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Journal Article

Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry

Alan B. Krueger
The Quarterly Journal of Economics
Vol. 106, No. 1 (Feb., 1991), pp. 75-101
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2937907
Page Count: 27
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Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry
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Abstract

This paper estimates the difference in compensation between company-owned and franchisee-owned fast food restaurants. The contrast is of interest because contractual arrangements give managers of company-owned outlets less of an incentive to monitor and supervise employees. Estimates based on two data sets suggest that employee compensation is slightly greater at company-owned outlets than at franchisee-owned outlets. The earnings gap is 9 percent for assistant and shift managers and 2 percent for full-time crew workers. Furthermore, the tenure-earnings profile is steeper at company-owned restaurants. These findings suggest that monitoring difficulties influence the timing and generosity of compensation.

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