The effect of franchising in the quick service restaurant (QSR) sector

초록

Franchising is employed more extensively in the quick service restaurant (QSR) industry than in any other sector. This study examines the effect of franchising on accounting performance, the value of firm, and operational risk based on existing theories (resource scarcity theory, agency theory, and risk sharing theory). The data for this study is derived from Compustat, using the North America Industrial Classification System (NAICS) code 722211 and the annual 10K of public traded companies. The study period covers 2000–2012. The results of the analysis indicate that franchising enhances accounting performance and the value of firms, though it does not reduce risk. Tobin’s Q shows inverted U-shape relation to franchising proportion, while financial risk has U-shape association to franchising proportion. The study results enable managers to make more informed franchising decisions

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