Unravelling the Evidence on Franchise System Survivability

Abstract

The underlying hypothesis behind the evidence presented here - some of it drawn from earlier literature and some of it previously unpublished - is that franchise system survival patterns largely mirror those of conventional small businesses, with high attrition rates in the formative years, rather than being a sure-fire recipe for success with low system failure rates. After all, the majority of new franchise systems are in fact themselves small businesses, obliged to construct a front-end infrastructure of managerial support some years ahead of achieving full financial break-even point. In effect, given the demands placed upon an infant franchise system to finance and manage the processes of franchisee recruitment and all that entails, plus induction and field support for franchisees, the new franchise company is, in effect, developing the management and administrative structures normally associated with a medium-sized business, without the income levels normally associated with this scale of business. F...