The organizational learning dynamics inherent in the franchise relationship provide the primary focus for this research. By encoding knowledge of the skills needed to suceed within the contractual arrangement, the franchisor can short cut the learning process for the franchisee. Once the franchising arrangement is established, both franchisees and franchisors have vested interest in maintaining high levels of organizational learning. In this research a model is presented that incorporates these learning dynamics, and relates them to entrepreneurial returns. Using a sample of heavy-duty truck franchisees, the relationship between different types of organizational learning and performance are explored. The results indicate that the franchising contract may actually act to limit the returns to the franchise relationship. Instead, it may encourage the franchisee to direct their learning efforts to skew returns in their favor. Successful franchisees were found to systematically value the franchise contractual and non-contractual information content more than less successful franchisees.
