THE INFLUENCE OF CAPITAL STRUCTURE ON THE GOVERNANCE AND PERFORMANCE OF COMPANIES IN THE FRANCHISE SECTOR
DOI:
https://doi.org/10.56238/levv16n55-043Keywords:
Capital Structure, Corporate Governance, Franchising, Brand Control, Organizational PerformanceAbstract
This conceptual article proposes a model that integrates the capital structure literature with hybrid governance in franchise networks. Drawing on pecking order, trade-off, and agency theories, it argues that debt is not merely a financial decision, but a governance mechanism that affects brand control and the mix between company-owned and franchised units. The model suggests an inverted U-shaped relationship between leverage and performance: moderate levels of debt discipline resource use, align incentives, and strengthen governance practices, whereas extreme levels increase operational and reputational risk. This dynamic is moderated by two central franchising governance constructs—brand control and ownership mix. The article also presents testable hypotheses and outlines empirical strategies to assess the model across sectors, discussing managerial implications for franchisors.
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