test these hypotheses using panel data from the French Franchise Federation for the period 2009–2017. The results show that the issue of control remains central to the adjustment of contract duration. We also demonstrate that experienced franchisors tend to adjust the contract duration more frequently. These results point to a conception of learning that goes beyond simple foresight, and refers instead to the routines used in the management of the network.