Abstract
This study examines whether franchisees are less likely to default on loans compared to counterpart independent SMEs. Findings from analyses of SME loan defaults between 2001 and 2015 suggest that franchisees, young and old, were just as likely to default than non-franchisee counterparts. The likelihood of loan default is higher for franchisees than for non-franchisees for those with high debt burdens. While default rates vary by sector, these findings are robust to sector-specific estimations and alternative time horizons of default. Findings suggest that the benefits of the franchising model, such as new firms acquiring the franchisors’ brand name, do not necessarily lead to lower default rates for franchisees. Overall, this study finds evidence questioning the proposition that franchising is a relatively less risky form of business organization for prospective entrepreneurs.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.