TY  - JOUR
AU  - Lafontaine,Francine
AU  - Raynaud,Emmanuel
TI  - The Role of Residual Claims and Self-Enforcement in Franchise Contracting
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8868
PY  - 2002
Y2  - March 2002
UR  - http://www.nber.org/papers/w8868
L1  - http://www.nber.org/papers/w8868.pdf
N1  - Author contact info:
Francine Lafontaine
Ross School of Business
University of Michigan
701 Tappan Street
Ann Arbor, MI  48109
Tel: 734/647-4915
Fax: 734/936-0279
E-Mail: LAF@UMICH.EDU

Emmanuel Raynaud
University of Paris, Pantheon-Sorbonne
E-Mail: emmanuel.raynaud@agroparistech.fr
AB  - Much of the economic literature on franchising has been concerned with incentive issues and how these are managed in franchised contracts.  Two main types of incentive mechanisms have been identified: residual claims and self enforcement.  In this paper we describe these incentive mechanisms, and their use in franchise contracts.  We argue that although these two types of mechanisms are usually thought of as alternative ways to align franchisee and franchisor incentives, they are in fact complementary in franchise contracts because they address different incentive problems.  We explore what these incentive problems are, and then describe specifically how franchise contract terms and practices support each type of incentive mechanism.  Finally, we discuss briefly, via two examples, how our analysis also applies to non-franchised systems with common marks or other reputation concerns.
ER  -