Franchise Termination Laws, Craft Brewery Entry and Growth

42 Pages Posted: 9 Jun 2019 Last revised: 8 Dec 2021

See all articles by Jacob Burgdorf

Jacob Burgdorf

affiliation not provided to SSRN

Date Written: November 17, 2021

Abstract

This paper estimates how beer franchise laws and their interaction with restrictions on vertical integration between manufacturing and wholesaling impacted US craft brewers’ entry and production decisions. The effects are identified by exploiting variation in policies across states and time between 1980 and 2016. I find that beer franchise laws significantly reduced craft brewery entry and growth, leading to lower levels of breweries and craft beer production. The effects are largest in states that place restrictions on brewery/wholesaler integration. The findings in this paper indicate that contract termination restrictions, which were legislated to protect wholesalers from upstream brewers, had the effect of encouraging opportunism from wholesalers and inhibited the growth of smaller firms in the industry.

Keywords: brewing industry, franchise laws, vertical integration

JEL Classification: L42, L51

Suggested Citation

Burgdorf, Jacob, Franchise Termination Laws, Craft Brewery Entry and Growth (November 17, 2021). Available at SSRN: https://ssrn.com/abstract=3392392 or http://dx.doi.org/10.2139/ssrn.3392392

Jacob Burgdorf (Contact Author)

affiliation not provided to SSRN

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