Are the parents to blame? Predicting franchisee failure. Issue 2 (16th March 2015)

• Record Type: Journal Article
• Authors: Alon, Ilan; Boulanger, Michèle; Misati, Everlyne; Madanoglu, Melih
• Is Part Of: Competitiveness review. Volume 25:Issue 2(2015)
• Page Start: 205
• Page End: 217
• Publication Date: 2015-03-16
• Subjects: Franchising -- Failure -- Predictive analytics -- Small business financing; Competition -- Periodicals; Competition, International -- Periodicals; Competition -- United States -- Periodicals; United States -- Economic policy -- 1981- -- Periodicals; United States -- Commercial policy -- Periodicals; 338.604805
• DOI: 10.1108/CR-10-2014-0034
• Languages: English
• ISSNs: 1059-5422

Abstract

Abstract : Purpose: – The purpose of this study is to show how franchisor characteristics influence franchisee failure. To achieve this aim, we developed a heuristic model using the methodology and power of predictive analytics. Design/methodology/approach: – The authors use data from the World Franchising Council's and from the Small Business Administration (SBA). The data cover 271 diverse USA franchise chains that are present in both databases. Findings: – The model predicts potential defaults of SBA-backed loans issued to American franchisees, and the authors identify 13 variables that help explain franchisee failure. Practical implications: – The authors offer guidance for stakeholder groups – lenders, franchisors and franchisees – to minimize the risk of lending and business failure. Originality/value: – The paper contributes to the franchising literature by considering parent firms' characteristics to predict franchisee failure.