Franchising typically refers to contractual relationships between legally independent firms, where one firm pays the other for the right to operate under the latter’s brand, or sell its product, in a given location and time period. Franchised firms account for a large portion of commerce in the United States and around the world. The economics literature on franchising has focused mostly on why and how firms franchise, emphasizing incentive or opportunism issues on the part of franchisees and franchisors to explain various aspects of the relationships. Empirical findings have confirmed the importance of such issues in shaping these contractual relationships.
KeywordsAntitrust Business-format and traditional franchising Chain structures Contract enforcement Franchising Industrial organization Principal and agent Risk Royalties Sharecropping Vertical integration
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