Purpose – This study seeks to find out the factors affecting the performance of franchisees from the franchisor's and franchise's intangible assets. In order to explain the process, this study explores the concept of LMX, Relational Capital, and Decision Rights Delegation. Research design, data, and methodology – To verify the proposed hypotheses, a questionnaire survey was conducted for franchise store owners, and to test the hypotheses, structural equation modeling was established. Results – First, franchisor’s intangible assets affect the quality of LMX, but don’t affect the relational capital. And the quality of LMX affects the relational capital. In addition, "the effect of delegation of decision rights on relational capital" and "the effect of relational capital on franchisee’s performance" were significant. However, the effect of delegation of decision rights on franchisee’s performance wasn’t significant. Second, the intangible assets of the franchise have a positive effect on the quality of the LMX and the degree of delegation of decision rights, and the quality of the LMX has a positive effect on the delegation of decision rights. Conclusions – This study would suggest operational implications for the formation of vertical and horizontal relationships and the cooperation between the main members of the franchise business.


Franchise Industry, Franchisor, Franchisee, Intangible Asset, Leader-Member eXchange(LMX), Relational Capital, Decision Rights Delegation.