Franchisee-Franchisor Relationship in Saudi Arabia: Agency Theory Perspective

Abstract

This study investigates the interactions between franchisees and franchisors in Saudi Arabia by applying agency theory, considering challenges, control issues, and factors such as trust, satisfaction, and conflict. Information from 105 franchisees across different industries was studied with IBM SPSS software, using frequency distribution and Chi-Square tests. The findings reveal important challenges related to how much control franchisees have, trust in their franchisors, and the openness of information. Despite these concerns, the study did not discover any strong statistical relationships between trust and satisfaction, control and conflict, or the alignment of goals and satisfaction. The results indicate that financial stability, strong operational support, and legal protections play a bigger role in franchisee experiences than the traditional factors of agency theory. The research advises franchisors to be more open, provide flexible financial terms, and grant franchisees more control over their marketing and daily operations. It also asks government officials to improve the rules for franchising and make dispute resolution fairer to help maintain fair franchise agreements. More qualitative research and studies in different industries are required to better understand the growth of franchises in Saudi Arabia.