Using franchise data, we identify that entrepreneurial characteristics of franchisees partially
impact on their opportunistic tendencies. Further, relational contracting increases franchisee
opportunism by strengthening the opportunism-enhancing impact of entrepreneurial characteristics.
These findings point to a key dilemma franchisors need to be aware of: Entrepreneurially
minded franchisees who might be better at exploiting market opportunities for their units may also
behave more opportunistically, if given the chance through a more relational contracting regime.
At the same time, if they perceive the contractual framework as being too rigid, they may be less
able to leverage their capabilities, become dissatisfied, and exit the system.