Variation in management control system design in terms of the customization of service provision: an analysis of franchise contracts

The aim of this research project is to investigate how inter-organizational management control system design varies with the degree of service customization offered to the end customers involved. More specifically, we will focus on franchisor-franchisee relationships to gain insights into how service customization impacts on the way in which franchisors control the relationship with their franchisees. For our analysis, we will gather as many franchise contracts as possible from chains offering services with varying levels of customization. These contracts will then be coded and analyzed in terms of the delegation of decision rights, monitoring, incentives and input control. We aim to understand whether franchising chains offering highly customized services (as opposed to the ones offering rather uncustomized services) delegate more decision rights to their service units, engage more in outcome monitoring than in behavior monitoring, and pay significantly more attention to personnel control.

Keywords:Franchising, Contract design, Customized services

Disciplines:Applied economics not elsewhere classified