Firms Started As Franchises Have Lower Survival Rates Than Independent Small Business Startups

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Firms Started As Franchises Have Lower Survival Rates Than Independent Small Business Startups

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Timothy Bates

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Timothy M. Bates

Abstract

Aspiring entrepreneurs choosing to become franchisees certainly expect to improve their chances of survival during the turbulent early years of business startup and operation. Alignment with a franchiser parent company offers the franchisee managerial assistance, access to financial capital, and access to markets via the right to utilize the parent company trademark. This study examines survival patterns among franchise and nonfranchise small firms started between 1984 and 1987: survival through late 1991 is tracked for all firms. Although the franchise operations are larger scale, better capitalized young firms, the independent business startups are found to be more profitable and their survival prospects are better than those of franchises.

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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 94-3.

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Date of creation: May 1994
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Handle: RePEc:cen:wpaper:94-3

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Web page: http://www.ces.census.gov

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Rubin, Paul H, 1978. "The Theory of the Firm and the Structure of the Franchise Contract," Journal of Law & Economics, University of Chicago Press, vol. 21(1), pages 223-33, April.
Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
Alfred R Nucci, 1992. "The Characteristics of Business Owners Database," Working Papers 92-7, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
Norton, Seth W, 1988. "An Empirical Look at Franchising as an Organizational Form," Journal of Business, University of Chicago Press, vol. 61(2), pages 197-218, April. [Downloadable!] (restricted)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Michael Ollinger & Jorge Fernandez-Cornejo, 1995. "Innovation and Regulation in the Pesticide Industry," Working Papers 95-14, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]

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