What determines whether a business is franchised or run by an operating company? I thought there was a correlation between unique SKU count and operator status, then I found out the French grocery business is heavily franchised. Economist friends: what gives?
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Could be! In that case, it’s a historical argument: if the business grew when capital was hard to get: franchise. The first fast food chains used the interstate highway system as their platform, analogous to the Internet. It was a land-grab; they couldn’t fund growth internally.
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I’ll have to read up and see if that’s true. With hotels, they’ve gotten more asset-light over time, but this could be because there’s so much institutional money in real estate now.
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McDonalds is a real estate company that smooths cash flow by creating tenants with predictable income.
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