Year of Award
Master of Business Administration (MBA)
College of Business & Professional Studies
interstate, marketing, institutions, trade name, banking
The primary purpose of this thesis was to determine the effect of franchising on a financial institution joining a franchise system. A review of the literature revealed that the marketing related literature was almost totally written from the viewpoint of the franchisor. In addition, no comprehensive study had been done on the results of the participants in franchising of financial institutions since franchising began in that industry in 1982.
To investigate the results of franchising in the financial institutions industry, a study of performance measures was conducted on a before-franchising and after-franchising basis on those banks joining a franchise system. The measures of performance used were (1) market share of two primary product areas, deposits and loans; and (2) profitability; as reflected by return on average assets.
The primary data in the study were collected on the commercial bank franchisees of First Interstate System from their quarter reports of condition and income filed with the Federal Deposit Insurance Corporation. The data were collected for the time period of twenty (20) quarters prior to franchising through the quarter ending June 30, 1987. This represented up to forty (40) quarters of data.
There were two generalized research hypotheses:
I. Financial institutions joining a franchise system will improve their market share position in both loan and deposit product categories.
II. The costs associated with franchising will not negatively affect profitability performance. T
he analysis of covariance technique was used to test the hypotheses. A non-parametric sign test was also used.
Hypothesis I was rejected. No significant positive effect was found on either the market share of deposits or the market share of loans. The sign test confirmed these findings.
Hypothesis II was accepted. No significant negative effect of franchising was found on the profitability performance of the banks tested. The non-parametric sign test confirmed these finding: and showed a significant positive effect on profitability performance.
Finally, these results indicated a change in the marketing strategy for First Interstate System. It is currently stressing the marketing and competitive benefits of franchising. This study suggests that a change of emphasis to profitability performance benefits would be in order.
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Chaiyasut, Chot, "Franchising of Financial Institutions" (1992). Theses, Dissertations, and Capstone Projects. 381.
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