RADIUS RESTRICTION AND FIRMS' SURVIVAL: EVIDENCE FROM THE COFFEE FRANCHISE INDUSTRY

Yun Jeong Choi, Jee Young Kim and Min Hee You

Contemporary Economic Policy, 2020, vol. 38, issue 3, 496-514

Abstract: This study investigates the effects of distance restrictions on Korean coffee shops' survival. Restrictions were implemented by South Korea's Fair Trade Commission to limit the headquarters' opening of new shops to protect franchisees' territorial rights. Using extended Cox proportional hazard regression analyses, we find that the hazard rates of all coffee shops decreased significantly under the radius restriction, with more substantial decreases for young stores, attenuating over store ages. However, selective restrictions on five big brands influencing interbrand competition might have changed the coffee franchise industry's landscape and thereby widening the gap between exempted brand coffee shops and the rest. (JEL D22, L40, L66)

Date: 2020
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