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Family Ties that B(l)ind: Do Family-Owned Franchisees Have Lower Financial Performance than Nonfamily-Owned Franchisees?

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  • Patel, Pankaj C.
  • Kim, Kyoung Yong
  • Devaraj, Srikant
  • Li, Mingxiang

Abstract

Over the past three decades, franchisee performance has attracted the attention of scholars in both retailing and entrepreneurship. However, to date, research has not investigated whether the type of franchisee ownership influences franchisee financial performance. Family ownership, the most dominant form of firm organization worldwide, ingrains greater focus on noneconomic goals that could, in turn, reduce the financial performance of a family-owned franchisee. Drawing on the tenets of agency theory undergirding the franchising and family business literature, we examine whether family-owned franchisees have lower financial performance than nonfamily-owned franchisees. Using data from the 2007 Small Business Owner survey and propensity score matching, we observed that family franchisees generated at least 6.7% lower sales per employee than nonfamily franchisees. The inferences are consistent across two additional samples and robust to additional performance outcomes and specifications. Overall, this research provides a novel empirical examination of the influence of family ownership on franchisee financial performance and has managerial implications for both franchisors and franchisees.

Suggested Citation

  • Patel, Pankaj C. & Kim, Kyoung Yong & Devaraj, Srikant & Li, Mingxiang, 2018. "Family Ties that B(l)ind: Do Family-Owned Franchisees Have Lower Financial Performance than Nonfamily-Owned Franchisees?," Journal of Retailing, Elsevier, vol. 94(2), pages 231-245.
    • Handle: RePEc:eee:jouret:v:94:y:2018:i:2:p:231-245
    DOI: 10.1016/j.jretai.2017.12.001
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