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Effect of Franchised Business models on Fast Food Company Stock Prices in Recession and Recovery with Weibull Analysis

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Document pages: 19 pages

Abstract: At the initial stages of this research, the assumption was that thefranchised businesses perhaps should not be affected much by recession as thereare multiple cash pools available inherent to the franchised business model.However, after analyzing the available data, it indicated otherwise, the stockprice performance as discussed indicates a different pattern. The stock pricedata is analyzed with an unconventional tool, Weibull distribution andobservations confirmed the presence of either a reverse trend in franchisedbusiness than what is observed for non-franchised or the franchised stockfollowed large food suppliers. There is a layered ownership and cash flow in afranchised business model. The parent company run by franchiser depends on theperformance of child companies run by franchisees. Both parent and childcompanies are run as independent businesses but only the parent company islisted as a stock ticker in stock exchange. Does this double layer of verticaloperation, cash reserve, and cash flow protect them better in recession? Thedata analyzed in this paper indicates that the recession effect can be moresevere; and if it dives with the average market, expect a slower recovery ofstock prices in a franchised business model. This paper characterizes thedifferences and explains the natural experiment with available financial data.

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