Graduation Year


Date of Submission


Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Darren Filson

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I investigate the effects of various announcements regarding the COVID-19 pandemic on the financial performance of franchised and not-franchised firms in the United States Restaurant industry. This study contributes to the understanding of which organizational structure leads to greater adaptability and efficient response, to unexpected economic events. COVID-19 resulted in non-essential business shutdowns, social-distancing regulations, mandatory face-masks, and in some extreme cases, mandatory curfews that have greatly disrupted the restaurant industry; restaurants were not only forced to close for weeks at a time but were also mandated to operate at less than 50% capacity to ensure social-distancing regulations were met. Based on prior literature, I expect that franchised firms’ abnormal returns are less negatively affected by the announcement of an unexpected economic event compared to not-franchised firms’ abnormal returns. I also expect that the market will not react to COVID-19 until the date which the WHO declares COVID-19 a pandemic.

For this research, a list of 43 publicly-traded firms in the U.S. restaurant industry was created by consolidating firms that operated in the food or drink space in HSICCDs 5810, 5812, and 9999 in CSRP. The daily returns of each firm and the Fama-French 3 factors of the size of firms, book-to-market values, and excess return on the market were collected between January 2nd, 2019 to March 18th, 2020. I used the Event Study Method (ESM) and the Fama-French 3 Factor model to analyze the effect of various announcements regarding COVID-19 on the financial performance of franchised and not-franchised firms from December 31st, 2019 to March 13th, 2020. The estimation period was from January 2nd, 2019 to December 30th, 2019, while the event window varied from [0], [-1, 1], and [-1, 3] for various events. To test the significance of the events, a dummy variable for each event was included in the Fama-French 3 Factor model. Two sets of portfolios of franchised and not-franchised firms were constructed for this study; one is an equally-weighted portfolio, while the other is weighted by market capitalization.

My research concluded that the market did not react to the COVID-19 pandemic until the WHO declared COVID-19 a pandemic on March 11th, 2020. It also concluded that this event had more of a negative effect on not-franchised firms than on franchised firms. The research concluded that the WHO’s announcement on March 11th, 2020 was a statistically significant event, with the equally-weighted not-franchised portfolio’s daily returns negatively affected by -6.06%, while the franchised portfolio’s daily returns were affected by -4.15%. In the portfolios weighted by market capitalization, the announcement had a -2.01% and -4.12% effect on the franchised and not-franchised portfolio’s daily returns. Furthermore, abnormal returns on March 11th, 2020 for the equally-weighted franchised and not-franchised portfolios were -6.45% and -9.39% respectively, while it was -4.56% and -6.15% for franchised and not-franchised portfolios weighted by market capitalization, indicating that not-franchised firms were more negatively impacted by the announcement than franchised firms.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.