The Use of Franchising by U.S.‐Based Retailers

The question of whether to franchise or to own has received much research interest in recent years. Two popular approaches used to explain the proportion of franchising (PF) in the franchisor's system are resource‐scarcity and agency theories. This study combines both theories to explain the proportion of franchised outlets in the U.S. retailing sector between 1990 and 1997. The findings show mixed results with regard to both previous studies and hypothesized relationships. The study shows that the proportion of franchising used by retailers is positively related to size (number of outlets) and geographical scope, and negatively related to the rate of growth and the level of investment. Age and royalty rates are not found to be significant to the proportion of franchising.

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