The impact of franchising on the financial performance of small firms

Journal of the Academy of Marketing Science · 1986 · Volume 14 · Issue 4

Abstract

The objective of this study was to examine the relationship between form of ownership (independent vs. franchise) and financial performance of a select group of small, mature firms. MANOVA and ANOVA tests failed to identify significant performance differences. Recommendations for future research studies are mentioned.Venturing into a small business is risky. Approximately 400,000 small businesses fail each year (The State of Small Business 1986). A conservative estimate of the failure rate of start-up firms in their first 5 years is close to 65% (Hodgetts 1982). Between one-quarter to one-third fail in their first year of operation (Small Business Reporter 1986). However, many would-be entrepreneurs minimize their business risk by purchasing a franchise rather than starting from scratch. In contrast, only about 2.5% of franchise-owned outlets discontinue operations per year, many for reasons other than economic (“Franchising is Management for Success” 1986).

Keywords

Small Business, Financial Performance, Small Firm, Small Business Owner, Independent Firm

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