How does franchising alter competition in the restaurant industry?

Abstract

As business environments become more competitive, making it more difficult for firms to survive, it is important to understand how a firm's strategic actions affect the firm's competitiveness. The franchising strategy is a significant and representative strategic action in the hospitality industry, so this study examines the relationship between the relative degree and speed of franchising involvement (i.e., strategic action) and the competitive condition of the firm. Empirical results generated by 2SLS models suggest that the relative degree and speed of franchising involvement have negative effects on condition of rivalry and dynamic competition. Our findings contribute to the literature and managerial suggestions on how to compete and survive in the hyper-competitive business environment. © 2021 The Authors