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Franchise failure: a reassessment of the Bates (1995) results


  • Gary Castrogiovanni


  • Robert Justis



Franchising is often touted as a safe route to business ownership in the service arena. Yet findings by Bates (J Small Bus Manage 33(2):26–36, 1995 ) suggest that franchising may be a riskier alternative for prospective business owners than starting a non-franchised business. We contend that this conclusion is inappropriate because flaws in Bates’ study lend themselves to alternative interpretations of his results. The most critical flaws and plausible alternative interpretations are explained, and implications for prospective business owners are discussed. Copyright Springer-Verlag 2007

Suggested Citation

  • Gary Castrogiovanni & Robert Justis, 2007. "Franchise failure: a reassessment of the Bates (1995) results," Service Business, Springer;Pan-Pacific Business Association, vol. 1(3), pages 247-256, September.
  • Handle: RePEc:spr:svcbiz:v:1:y:2007:i:3:p:247-256
    DOI: 10.1007/s11628-007-0023-1

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    References listed on IDEAS

    1. Bates, Timothy, 1998. "Survival patterns among newcomers to franchising," Journal of Business Venturing, Elsevier, vol. 13(2), pages 113-130, March.
    2. Holmberg, Stevan R. & Morgan, Kathryn Boe, 2003. "Franchise turnover and failure: New research and perspectives," Journal of Business Venturing, Elsevier, vol. 18(3), pages 403-418, May.
    3. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    4. Alfred R Nucci & Timothy Bates, 1990. "An Analysis of Small Business Size and Rate of Discontinuance," Working Papers 90-2, Center for Economic Studies, U.S. Census Bureau.
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    Cited by:

    1. Richard S. Brown, 2017. "Franchisor market power and control rights in franchise systems: the case of Major League Baseball versus the Los Angeles Dodgers," Service Business, Springer;Pan-Pacific Business Association, vol. 11(1), pages 1-21, March.
    2. José Ramírez-Hurtado & Flor Guerrero-Casas & Francisco Rondán-Cataluña, 2011. "Criteria used in the selection of franchisees: an application in the service industry," Service Business, Springer;Pan-Pacific Business Association, vol. 5(1), pages 47-67, March.

    More about this item


    Franchising; Small business; Failure; Survival; Risk;


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