A Comparison of Retail Franchises, Independent Businesses, and Purchased Existing Independent Business Startups: Lessons From the Kauffman Firm Survey

Abstract

Franchising is a major economic powerhouse. Though research has been conducted on franchising from multi-disciplinary viewpoints, no study has compared retail franchises, independent businesses, and purchased existing independent businesses in the startup phase. This study utilized data from the U.S.-based Kauffman Foundation Firm Survey and examined major variables that would more likely influence survival-business type, ownership, owner-operator combinations, total revenue, labor intensity, profit and loss, and prior ownership experience. Our findings indicate that franchises differ considerably from new, independent businesses in most respects but are similar to purchased existing independent businesses. The overall results confirm prior findings that franchises have impediments that may affect their survival in the first year of operation and that some of the advantages of choosing a franchise over another form of business that have been sighted by the industry may not be completely valid.

KEYWORDS:

• business startups
• entrepreneurship
• firm survival
• franchising

Notes

Note. All chi-square comparisons are made to franchised businesses.

*p < .05; **p < .01; ***p < .001.

Note. All comparisons are made to franchised businesses.

***p < .001.

Certain data included herein are derived from the Kauffman Firm Survey confidential microdata release 4.0. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the Ewing Marion Kauffman Foundation.