Franchise vs. Direct Ownership A Financial Analysis of Bar Chain Business Models in the U.S.
Yuhao Hu
Co-Presenters: Individual Presentation
College: College of Business and Public Management
Major: Accounting
Faculty Research Mentor: Huaibing Yu
Abstract:
This study examines the financial implications of franchise versus direct ownership models in the U.S. bar and restaurant industry, using a comparative analysis of TGI Fridays (franchise model) and Dave & Buster’s (direct ownership model) over the 2019–2021 period. Key financial indicators—including net profit margin, return on assets (ROA), operating cash flow margin, and debt-to-equity ratio—are analyzed to assess profitability, financial stability, and risk exposure.Results show that while Dave & Buster’s outperformed in profitability and asset efficiency during 2019 and 2020, its financial performance sharply deteriorated in 2021, with net margins falling to -47.41% and ROA to -8.80%. In contrast, TGI Fridays maintained stable margins (2.67%) and positive cash flow (9.92%) throughout the period, reflecting greater resilience under economic stress. Furthermore, Dave & Buster’s exhibited significantly higher debt leverage (up to 11.01), indicating elevated financial risk, while TGI Fridays’ leverage remained comparatively stable.These findings suggest that franchise models provide more consistent financial stability, particularly in volatile conditions, whereas direct ownership offers higher returns in favorable markets but with greater risk. The research aligns with UN Sustainable Development Goal 8 by informing strategies for sustainable economic growth and business resilience in the service sector.