Optimal Monetary Provisions in Plural Form Franchise Systems; A Theoretical Model of Incentives with Two Risk-Averse Agents

Empirical studies show that most franchise chains use dual distribution - or a plural form franchise system - characterized by the coexistence of franchised units and company- owned retail units in the same distribution network. Therefore, this paper focuses on dual distribution and considers the di fferent contractual arrangements in this type of franchise system. The paper contributes to the theoretical eff orts at developing a model to study the optimal determination of the share parameters (commission and royalty rates) in a mixed system.