Sorting,Franchising and Real Estate Brokerage Firms |
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Authors: | John D Benjamin Peter Chinloy Daniel T Winkler |
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Institution: | (1) Kogod School of Business, American University, 4400 Massachusetts Ave., NW, Washington, DC 20016, USA;(2) Bryan School of Business and Economics, University of North Carolina at Greensboro, Greensboro, NC 27412-5001, USA |
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Abstract: | Real estate markets remain localized and reflect differences by region. With a large number of brokerage firms and a smaller
number of franchisors, a testable hypothesis is whether in equilibrium fees and royalties are equal to the additional return
to the franchisee. If fees are set uniformly across the country, economic rents may be earned in specific local markets. Some
franchisees may earn excess profits from the franchise arrangement. Empirical results for 1,143 United States residential
brokerage firms in 2001 show standardized uniform franchising costs cover any added returns to franchises in the Midwest and
South. Excess returns are present for franchisees in the Northeast. The probability of being a franchisee increases with size
and scale. |
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Keywords: | Franchise Residential brokerage Self-selection Profitability Regional variation Fees Royalties |
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