Efficiency analysis of small franchise enterprises through a DEA metafrontier model

Abstract

Spain has over 1000 franchises with more than 65,700 establishments in a wide range of economic sectors and a global turnover of over €19,000 million (2011). These figures confirm the importance of franchises in the Spanish economy. Consequently, an understanding of the economic and technical efficiency of franchises can help managers to optimise resources and take correct decisions. Traditional efficiency models require that the units being assessed operate with the same technology. As franchises reach many different sectors (travel agencies, catering companies, fashion firms, etc.) their relative efficiency is analysed using a non-concave metafrontier approach, which is based on data envelopment analysis. This methodology enables a comparison between different groups and takes into account any heterogeneity between the franchise firms of several sectors.

Keywords:

• small services
• franchises
• data envelopment analysis
• metafrontier
• non-homogeneous technology

Notes

Classification by CNAE (Clasificación Nacional de Actividades Económicas) 2009.

This figure has not taken into account firms without assets or with negative own resources.

Transport, education, and information and communication are sectors with few franchises.

The called ‘Cooper rule’ (Charnes & Cooper, 1990) establishes that the number of units (franchise firms in this case) should be between 1.5 and twice the number of variables selected (number of inputs plus outputs). For this reason, the study does not analyse the efficiency of very small groups of firms.

Except motor vehicles and motorbikes.

The scores have been obtained from an efficiency analysis with a DEA BCC model, which supposes variable return to scale between the variables. We used DEA-SOLVER PRO.

Firms which have obtained a score equal 1 from the efficiency analysis.

The maximum value of TGR is one.