This study examines the ownership structure of restaurant franchising by
comparing and contrasting capital market and agency explanations. The primary
emphasis is placed on evaluation of these competing theories based on empirical
data related to the major determinants of ownership structure that concerns
restaurant franchising systems. Comprehensive data from specific individual restau
rant franchisors are used in this study. In contrast to previous conjectures made in
hospitality literature, this study finds that the choice of organizational form (company
ownership versus franchising) is largely influenced by agency costs.
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