The effects of franchising on stores, competitors, and consumers

Jeff Ackermann

International Journal of Industrial Organization, 2024, vol. 93, issue C

Abstract: Following a corporate acquisition, a casual dining chain sold all of its company-owned stores to franchisees. I exploit this change in franchise status to estimate the effects of franchising. I use a utility-based choice model to predict alcohol sales for all liquor-selling bars and restaurants in Texas over a 10-year period. Using this model, I find that franchising a restaurant increases its revenues by 7 percent. A substantial share of this revenue increase comes at the expense of competing national chains. I also find that franchising a store produces a consumer utility gain equal to the gain that would result from a 2.8-mile reduction in distance from the individual's home to the store.

Keywords: Franchising; Interfirm relationships; Industrial organization; Restaurants (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:93:y:2024:i:c:s0167718724000109

DOI: 10.1016/j.ijindorg.2024.103055

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