The Analysis Of Franchise In The Point Of Institutional Change View

Franchise is an inter-firm between enterprise and market. Franchiser and franchisee build a kind of contractual relationship through franchise contract. Through the franchise contract, they arrange the organizational right and structure. Franchise ownership of the two sides is separated. The headquarters of franchise don't have the ownership of franchisee and give franchisee the whole revenue based on the separate ownership. Because of the separate ownership, the two sides is in the state of the market; and to the outside, the franchise system is a whole and has a unified corporate image while the operating right should be concentrated in the headquarters, at this time it is an enterprise. In this way, franchise successfully realizes the combination of enterprise and market and become a new type of organizational arrangements—inter-firm.With its unique advantages franchise developed very rapidly in the 20th century. In the 21st century there are many new forms. Correspondingly, theoretical study of franchise is also increasingly sophisticated. However, because of the imperfect institutions, the development of franchise faces many problems. Therefore, it is very necessary to research the emergence, development and subsequent changing direction of franchise and to give theoretical explanations and guidelines from the view of institutional change. Based on the introduction of a number of fundamental assumptions of economics, this paper introduces the theoretical framework of North's institutional change, including property right theory, state theory, ideology theory and path-dependence characteristic. This paper applies the theoretical framework to the analysis of franchise. The main bodies of franchise institutional changes are franchiser and franchisee. Driven by the new profit, low-cost and low-risk, they continuously push the changes in franchise, design and improve clear arrangements of property right and an effective incentive mechanism. The franchise contract is a link between franchiser and franchisee. On the basis of defined ownership, franchisee is responsible for the operation and has the absolute right of revenue. Franchisee could receive all the remaining profits, so as to solve the problems of internal proxy, supervising and incentive. With the expansion of franchise systems, stores more and more, its unit costs and additional costs will decline, therefore the franchise can more easily access to the benefits of scale economy. This drives franchise continuous self-reinforcing, showing the path-dependence characteristic. With chain operations and proxy comparison, the franchise has unique institutional advantages.After the introduction of franchise to China, its development is extremely rapid, at the same time there are a lot of problems, such as benefit disputes between franchiser and franchisee, non-standard operation and management, lagged relevant legal supply, and so on. According to experiences of franchise development and practices of foreign government management, this paper gives many institutional designs to solve the problems of Chinese franchise, so institution could realize re-innovation and promote franchise to develop healthily.