In the US economy, retail chains are extremely important since they account for a very high\nshare of GDP relative to manufacturing sector. Retail is dominated by large franchised chains,\nparticularly in the restaurant industry. A proven business format comprising a differentiated\nmenu, exterior and interior design of the outlet, logos, etc., draws the interest of many\nprospective franchisees simultaneously, especially to large chains because it reduces their risk.\nTheoretical arguments are built, supported in relevant research, to present three hypotheses.\nTogether, they form a theory of how franchising helps large chains despite abating of\nresource scarcity and escalation of threat from agency problems. Developing such a theory is\nimportant because extant research does not adequately address the boundary condition of\nlarge chains, even though many of them have been becoming from large to mega for many\nyears. This theory is tested in a longitudinal sample from Quick Service Restaurant magazine,\nwhich has been publishing a list of top 50 restaurant chains for many years. All of three\nhypotheses are strongly supported. The paper closes with discussion of results and their\nimplications for practice and research.
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