Principal Agent Blog

I witness this from afar from a friend who takes money from investors to build out restaurants and other foodservice businesses. This man takes his investors money to give them a return, and hence he is their agent. In addition, he is the chosen master franchisor for several foodservice brands, which makes him their agent as well. The main business expects from him a well operated store, the investors expect from him a decent return on their money.

The two will not always see eye to eye on the goals they have for the business. For example, a store may be running operationally well yet the initial investment was overcalculated- giving investors a bad return but giving the franchise company a good store. There are often ways, however, to resolving issues with both. If the agent makes great money from a store, it is hard to see a scenario where he wouldn't satisfy both principals. I believe that the principal agent model in this scenario is much more complex. It takes a much higher level of responsibility to have your career dependent on two principals, rather than say having one employer and one set of expectations to achieve.