Abstract. The aim of this article is to emphasize the major contribution of franchise, as hybrid institutional arrangement and governance structure, on the mechanism of sustainable development. Transaction costs illustrate a permanent obstacle which hinders healthy, long-term development. Using the theoretical tools of the New Institutional Economics we admit that, placed between the market and the firm, mixed governance structures are able to limit all these costs. Among them, franchise is the closest to the optimal model. Considering its profound social and economic valences franchise might be considered a vector of sustainable development.

Keywords: franchise, transaction costs, governance structure, sustainable development.