FRANCHISE FACTOR
The measurement of the impact on a company's price-earnings (P/E) ratio per unit growth in new investment. For example, a franchise factor of 3 would indicate that the P/E ratio of a company would increase by three units for every unit of growth in the company's book value.
The franchise factor can be calculated as the product of annual investment returns in excess of market returns and the duration of the returns. A P/E ratio will not be elevated with a high franchise factor alone.
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