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The Effect of Contract Regulation on Franchising

Author

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  • Jonathan Klick
  • Bruce H. Kobayashi
  • Larry E. Ribstein

Abstract

Previous work on the regulation of termination clauses in franchise contracts has ignored the ability of parties to contract around state law. Using data on two national fast-food restaurants, we find that Washington, D.C.'s termination restriction which did not restrict choice-of-law provisions had little systematic effect on business practice, while Iowa's termination restriction which did prohibit choice-of-law provisions had a large negative effect on franchising.

Suggested Citation

  • Jonathan Klick & Bruce H. Kobayashi & Larry E. Ribstein, 2012. "The Effect of Contract Regulation on Franchising," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 38-53, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201203)168:1_38:teocro_2.0.tx_2-s
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    References listed on IDEAS

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    1. Theodore Eisenberg, 2012. "Methodological Issues in the Analysis of Longitudinal Data," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 54-57, March.
    2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(2), pages 238-249, April.
    3. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    4. Brickley, James A & Dark, Frederick H & Weisbach, Michael S, 1991. "The Economic Effects of Franchise Termination Laws," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 101-132, April.
    5. Brickley, James A, 1999. "Incentive Conflicts and Contractual Restraints: Evidence from Franchising," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 745-774, October.
    6. Timothy G. Conley & Christopher R. Taber, 2011. "Inference with "Difference in Differences" with a Small Number of Policy Changes," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 113-125, February.
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    Citations

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    Cited by:

    1. Andreas Roider, 2012. "The Effect of Contract Regulation on Franchising," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 58-61, March.
    2. Theodore Eisenberg, 2012. "Methodological Issues in the Analysis of Longitudinal Data," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 54-57.
    3. Charles Murry & Peter Newberry, 2022. "Franchise Contract Regulations and Local Market Structure," Journal of Law and Economics, University of Chicago Press, vol. 65(1), pages 105-130.
    4. Christoph Engel & Urs Schweizer, 2012. "Testing Contracts 29th International Seminar on the New Institutional Economics June 15-18, 2011, Krakow, Poland," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 1-4, March.

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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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