publication . Article . 1994

Adoption, Transfers, and Incentives in a Franchise Network with Positive Externalities

Barrie R. Nault; Albert S. Dexter;
Open Access
  • Published: 01 Jan 1994 Journal: Marketing Science, volume 13, pages 412-423 (issn: 0732-2399, eissn: 1526-548X, Copyright policy)
  • Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
Abstract
We study franchise arrangements that allow franchisees with exclusive territories to own their customers. This permits franchisees to benefit from positive externalities in the franchise network through interfranchise transfers based on the purchases by their customers at other franchises on the network. Using the structure of a single franchisor and many franchisees, we show that, in general, interfranchise transfers between franchisees and incentives for franchisee investment in the expansion of their customer base are critical both to the size and to the benefits derived from the franchise network. Specifically, we find that when individual franchisees make i...
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Subjects
free text keywords: Marketing, Business and International Management, channels of distribution, pricing research, Economics, Externality, Customer base, Network size, Microeconomics, Customer relationship management, business.industry, business, Incentive, Franchise, Profit (economics)
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