Article1993

Franchising, liquidity constraints and entry

104 citations0/0 files storedApplied Economics

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Franchising Strategies and Performance Merger and Competition Analysis Business Strategy and Innovation

Abstract

The short- and long-run incentives to franchise are considered. While monitoring problems due to geographic dispersion ensure that franchising is an efficient organizational form in the long run, entry costs suggest that franchising is an efficient solution to the formidable problems posed by entry in the short run. This explains the intensive use of franchising in the early growth stages, followed by a greater proportion of company-owned outlets as the system matures.

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References

1970The Market for "Lemons": Quality Uncertainty and the Market Mechanism 1987The Economic Institutions of Capitalism 1981Credit Rationing in Markets with Imperfect Information 1988Financing Constraints and Corporate Investment 1983Agency Problems and Residual Claims 1982Selection and the Evolution of Industry 1987Financing Constraints and Corporate Investment 1986The theory and practice of econometrics

Cited by

2002Size, growth rate and risk sharing as the determinants of propensity to franchise in chain restaurants 2010The franchising business model: an entrepreneurial growth alternative 1995Is franchising a capital structure issue?1998The use of franchising as a growth strategy by US restaurant franchisors 2010The Performance of Gatekeepers in Innovator Networks 2005Explaining franchisors’ choices of organization forms within franchise systems 2009Franchisor's ongoing support and franchisee's satisfaction: a case of ice cream franchising in Korea 1996Franchising, agency problems, and the cost of capital

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