The commonly held idea that large franchise chains are more likely to survive than smaller chains is not always the case, according to a Research Brief from the Cornell Center for Hospitality Research (CHR). The Research Brief, entitled “Age, Size, and Survival and Growth of Franchise Chains,” explains that large firms that are relatively young and perhaps have grown too fast are more likely to fail than older large chains.
In addition to its series of full research reports, CHR also summarizes hospitality studies of interest that are published in academic journals. This Research Brief is based on a full study, “Survival and Growth in Retail and Service Industries: Evidence from Franchised Chains,” by Renáta Kosová and Francine Lafontaine, which appears in the Journal of Industrial Economics.
For their study, Kosová and Lafontaine analyzed the growth and survival of 5,044 franchise chains across different service industries. They found that chains seem to have a size limit, which the researchers interpret as demonstrating consumers’ desire for diversity. Thus, the world’s largest restaurant chains, for example, have been able to continue growing through product diversity, rather than just by adding more outlets.
About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 78 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit www.chr.cornell.edu.
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