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The effects of franchising on stores, competitors, and consumers

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  • Ackermann, Jeff

Abstract

Following a corporate acquisition, a casual dining chain sold all of its company-owned stores to franchisees. I exploit this change in franchise status to estimate the effects of franchising. I use a utility-based choice model to predict alcohol sales for all liquor-selling bars and restaurants in Texas over a 10-year period. Using this model, I find that franchising a restaurant increases its revenues by 7 percent. A substantial share of this revenue increase comes at the expense of competing national chains. I also find that franchising a store produces a consumer utility gain equal to the gain that would result from a 2.8-mile reduction in distance from the individual's home to the store.

Suggested Citation

  • Ackermann, Jeff, 2024. "The effects of franchising on stores, competitors, and consumers," International Journal of Industrial Organization, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:indorg:v:93:y:2024:i:c:s0167718724000109
    DOI: 10.1016/j.ijindorg.2024.103055
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    References listed on IDEAS

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