Decision-Making Model for Service Franchising by Applying Game Theory Under Risk Analysis

Abstract

Both the evolutionary stable strategy (ESS) and the General Bass model have been combined to analyze the franchising process to develop a model for decision-making simulation that includes the risk factors of this field. This simulation has been done using Vanta software as well as the financial statements of 148 chain businesses (Yaran Deryan store) in the intervals of 2013 to 2018. This model simulates the decision-makers' behavior when the risks change. The simulation results reveal that when decreasing the probability of the survival of a chain business, franchising will increase. To contrast, the investment in franchising would be decreased for both franchisers and franchisees by the increase in the probability of survival of independent businesses. The increase in the possibility of franchise agreement extension has a downward proportional effect on franchisees' behavior. To continue, the limitations and suggestions were inserted.