Franchise firm entry time influence on long‐term survival

Abstract

Purpose

This paper aims to examine whether there is evidence of pioneering advantage in long‐term survival terms in the particular context of franchising.

Design/methodology/approach

Data covering 188 franchise chains for an eight‐year period (from 1995 to 2003), operating in restoration and fashion retailing sector are used. The Cox proportional hazard model is used to examine survival. The existence of pioneering advantage is tested in the Spanish context because its franchising sector is one of the most developed in Europe, along with those of France, the UK and Germany.

Findings

Empirical evidence of pioneering advantage was found. Early entry strategy leads to lower failure risk. Different strategies are highlighted according to different entry time moments, suggesting a moderating role of the entry timing decision. Additional variables influence survival such as previous experience or dual distribution.

Research limitations/implications

The paper has some limitations. The focus is just on one country. Therefore, a multi‐country study could help to generalize the results. Furthermore, the research could be improved by adding variables of the specific franchise context such as the franchise fee or the royalty rates.

Practical implications

The results may help franchisors to improve their survival, adapting their strategies to be more competitive in the market. Depending on their entry timing decisions, they can have different strategies to continue in the market. Pioneers differ from late entrants in terms of ownership structure and system size – two main aspects for survival. Moreover, the paper can help the prospective franchisee in making a better selection of franchise chain in which to invest. Findings support the idea that entering at the early stages of the franchise industry brings some advantages.

Originality/value

The paper highlights the importance of the entry‐timing decision in the franchising context using survival as performance. This objective has not been underlined in previous research.

Citation

Bordonaba Juste, V., Lucia‐Palacios, L. and Polo‐Redondo, Y. (2009), "Franchise firm entry time influence on long‐term survival", International Journal of Retail & Distribution Management, Vol. 37 No. 2, pp. 106-125. https://doi.org/10.1108/09590550910934263