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Economic Sustainability in Franchising: A Model to Predict Franchisor Success or Failure

Author

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  • Esther Calderon-Monge

    (Department of Economics and Business Administration, University of Burgos, C/Parralillos, s/n, 09001 Burgos, Spain)

  • Ivan Pastor-Sanz

    (Department of Economics and Business Administration, University of Valladolid, Avda. Del Valle Esgueva, 6, 47011 Valladolid, Spain)

  • Pilar Huerta-Zavala

    (Department of Economics and Business Administration, University of Burgos, C/Parralillos, s/n, 09001 Burgos, Spain)

Abstract

As a business model, franchising makes a major contribution to gross domestic product (GDP). A model that predicts franchisor success or failure is therefore necessary to ensure economic sustainability. In this study, such a model was developed by applying Lasso regression to a sample of franchises operating between 2002 and 2013. For franchises with the highest likelihood of survival, the franchise fees and the ratio of company-owned to franchised outlets were suited to the age of the franchise. Surviving franchises were those that opened franchised outlets at a sustainable pace, increased the franchise fee as intangible assets increased, and effectively managed profitability and efficiency.

Suggested Citation

  • Esther Calderon-Monge & Ivan Pastor-Sanz & Pilar Huerta-Zavala, 2017. "Economic Sustainability in Franchising: A Model to Predict Franchisor Success or Failure," Sustainability, MDPI, vol. 9(8), pages 1-16, August.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:8:p:1419-:d:107916
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    References listed on IDEAS

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    5. Bertrand, Jean-Louis & Brusset, Xavier & Chabot, Miia, 2021. "Protecting franchise chains against weather risk: A design science approach," Journal of Business Research, Elsevier, vol. 125(C), pages 187-200.
    6. Doo-Young Park & Kanghwa Choi & Dae-Han Kang, 2020. "Measuring the Meta Efficiency and Its Determinants on Efficiency in the Korean Coffee Shop Franchise," Sustainability, MDPI, vol. 12(6), pages 1-20, March.
    7. Baresa, Suzana & Ivanovic, Zoran & Bogdan, Sinisa, 2017. "Franchise Business As A Generator Of Development In Central Europe," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 8(3), pages 281-293.
    8. Cai, Ya-Jun & Chen, Yue & Siqin, Tana & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Pay upfront or pay later? Fixed royal payment in sustainable fashion brand franchising," International Journal of Production Economics, Elsevier, vol. 214(C), pages 95-105.

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