Time will tell: interaction effects of franchising percentages and age on franchisor mortality rates

  • Michael E. Dobbs
  • David J. Boggs
  • Marko Grünhagen
  • Laura Lucia Palacios
  • Richard L. Flight
Article

Abstract

Drawing from franchising and organizational ecology literatures, we hypothesize that franchising provides benefits to franchisors by addressing issues of adverse selection, moral hazard, holdup, obsolescence, and senescence. We assert that, over time, these benefits increase such that the more a franchise chain utilizes franchisees rather than company-owned outlets, the greater the franchising benefits accrue to the franchisor. We test our propositions by studying the mortality rates of 393 franchise organizations in the U.S. automotive products and services sector over the 21-year time period 1985–2005, using proportional hazard analysis. We find that older franchise chains with higher percentages of franchised units have lower mortality rates than older franchise chains with lower percentages of franchised units. We also find that younger franchise chains with higher percentages of franchised units have higher mortality rates than younger franchise chains with lower percentages of franchised units.

Keywords

Franchising Organizational ecology Mortality rates Automotive product and services sector 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Michael E. Dobbs
    • 1
  • David J. Boggs
    • 2
  • Marko Grünhagen
    • 3
  • Laura Lucia Palacios
    • 4
  • Richard L. Flight
    • 5
  1. 1.Eastern Illinois UniversityCharlestonUSA
  2. 2.Eastern Illinois UniversityCharlestonUSA
  3. 3.Eastern Illinois UniversityCharlestonUSA
  4. 4.Marketing DepartmentUniversidad de ZaragozaZaragozaSpain
  5. 5.Eastern Illinois UniversityCharlestonUSA

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