The Franchise Owner's most trusted news source


Log In / Register | Apr 16, 2014

Gillian Hadfield: Value of Reputation Systems

Gillian K. Hadfield was an expert witness at the Ontario [Canada] public hearings in 2000. Her 1990 paper, Problematic Relations: Franchising and the Law of Incomplete Contracts remains as the gold standard of academic work in the field.

Professor Hadfield was a speaker at the 2001 American Franchisee Association's Franchisee Legal Symposium. Reputation mechanisms are the key. Please find below an excerpt from her testimony. The entire record can be found below.

They [government] can support the reputation mechanisms and can do that by supporting the flows of information, by allowing information to flow. It's important for the stories about what franchisors have done and what franchisees have experienced to be out there and available at low cost to potential franchisees, so that they can make judgments about what to do, because that's what provides the check on franchisor behaviour that will in the end probably be most effective. That's really what makes the reputation mechanism that says, "Look, a franchisor's not going to cheat their franchisees because they won't be able to sell franchises." For that to work, that information has to be flowing. That's what you want franchisors to be doing, is paying attention to that...

For example, I think there should be a real push for the government to make sure that information is flowing, that it's not made confidential by confidentiality agreements, that franchisees are protected against lawsuits in the event they talk about what's happened to them as franchisees.

...for example, by mandating participation in an Internet Web site that publicizes information about the experience of franchisees with particular franchisors, that prospective franchisees could then access in order to assess, just as they're assessing investment levels and how you've been in this, so that the information is there. At the end of the day, I think that's one of the most effective things we can do.

Note: [italics - my emphasis]

  • Gillian K. Hadfield, Expert Testimony, Legislative Assembly of Ontario, March 8, 2000

Les Stewart
FranchsieFool

No votes yet