Franchising During Times of Economic Recession: A Longitudinal Analysis of Automotive Service Franchises

This study sheds light on how franchise companies weather periods of recession versus growth periods, based on firm-specific factors in contrast to exogenous influences over a 21-year period. Specifically, the analysis focuses on the 1984-2004 time period of franchise businesses in the automotive services sector, compiled from the Franchise Annual from 1985 through 2005. In contrast to previous studies, this investigation examines a period of 21 years, including three distinct periods of economic expansion and two periods of economic contraction. The most significant finding of this exploratory study is that generalist-type franchise systems (i.e., those that offer a broad range of automotive services) tend to have greater longevity than specialists during periods of economic recession. A related significant finding is that the number of services offered by franchisors expands and contracts in a counter-cyclical manner relative to broad economic indicators.