The Governance Research of Franchising Based on Organizational Delegation

Franchising has been proved to be a successful commercial pattern in practice, but research on this form of network organization is still behind of practice. This paper first summarizes existing literature on franchising and points out that these theories are based on GHM model. The distribution of the power in the GHM model is based on physical assets. The critical resources in franchising are intangible assets, such as brand, so the GHM model as the basis of the research on franchising obviously has limitations. This paper, based on the R-Z model, begins by analyzing externality issues of specific investments in franchising, then constructs a framework for the analysis of the governance of franchising. We show that three different governance patterns are corresponding to three kinds of situations respectively: internal delegation, external delegation and dual delegation, which will provide the governance of franchising with appropriate theoretical foundations.