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Economic Sustainability in Franchising: A Model to Predict Franchisor Success or Failure

Esther Monge, Ivan Pastor-Sanz () and Pilar Huerta-Zavala ()
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Ivan Pastor-Sanz: Department of Economics and Business Administration, University of Valladolid, Avda. Del Valle Esgueva, 6, 47011 Valladolid, Spain
Pilar Huerta-Zavala: Department of Economics and Business Administration, University of Burgos, C/Parralillos, s/n, 09001 Burgos, Spain

Sustainability, 2017, vol. 9, issue 8, 1-16

Abstract: As a business model, franchising makes a major contribution to gross domestic product (GDP). A model that predicts franchisor success or failure is therefore necessary to ensure economic sustainability. In this study, such a model was developed by applying Lasso regression to a sample of franchises operating between 2002 and 2013. For franchises with the highest likelihood of survival, the franchise fees and the ratio of company-owned to franchised outlets were suited to the age of the franchise. Surviving franchises were those that opened franchised outlets at a sustainable pace, increased the franchise fee as intangible assets increased, and effectively managed profitability and efficiency.

Keywords: franchise; survival; economic sustainability; Lasso regression model; Spain (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:gam:jsusta:v:9:y:2017:i:8:p:1419-:d:107916