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

• Main Authors: Esther Calderon-Monge, Ivan Pastor-Sanz, Pilar Huerta-Zavala
• Format: Article
• Language: English
• Published: MDPI AG 2017-08-01
• Series: Sustainability
• Subjects: franchise; survival; economic sustainability; Lasso regression model; Spain
• Online Access: https://www.mdpi.com/2071-1050/9/8/1419

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.