Franchising is an important business form that accounts for an estimated 806,270 franchise outlets and, in 2024, is expected to employ about 8.9 million people. Franchising is very prominent in the restaurant industry, being represented by 132,687 franchise restaurant chains across the United States. The existing literature demonstrates that degree of franchising, measured as the proportion of franchised units to total units, is positively related to financial performance, where more franchising is better for firm financial performance (Madanoglu et al., 2011). However, there is a scarcity of studies that investigate factors that influence chain-level success in terms of profitability, strength in franchising network, customer, and employee satisfaction. 

To fill one of these gaps, this project aims to examine the relationship between chain-specific characteristics and chain financial performance. The sample of this study consists of 73 restaurant franchising chains listed in FRANDATA, a major franchising data source in the United States. The observation period encompasses the 4-year period between 2016 and 2019, which makes up 274 firm-year observations. Proprietary data on chains such as system size, profitability, franchise fees, revenue etc. is obtained from FRANDATA, through an exclusive agreement. 

The dependent variable in this study is 3-year sales growth. Potential predictors are marketing inputs per store (marketing expense to number of stores) and business experience (years of experience before launching franchising). Both factors are expected to have a positive relationship with chain financial performance. The study controls system size, franchising proportion, and geographic dispersion as common determinants of firm financial performance. Multiple regression will be used to analyze data. This research study expects to determine which chain-specific factors influence financial performance. Findings can offer some insights to franchising firm executives in their efforts to understand how some controllable factors such as marketing inputs can impact financial performance.