Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2019/14: On the economic geography of dual distribution - The case of McDonald’s in Germany

Nisa E. Freiwald (), Steffen Juranek () and Uwe Walz ()
Additional contact information
Nisa E. Freiwald: Goethe Business School, Goethe University Frankfurt, Postal: Goethe Business School, House of Finance, Theodor-W.-Adorno-Platz 3, 60323 Frankfurt am Main, Germany
Steffen Juranek: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Uwe Walz: Faculty of Economics and Business, Goethe University Frankfurt, Postal: Goethe University Frankfurt, Faculty of Economics and Business, P.O. Box 54, Theodor-W-Adorno Platz 4, 60323 Frankfurt am Main, Germany

Abstract: We analyze the allocation of ownership in a franchise system by focusing on location-specific characteristics of the outlets. This study uses a comprehensive data set on McDonald’s restaurants in Germany to investigate the drivers of the decision on whether outlets are companyowned or franchised. We find strong evidence for the repeat-customer hypothesis by showing that outlets are significantly more likely to be company-owned when they are located at places with relatively few repeat customers.We observe the same for outlets that are closer to McDonald’s headquarters. Finally, we find pronounced clustering of multi-unit franchisees.

Keywords: Franchising; dual distribution; agency theory; geo-locational data; economic geography

JEL-codes: L24; L81

12 pages, October 29, 2019

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