Multi-Unit Franchising and Relational Governance: A Study of Operating Networks in Brazil

Abstract

The relationship between relational governance mechanisms and multi-unit franchising, where a single franchisee owns and operates multiple units, has received limited attention in the existing literature. Previous studies primarily focus on the role of trust in such arrangements. Consequently, this study aims to develop and test a theoretical model that explores the association between a higher allocation of units to this type of franchisee and key attributes of relational governance, such as participation and communication. Adopting the franchisors’ perspective, our sample consists of 170 networks affiliated with the Brazilian Franchising Association (Associação Brasileira de Franchising [ABF]), and data were collected from various sources, including a self-administered questionnaire (based on data from 2018). The results provide support for our general hypothesis, indicating a positive association between relational aspects of the franchisor-franchisee partnership and a higher proportion of units owned by multi-unit franchisees. Additionally, we find that the operational sector (retail/service) and specific local investments diminish the explanatory power of the model’s variables related to relational governance, suggesting a secondary influence on the decision-making process concerning the contractual mix.