Proportion of Franchised Outlets and Franchise System Performance

Abstract

This article explores how the proportion of franchised outlets in franchise systems influences two performance outcomes of these systems: the growth in sales per outlet and the proportion of outlets discontinued. It was found that franchise systems whose proportions of franchised outlets are misaligned according to agency theory show a higher proportion of outlets discontinued and lower growth in sales per outlet than their better aligned counterparts.

ACKNOWLEDGEMENTS

The author thanks numerous workshop participants for their comments and suggestions. He is solely responsible for any errors or omissions. This study received financial support from MCYT, a research agency of the Spanish government, through grants SEC2001-1756, SEC2002-04471-C02-02 and SEJ2004-03888/ECON.