Motivations for sub-franchising in the restaurant industry: An empirical examination

Yae Sock Roh, William P. Andrew

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

The purpose of this research is to examine why certain restaurant franchisors utilize sub-franchising agreements while others do not. The research tests capital market, agency, and brand name capital explanations for the existence of sub-franchising in the restaurant industry. Proxies for measuring the franchisor’s use of the capital markets, agency costs, and brand name capital are developed and described. Logit analysis is employed to examine the relationship between these factors and the use of sub-franchising. The empirical results are mixed. The results support the use of sub-franchising when the costs of monitoring franchisees are high and when franchisors wish to overcome weak brand name capital. The research found no evidence to support use of sub-franchising as an alternate to raising equity capital.

Original languageEnglish
Pages (from-to)59-75
Number of pages17
JournalJournal of Hospitality Financial Management
Volume7
Issue number1
DOIs
StatePublished - 1999

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