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Analysis of firm-specific, country-specific and sectoral determinants of international franchise survival

Abstract:

Franchising is a major part of the worldwide economy. Different factors at the firm and country levels simultaneously influence franchising survival, including location and governance. The purpose of this study is to holistically view the factors that affect franchisors’ survival. This study examines factors that affect franchisors’ survival in emerging and developed countries in different economic sectors by comparing data from Latin American and European countries between 2009 and 2017. Using survival analysis modelling, the results show that franchisors that enter many years after the first franchisor in the host country have higher hazard rates (franchisor’s failure probability). This finding is based on the fact that compared with late entrants, franchisors that enter the market earlier are more likely to gain brand loyalty, and advantages from the early registration of their brand, which allows them to survive longer. Franchise survival increases as the host country’s economic, institutional, infrastructure and technology factors improve. Implications are discussed.