How passive ownership restrictions affect the rate of franchisee failure

What variables influence the adoption of passive ownership restrictions in franchise systems and what are the effects of these restrictions on the rate of franchisee failure of such systems? This article shows how standard performance models that do not account for self-selection of these contractual decisions can improperly suggest a negative relationship between the adoption of passive ownership restrictions and a performance outcome of franchise systems -- the rate of franchisee failure. However, models that do account for self-selection of these restrictions indicate that these contractual decisions per se do not affect such a performance outcome. The findings also show that franchise systems with misaligned passive ownership restrictions show a higher rate of franchisee failure than their better-aligned counterparts.