The effect of franchising on debt maturity in the US restaurant industry

Abstract

With franchising as an efficient means of growth and expansion, this study aims to explore how franchising can influence corporate debt maturity structure in the US restaurant industry. The purpose of this study is to investigate (1) the effect of franchising on debt maturity structure, (2) the relationship between leverage and short-term debt, and (3) the moderating effect of franchising on the relationship between short debt maturity and leverage in the US restaurant industry. Analyzing panel data on publicly traded US restaurant firms, this study showed that franchising could be an important determinant of the maturity structure of corporate debt. Empirical evidence suggests that restaurant firms pursuing growth and expansion through franchising should take into consideration the effect of franchising on the debt maturity structure when making capital structure decisions.