Brighter prospects? Assessing the franchise advantage using census data

Lafontaine, F, Zapletal, M and Zhang, X (2019) Brighter prospects? Assessing the franchise advantage using census data. Journal of Economics and Management Strategy, 28 (2). pp. 175-197.

Abstract

This paper uses Census micro data to examine how starting a business as a franchise rather than an independent business affects its survival and growth prospects. We assess factors that influence the decision to become a franchisee and use various empirical approaches to correct for selection bias in our performance analyses. We find that franchised businesses on average exhibit higher survival rates than independent businesses, but importantly, the difference is small compared to claims in the trade press. The effect is also short lived: conditional on surviving a year or two, we no longer find survival (or growth) differences. We then explore two potential sources for this small survival advantage, namely franchisors’ screening process and the benefits arising from the brand and business know-how provided by franchisors. We find evidence that both of the sources contribute to the franchising advantage.

More Details

Item Type: Article
Subject Areas: Marketing
Additional Information: This is the peer reviewed version of the following article: Lafontaine F, Zapletal M, Zhang X. Brighter prospects? Assessing the franchise advantage using census data. J Econ Manage Strat. 2018;1–23, which has been published in final form at https://doi.org/10.1111/jems.12289. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
Subjects: E > Entrepreneurs
F > Franchising
R > Retailing
B > Business cycles
Date Deposited: 12 Oct 2018 08:42
Last Modified: 14 Jul 2019 15:41
URI: http://lbsresearch.london.edu/id/eprint/1003
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