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Franchise Contract Regulations and Local Market Structure

Charles Murry () and Peter Newberry

Journal of Law and Economics, 2022, vol. 65, issue 1, 105 - 130

Abstract: Many US states have regulations that restrict the ability of franchisors to terminate franchise contracts. We estimate the economic effects of these regulations with a focus on how they impact market structure. Using data from the quick-service restaurant industry, we find that implementing franchise regulations results in 4–5 percent fewer establishments in the average county. Our results imply that franchise regulation leads to increased concentration in a large number of markets, as the number of counties in the bottom quartile of concentration would increase by between 12 percent and 15 percent with regulation.

Date: 2022
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Handle: RePEc:ucp:jlawec:doi:10.1086/717159