Frontiers of Entrepreneurship Research
1996 Edition


AN EXAMINATION OF THE EFFECTS OF EXIT AND SWITCHING COSTS ON TRADE MARK VALUATION AND FRANCHISEE SATISFACTION

 

Stephen Spinelli, Babson College

Sue Birley, Imperial College


Introduction
Exit Costs, Trade Mark Valuation and Conflict in Franchising
Methodology

Table 1: Perceived Exit Costs

Results
Factor Analysis of Exit Cost Variables
Perceived Balance Sheet and Market Values of the Trade Mark

Table 2: Factor Analysis of Perceived Exit Variables (4 factors extracted)
Table 3: Balance Sheet and Market Valuations

Exit Cost as an Antecedent of Conflict
Exit Costs Predictors of Conflict in Franchising

Table 4: Exit Costs Which Correlate to Conflict Cluster Membership

Summary
References


ABSTRACT

Franchising plays a significant role in the development and expansion of businesses in the United States and increasingly throughout the world. The trade mark represents the manifestations of key strategic tasks embodied in the relationship between the franchisee and franchisor. Much of the small body of franchise literature and the popular press relate anecdotal evidence of conflict between the franchisee and franchisor. Therefore, it is important to understand the issues which bind the franchisee and franchisor. Utilizing both relational exchange and transaction cost theories, this study proposes that the nature and extent of exit and switching costs, as perceived by the franchisee, represent a surrogate for trade mark valuation and thus impact franchisee satisfaction. Managing the issues and tasks which the franchisees believe build trade mark value and/or bind the relationship with the franchisor can have an important effect on both the franchisor and franchisee firms’ development of policy and its strategic implementation. Our research question asks: Do exit and switching costs as perceived by the franchisee, reflect trade mark valuation and influence inter-organizational conflict?

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1997 Babson College All Rights Reserved
Last Updated 2/9/97 by Geoff Goldman

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