The impact of regulatory oversight
on franchisor-franchisee conflict, however, remains unclear. Relying on
agency theory arguments, the authors first assess the influence of the
regulatory context, both by itself and in combination with the franchise
ownership structure, on the incidence of litigated conflict. Conditional on
litigation, they also predict the impact of franchise regulation on both the
parties' litigation initiation and resolution choices and the resulting
outcomes. The authors test the hypotheses using a unique multisource
archival database of 411 instances of litigation across 75 franchise
systems observed over 17 years. The results indicate that the regulatory
context, by itself as well as in combination with the franchise ownership
structure, significantly shapes parties' conflict management choices. The
authors also find evidence of a trade-off between prevailing in the
particular conflict and achieving franchise system growth objectives.