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Multi-unit Ownership in Franchising: Evidence from the Fast-Food Industry in Texas

Author

Listed:
  • Arturs Kalnins

    (University of Southern California)

  • Francine Lafontaine

    (University of Michigan)

Abstract

Using data on all restaurants opened in Texas between 1980 and 1995 by seven large U.S. fast-food chains, we examine the extent of multi-unit ownership among franchisees and analyze how franchisors allocate the ownership of new units. We show that franchisees with nearby units are much more likely to be assigned ownership of a new unit. Further, controlling for distance, franchisees are more likely to obtain a new unit whose market is contiguous and demographically similar to those surrounding their existing units. Finally, franchisors use these same criteria to select those units to retain as company owned.

Suggested Citation

  • Arturs Kalnins & Francine Lafontaine, 2004. "Multi-unit Ownership in Franchising: Evidence from the Fast-Food Industry in Texas," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 747-761, Winter.
    • Handle: RePEc:rje:randje:v:35:y:2004:4:p:747-761
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    More about this item

    Keywords

    Transactional Relationships; Contracts and Reputation; Networks Sports; Gambling; Recreation; Tourism Franchising; Restaurants;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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