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Franchisors'choice between royalties and fixed fees evidence from Brazil

Author

Listed:
  • Eugênio José Silva Bitti

    (School of Economics, Business Administration and Accounting University of São Paulo, Brazil Av. Bandeirantes 3900 - Monte Alegre – CEP 14040-905 Ribeirão Preto - SP)

  • Cintya Lanchimba

    (Escuela Politécnica Nacional, Ecuador Ladron de Guevera E11-253, Quito 170517, Ecuador)

  • Muriel Fadairo

    (Univ Lyon, UJM Saint-Etienne, GATE L-SE UMR 5824, F-42023 Saint- Etienne, France)

Abstract

In franchise contracts, the royalty rate and the fixed entrance fee are the main monetary clauses defining the payment scheme between the franchisor and the franchisee. In the traditional agency view, the presence of distant outlets leads the franchisor to choose a payment mechanism designed to provide incentives to the franchisee; that is, a low royalty rate associated with a high fixed fee. Based on a unique panel dataset, we provide evidence that, in the Brazilian context, spatial dispersion has the opposite impact, with interesting practical and research implications.

Suggested Citation

  • Eugênio José Silva Bitti & Cintya Lanchimba & Muriel Fadairo, 2017. "Franchisors'choice between royalties and fixed fees evidence from Brazil," Working Papers 1731, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:1731
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    contract design; brand strategy; agency theory; distance;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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