Multiple Choice
You are an owner of a popular restaurant chain,and you are thinking about franchising additional stores.Which of the following approaches would be best at controlling incentive conflicts?
A) Offer a fixed payment to the franchisee,and monitor the store? (issues of: shirking,adverse selection,and monitoring costs)
B) Let franchisee keep all profit above the franchise payment but do not monitor (must compensate agents for bearing risk)
C) Profit-sharing contract and conducting some monitoring (issue with some shirking and some risk compensation)
D) Mix of fixed payment and incentive compensation.
Correct Answer:
Verified
Correct Answer:
Verified
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