The Plural Form in Franchising: A Synergism of Market and Hierarchy

In a plural form, two or more organisational arrangements possess a synergism when used simultaneously. For example, rather than specialising, many chains contain a large proportion of both franchised and company-owned stores. By franchising some stores while they own others, franchise systems can achieve dynamic efficiency that would be impossible in a homogenous system. Chains value their franchisees because franchisees exercise initiative. However, unless a chain includes a sufficiently high proportion of company stores, it lacks proper incentives to evaluate innovations efficiently. Therefore, despite the dynamism of franchises, a chain must maintain a certain proportion of company stores.