Personality Traits of the Partners and Performance in the Franchise Agreement

Abstract

Franchising is a form of entrepreneurship in which the franchisor identifies and exploits market opportunities and takes risks by starting businesses within the franchise. The franchise is governed by a contractual relationship between the franchisor (entrepreneur) and franchisee. Franchisees are responsible for spreading the franchisor’s business idea throughout the market. This chapter describes the franchisor’s and franchisee’s personality traits, which act as determinants of the success of the business idea. Knowledge of the franchisor’s personality traits helps potential franchisees select franchise brands with which to establish formal contractual relationships. Similarly, knowledge of franchisees’ personality traits helps franchisors select suitable candidates, preventing the agency relationship between franchisor and franchisee from being violated and safeguarding against opportunistic behaviour. The chapter offers a review of research discussing the applications of psychology to franchising as a form of entrepreneurship and thus identifies the main psychological traits required of franchisors and franchisees to ensure franchise success.