Managing asymmetry in franchise contracts: transparency as the overriding rule

Abstract

Purpose

The aim of this article is to provide solutions to protect the weaker party in management and distribution contracts, especially in the field of franchising.

Design/methodology/ approach

The paper is based on a review of literature, legislation and practices concerning management and franchise contracts. The regulation of this field at a national level consists of laws that are both private and mandatory in nature. Certain questions are raised concerning the obligatory nature of regulations when applied to the management of international franchise contracts.

Findings

This article studies the question of whether the imperative application of laws to international contract management is appropriate. These contracts are concluded through the form of adhesion contracts, which have been prewritten by the dominant party and by which the adherent, the distributor, the franchisee or the agent, are placed in a weaker legal position. Considering the absence of international tuitive rules, this article suggests a way to guarantee the protection of parties in a weaker position.

Practical implications

This research provides entrepreneurs, managers and other members of the business community with legal tools and mechanisms for the protection of the franchisee's position.

Originality/value

This approach may well be helpful in finding solutions to legal issues that are of great importance in the negotiation of service contracts, as a way to overcome the difficulty of finding solid arguments to extend the rules that protect consumers and workers in service agreements.

Citation

Lapiedra, R., Palau, F. and Reig, I. (2012), "Managing asymmetry in franchise contracts: transparency as the overriding rule", Management Decision, Vol. 50 No. 8, pp. 1488-1499. https://doi.org/10.1108/00251741211262042