Abstract
Chain organization has become the most prevalent form of the restaurant industry. Facing asymmetric information, however, many chains encounter difficulties in monitoring chain store managers who serve different markets. A proper incentive scheme for store managers must be designed to solve the agency problem. However, measuring performance is a critical element of any incentive system. Thus, this study examined the appropriate performance measures of assessing the performance of a store manager. Results revealed that emphasizing quality-related performance measures of assessing store managers produces significant effects on chain growth. Furthermore, placing greater emphasis on quality-related performance measures produces a greater effect on chain growth if the operation can be easily standardized. Contrary to the negative effect of stock-based compensation, bonus-based compensation could strengthen the positive relationship between quality-related performance measures and chain growth. The alignment among quality-related performance measures, operation standardization, and reward modes was considered crucial for managing restaurant chains.
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