Innovation and Authority in Franchise Systems: An Empirical Exploration of the Plural Form

The co-existence of franchised and company-owned stores influences the dynamic of innovation in franchise systems as well as the balance of power between franchisees and their chain. We report on case studies of five franchise system. We focus on how innovation and authority are interrelated in franchise systems, and we illustrate how a synergism exists between the franchised and company-owned sectors. We relate these finding to a theoretical model which predicts that franchisees will have moderate power when there are many company stores, and either very low or very high power when there are few company stores.