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The impact of franchising on the financial performance of small firms

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Abstract

The objective of this study was to examine the relationship between form of ownership (independent vs. franchise) and financial performance of a select group of small, mature firms. MANOVA and ANOVA tests failed to identify significant performance differences. Recommendations for future research studies are mentioned.

Venturing into a small business is risky. Approximately 400,000 small businesses fail each year (The State of Small Business 1986). A conservative estimate of the failure rate of start-up firms in their first 5 years is close to 65% (Hodgetts 1982). Between one-quarter to one-third fail in their first year of operation (Small Business Reporter 1986). However, many would-be entrepreneurs minimize their business risk by purchasing a franchise rather than starting from scratch. In contrast, only about 2.5% of franchise-owned outlets discontinue operations per year, many for reasons other than economic (“Franchising is Management for Success” 1986).

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  1. Arizona State University, Arizona, USA

    Jeffrey S. Bracker & Joh N. Pearson

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  1. Jeffrey S. Bracker
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  2. Joh N. Pearson
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Bracker, J.S., Pearson, J.N. The impact of franchising on the financial performance of small firms. JAMS 14, 10–17 (1986). https://doi.org/10.1007/BF02721811

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