Manifest Conflict and Conflict Aftermath in Franchise Systems: A 10‐Year Examination

Conflict within interorganizational relationships has been demonstrated to impair the mechanisms by which cooperation results in mutually beneficial outcomes for partners. The focus of this research is upon the landmark legal battle that occurred within the Meineke franchise organization in the 1990s—a case that includes a potentially devastating demonstration of manifest conflict encompassing overtly opportunistic behavior, contentious class‐action litigation, and a demoralizing reversal of a half‐billon dollar verdict. In a study spanning a 10‐year period within the Meineke organization, the effects of conflict on franchisee satisfaction and compliance are revealed to be long‐lasting and substantial. Using path analysis and mediation tests, we examine both the immediate and long‐term impacts of manifest conflict on channel partner perceptions. We find that episodes of manifest conflict can, through the increased salience of this conflict, have long‐lasting negative impacts on franchisee satisfaction with the relationship and willingness to comply with franchisor regulations, even when the original conflict was remediated in a manner that yielded highly positive outcomes to the aggrieved parties. As a result, our study provides unique and valuable insights to the understanding of franchises and other forms of interorganizational relationships.