THE ROLE OF SCALE IN FRANCHISE SUCCESS - EVIDENCE FROM THE TRAVEL INDUSTRY

The relative performance of independent business locations versus fran chised business locations is examined for one industry. Franchised loc ations are found to have significantly higher sales adjusted for the n umber of employees, than similar independent business locations. Highe r sales are argued to be the result of the franchise's ability to real ize economies of scale. A mediation model is used to demonstrate that the greater efficiency of franchised locations is the result of scale economies. While the study's results reveal that a franchise location' s sales average 35 percent higher than similar independent business lo cation's sales, the findings should not be construed to suggest that f ranchise locations are necessarily more profitable.