Protecting franchise chains against weather risk: A design science approach (2021)
Journal of Business Research 125:187-200
Jean-Louis Bertrand, Xavier Brusset, Miia Chabot
Summary
Franchisees are often small business owners whose sales, profitability and financial balance in the early years of business are increasingly affected by weather variability.
The literature has analyzed the effectiveness of the various guarantees offered by franchisors in franchise contracts, but the case of coverage of local weather risk to which each franchisee is exposed has never been addressed.
Using design science, we show that franchisors operating in one of the top 70% weather-risk industries can support franchise setup, measure their weather risk, and incorporate financial protections against the consequences of adverse weather into the franchise agreement.
In doing so, they can reduce the risk of financial distress, provide an innovative service and strengthen the quality of the relationship with their franchisees.