Franchising During Times of Economic Recession: A Longitudinal Analysis of Automotive Service Franchises

Abstract

This study sheds light on how franchise companies weather periods of recession versus growth periods, based on firm-specific factors in contrast to exogenous influences over a 21-year period. Specifically, the analysis focuses on the 1984–2004 time period of franchise businesses in the automotive services sector, compiled from the Franchise Annual from 1985 through 2005. In contrast to previous studies, this investigation examines a period of 21 years, including three distinct periods of economic expansion and two periods of economic contraction. The most significant finding of this exploratory study is that generalist-type franchise systems (i.e., those that offer a broad range of automotive services) tend to have greater longevity than specialists during periods of economic recession. A related significant finding is that the number of services offered by franchisors expands and contracts in a counter-cyclical manner relative to broad economic indicators.

KEYWORDS:

• automotive services
• economy
• franchising
• longitudinal
• recession

Acknowledgments

The authors gratefully acknowledge the assistance of Ms. Monica Rogoz and Ms. Ivana Milošević in the data collection process.

Notes

Note. N = 393.

Note. N = 393.

Note. N = 393.

^a Transportation Energy Data Book (2009).

^b National Bureau of Economic Research (2009).

Note. N = 393.

Note. Figures in parentheses denote levels of significance.