Franchisors do not like to take on ‘entrepreneurs’ as franchisees. Discuss this statement, giving sound reasoning why this statement might be true and countering with arguments against the statement?
Word Count: 1907
Franchisors are increasingly having to be more and more selective in the adoption of franchisees with factors such as economic climate and the potential difficulty with growth playing key factors in the decision making process. It is not simply an ability to grow which creates a successful Franchise and nor is it the desire of any franchisor to adopt every potential franchisee. Franchisors are becoming more and more scrutinising as the global economy declines. There is a general understanding within any franchised business, which is that one of the most desired traits of any franchisee is the ability to follow a set design "People who buy franchises are not entrepreneurs, and they better know that going in," (Libava, 2012). Throughout, the difficulty of working with entrepreneurial franchisees will be analysed alongside what a Franchisor looks for in an ideal Franchisee in the context of someone seeking to enterprise a franchise; how these differ, how they are similar and what potential benefits or disadvantages this stance may create. The entrepreneurial process requires a great number of identification and opportunist methods in order to obtain the resources for their business and be deemed “entrepreneurial” (Shane, 2003). The use of these skills will be evaluated in the context of a franchise in order to understand why franchisors prefer not to take on entrepreneurs.
Firstly, it is important to understand why franchisors must have certain barriers of entry to their franchise before we can fully question their likeliness to take on entrepreneurs. Franchisees seek to join a Franchise due to the ease of starting a business; Suppliers are already established, store layout is already set, uniforms already designed customers already familiar with the brand and so on. The sole reason this is set out already is because it has been tried and tested (in most cases) over time, and most likely by a number of other Franchisees. Since all the Franchisees have built this brand image up since the off, it is integral to protect this brand image as any impairment to one franchisee could cause the public to “tar” the whole franchise “with the same brush”. However, the extent to their high expectations of potential franchisees has a tendency to vary with each scale of franchise. A well-established franchise has a lot to protect and therefore is likely to resist the urge to take on an enterprising franchisee, seeing them as “high risk”. Alternatively, the opposite can also be said as it is likely to promote the business more with greater levels of feedback, new prospects and innovative ideas (Diebold 1990). From one perspective, there are many reasons why certain franchisors would avoid accepting entrepreneurial Franchisees into their Franchise. Entrepreneurial businessmen and women are often stereotyped as the innovators; someone who pushes the boundaries of the known world--a change agent who is relentless in making things happen and bringing ideas to execution (Entrepreneur.com). This means that their skills best lie in the development of new ideas, improvement of old ways and generally the identification of modern concepts and techniques. In the eyes of a potential franchisor this has many foreboding difficulties should they decide to accept the franchising agreement. Firstly, a franchise is a tried and tested model which has proven to be a mostly profitable and successful enterprise of its own with a large quantity of time, effort and money used to perfect the foundations of the franchise. Therefore should a franchisee wish to try and change these perfected techniques, not only does it risk the chance of failure and therefore damaging the brand as a whole, but also the arrogant “I know better” attitude contradicts...
Please join StudyMode to read the full document