Moral Hazar, Path Dependency, and Failing Franchisors: Mitigating Franchisee Risk through Participation

Journal article


Gant, J. and Buchan, J. 2019. Moral Hazar, Path Dependency, and Failing Franchisors: Mitigating Franchisee Risk through Participation. Federal Law Review. 47 (2), pp. 261-294. https://doi.org/10.1177/0067205X19831841
AuthorsGant, J. and Buchan, J.
Abstract

Employment relations are well understood. Business format franchising is a newer and rapidly evolving business expansion formula, also providing employment. This article compares the fates of employees and franchisees in their employer/franchisor insolvency. Whereas employees enjoy
protection, franchisees continue to operate in conditions that have been described as Feudal. We identify the inherence of moral hazard, path dependency and optimism bias as reasons for the failure of policies and corporations laws, globally, to adapt to the franchise relationship. This failure comes into sharp focus during a franchisor’s insolvency. We demonstrate that the models of participation available to employees in the United States, Australia and the United Kingdom could be used to inform a re-balancing of the franchisees’ relationship with administrators and liquidators during the insolvency of their franchisor, providing franchisees with rights and restoring their dignity.

Keywordsfranchising; employment; consultation; insolvency
Year2019
JournalFederal Law Review
Journal citation47 (2), pp. 261-294
PublisherSAGE Journals
ISSN0067-205X
Digital Object Identifier (DOI)https://doi.org/10.1177/0067205X19831841
Web address (URL)https://journals.sagepub.com/doi/full/10.1177/0067205X19831841
Accepted author manuscript
File Access Level
Open
Publication dates
Online01 Apr 2019
Publication process dates
Accepted2019
Deposited22 Apr 2022
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