The market performance of franchise stock portfolios

Abstract

Purpose -This paper's aim is to examine the risk-adjusted market performance of an overall franchise and three sub-sector franchise common stock portfolios from 1990 through 2008. Design/methodology/approach -Four sets of franchise sector portfolios are constructed, their returns are calculated, and their performances relative to three market benchmarks are evaluated using the Sharpe ratio and Jensen's a. Findings -The all franchise portfolio significantly outperformed the three market benchmarks. Among the sector portfolios, the services and restaurant portfolios also outperformed the market benchmarks, but not the lodging portfolio. Results support the theoretical hypothesis that franchising may provide superior advantages to investors and point to a possible "franchising anomaly". Investors consider franchise firms to be less risky than the average publicly traded firms and therefore require a lower rate of return. Practical implications -The results of the study suggest that in the past, franchise managers may have paid a much higher cost of capital than warranted by their firms' risk characteristics. Study results also have positive implications for franchise firms' access to capital and for evaluating franchise managers' compensation arrangements. Investors should consider allocating a portion of their investible funds to franchise stocks. Many lodging firms may not have taken full advantage of the benefits of franchising to reduce their financial risks. Restaurant firms may further improve their financial performance by selling their riskier units. Originality/value -This is the first comprehensive study of the risk-adjusted market performance of franchise firms over an extended period of time covering a variety of economic conditions that also analyzes the risk-adjusted performance of the main business subcategories in franchising.

Franchise business sustainability model: Role of conflict risk management in Indonesian franchise businesses

“…The information collected can strengthen the initial information that can increase awareness in managing business risks. A business partner needs to know its reputation before signing a contract (Aliouche et al, 2012). Therefore, if a content fan already knows in advance about the franchisor's reputation, this can encourage satisfaction because the information obtained is complete enough so that the possibility of default is getting smaller.…”

Meta-analytically linking the marketing mix to hospitality organizations’ performance

“…Hospitality organizations have developed geographically-driven strategies in an effort to identify business expansion opportunities (Aliouche et al, 2012; Jung et al, 2016; Koh et al, 2009a; Rhou & Koh, 2014). In this context, “place” refers to the distribution of or procedures involved in delivering products to customers (American Marketing Association, 2021).…”

“…The borderless nature of globalization has facilitated hospitality organizations’ overseas business expansion (Koh et al, 2009b; Lee et al, 2014). Franchising involves a business relationship between a franchisor (including its trademarks, licensed products, operating procedures, and various property forms) and a franchisee who is contracted to pay loyalty fees and other incurring expenses to the franchiser in exchange for the acquisition of rights to use its well-established intellectual assets (Aliouche et al, 2012). Geographic diversification occurs when a firm enters new geographic regions or markets (Kang & Lee, 2014).…”

Comparison of SME stock portfolio and manufacturing company performance in the Indonesian, Indian and Chinese stock markets

“…Several previous studies were used as references in this research, such as the (1) Capital Market by Mouritsen (2003), Wonglimpiyarat (2005), Abhayawansa and Guthrie (2010), Aziz and Ansari (2017), Mazuruse (2014), (2) Portofolio Performance by Stevenson (2004), Yalama and Coskun (2007), Francoeur and Niyubahwe (2009), Li et al (2016), Tuor and Gellner (2010), Lally (2007), Hutchison et al (2011), Zainol and Kassim (2012), Mausser and Rosen (2000), Lee (2017), (3) Risk Free Return by Bouriaux and Scott (2004), Aliouche et al (2012), Hamilton (2011), Le and Ooi (2012), Salamudin et al (2010) and (4) Stock Return by Abraham (2005), Hussainey and Mouselli (2010), Simlai (2013), Simlai (2009), Adaoglu and Katircioglu (2013). The originality for this paper shows the comparative study of the stock portfolio performances of Small Medium Enterprises (SME) in Indonesian, Chinese and Indian stock markets, and object studies conducted in Indonesia, China and India.…”