Abstract
Franchise retail firms like supermarkets and convenience stores improve the efficiency of goods distribution to franchise stores by locating distribution centers in a city or the proximity of the city. This study discusses that investment in urban road network facilitates the utilization of distribution centers through the reduction in logistics transportation time. For the discussion, this study models the inventory management of franchise retail firms, and identifies that distribution centers have two functions. The first is to aggregate the risk to hold goods inventory, which is faced by individual franchise stores. The second is to increase the lot size of order to transport goods from the outside of the city. Then, this study analyzes how the investment in urban road network affects the location pattern of franchise stores and a distribution center in a city, through the improvement of logistics transportation. Its economic benefit to increase the convenience of shopping for consumers is also discussed.
