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Firms Started As Franchises Have Lower Survival Rates Than Independent Small Business Startups

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  • Timothy Bates

Abstract

Aspiring entrepreneurs choosing to become franchisees certainly expect to improve their chances of survival during the turbulent early years of business startup and operation. Alignment with a franchiser parent company offers the franchisee managerial assistance, access to financial capital, and access to markets via the right to utilize the parent company trademark. This study examines survival patterns among franchise and nonfranchise small firms started between 1984 and 1987: survival through late 1991 is tracked for all firms. Although the franchise operations are larger scale, better capitalized young firms, the independent business startups are found to be more profitable and their survival prospects are better than those of franchises.

Suggested Citation

  • Timothy Bates, 1994. "Firms Started As Franchises Have Lower Survival Rates Than Independent Small Business Startups," Working Papers 94-3, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:94-3
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    File URL: https://www2.census.gov/ces/wp/1994/CES-WP-94-03.pdf
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    References listed on IDEAS

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    3. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    4. Rubin, Paul H, 1978. "The Theory of the Firm and the Structure of the Franchise Contract," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 223-233, April.
    5. Alfred R Nucci, 1992. "The Characteristics of Business Owners Database," Working Papers 92-7, Center for Economic Studies, U.S. Census Bureau.
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    Cited by:

    1. Ollinger, Michael & Fernandez-Cornejo, Jorge, 1998. "Innovation and Regulation in the Pesticide Industry," Agricultural and Resource Economics Review, Cambridge University Press, vol. 27(1), pages 15-27, April.

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