This paper investigates the entry decisions of chain restaurants, by using the
data of starbucks coffeehouses in the U.S. The empirical results suggest that
a potential entry is deterred by a large number of branches in a local market,
but promoted by high population. However, the competition among the
branches can be less important in the top 10% chain restaurant markets. The
estimation results are robust, even when other chain stores are considered.
The contribution of this paper is showing that the entry decisions of chain
restaurants is influenced by local demand shifters and competition among the
branches, and that those results can be sensitive to market potentials.