Ownership structure in franchising: the effects of transaction costs, production costs and strategic considerations

Abstract

This paper explores the determinants of ownership structure in business-format franchising from the perspective of an expanded economizing framework that builds on transaction cost analysis. It is hypothesized that variations in ownership structure in franchising are affected by transaction costs productions costs and strategic considerations. Based on a sample of 179 franchises in the United States, results suggest that strategic considerations are important, and production costs are at least as influential as transaction costs in explaining observed patterns of ownership structure in franchising.