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What Makes a Franchisee Successful: Attitudes and Pre-requisites of Profitable Franchise Partners

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Franchising has gained popularity over the last decades. From a franchisor point of view, expanding a franchise network depends on several key aspects, one of which is the franchisee candidate recruitment and appropriate selection. This paper develops a theoretical franchisee selection model, which is based on an extensive international literature review and then discussed with 33 German-speaking franchise experts, in order to result in an improved and practically oriented model. The findings of this research are numerous and include the closely oriented opinion between academics around the world and interviewed franchise experts in Germany and Austria. Qualitative interviews give an insight in the many facets necessary to consider when evaluating a franchisee candidate. Nevertheless, the complexity of the topic limits the validity of the analysis made in this single paper.
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International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 387 The Clute Institute
What Makes A Franchisee Successful:
Attitudes And Pre-Requisites Of Profitable
Franchise Partners
Christine Gaul, University of Latvia, Latvia
ABSTRACT
Franchising has gained popularity over the last decades. From a franchisor point of view,
expanding a franchise network depends on several key aspects, one of which is the franchisee
candidate recruitment and appropriate selection. This paper develops a theoretical franchisee
selection model, which is based on an extensive international literature review and then discussed
with 33 German-speaking franchise experts, in order to result in an improved and practically
oriented model. The findings of this research are numerous and include the closely oriented
opinion between academics around the world and interviewed franchise experts in Germany and
Austria. Qualitative interviews give an insight in the many facets necessary to consider when
evaluating a franchisee candidate. Nevertheless, the complexity of the topic limits the validity of
the analysis made in this single paper.
Keywords: Franchising; Franchisee Selection
INTRODUCTION
ertical cooperation systems have gained access to countless business sectors and service providers.
Within vertical cooperation systems, one channel member takes over power over other channel
members and guarantees cooperation (Kotler et al., 2008). Vertically integrated systems keep
competing over customers with non-integrated systems (Ahlert et al., 2013). This competitive setting allows
dynamic process of change and continuous improvement. Franchising is one example of vertical cooperation
systems. Via franchising, cost of production and the respective coordination of it decrease, while flexibility of the
business rises (Caves et al., 1976). For an entrepreneur, the reasons opting for being part of a franchise system are
foremost a high possibility of gaining superior standard of living, the offer of receiving training on the job, and the
chance to being one’s own boss, (Bennett et al., 2010) while being backed up by a proven system.
Opting for franchising as expansion strategy, on the one hand allows easy access to capital, rapid market
penetration, development of a network distribution system, cooperation with striving entrepreneurs, and quick
growth rates (Hoffman et al., 1991; D. Ahlert et al., 2010). On the other hand, it relaxes several other growth
constraints a firm may have (Lafontaine, 1992). Nevertheless, several challenges arise when using franchising as an
expansion strategy.
One difficulty of network expansion is the challenge of finding the right partners for the systems. Misfitting
characters within an organization, which builds upon individual entrepreneurs who operate independently, to a
certain extend, may cause enormous damage for the brand, the company, the franchisor, and the franchise network at
the same time. Researchers and practitioners have stated that selecting qualified franchisees is perceived the
franchisor’s single most pervasive operating problem (Clarkin et al., 2006). Franchise partnerships are meant to be
win-win situations for everyone involved. For this reason, adequate preparation before the selection process is
highly necessary to prevent future losses and a negative climate inside the organization. The ultimate goals of
searching suitable candidates serve the purpose to minimize the risk of inadequate selection, to increase the
probability of finding the right candidates, and to diminish the component of lucky guessing and gambling for a
V
International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 388 The Clute Institute
qualified partner (Ahlert et al., 2006). The research question, therefore, is, Do entrepreneurial abilities, sales
abilities, a certain financial background, and leadership abilities lead to an improved franchiseship performance?
This paper presents one part of a larger project and demonstrates a model for franchisee partner selection.
Qualitative research to test sections of the model was conducted and parts of the results are demonstrated in this
contribution. The goal is to refine the presented model with the findings of the research and to improve the model
for further research. The model is based on an extended international literature review and it will allow a deeper
insight into qualifications and criteria necessary for favorable franchisee selection.
As far as limitations in this contribution are concerned, the author points out that, solely, a few parts of the
model are tested in this paper. Finally, further testing is necessary to build a strong model for future verification. For
this reason, final results are yet to be expected after the entire project will be finalized.
LITERATURE REVIEW
Amongst numerous types of characteristics a franchise partner should display, one major aspect is the
entrepreneurial attitude. Different opinions exist on how much of an entrepreneurial spirit is needed in a franchise
business. Some believe that entrepreneurial aspects are absolutely necessary as business risk applies to all parties
and has to be dealt with accordingly. Others mention that franchisees are a special type of managers as they do not
pursue specific growth strategies (Ketchen, Jr. et al., 2011). Nevertheless, legally the franchisee has an
entrepreneurial standing. Practically, the degree of entrepreneurial spirit required to reach mutual goals and to grow
the business might depend on the franchise system.
Franchisee selection is a challenge for practitioners, theorists, and academics alike. A direct connection
between partner acquisition and future development of franchisees has been established. For this reason, Heußler et
al. (2013, p. 57) state that it is highly important to find so-called “hidden characteristics”. The group of researchers
names personal interviews, estimating entrepreneurial potential, evaluating learning probabilities, observing team
player characteristics, and testing soft skills to be relevant steps in the selection process. The process has been
researched in several case studies by Altinay and defined through partner-related and task-related selection criteria,
where different stages of the selection process put distinct emphasis on certain criteria (Brookes et al., 2011). In
another study, Altinay reveals political decision-making as an important base for a franchisor strategy in one
participant company. This means “personal goals and benefits of key players, such as country managers and senior
development managers, influence the franchising decision-making process” (Altinay et al., 2010, p. 941-942). This
statement implies that the process can be a cross-discipline process where not only the top management participates
in selection decisions (Altinay, 2006, p. 123).
Stanworth (1995) suggests financial background, energy and enthusiasm, besides other qualifications, to be
looked for in franchisee candidates. He states that when picking winners, gut feeling is one factor that often plays a
role. Other factors include profit motivation, sales orientation, ability to compete with self-imposed standards, and to
make unpopular decisions, as well as ability of dealing with surviving uncertainty. Olm et al. (1988) examines four
groups of characteristics - personality/attitude, knowledge/capability, financial capability, and general
demographics. The results show that general management skills, previous work experience, and management of
personnel were considered the most important aspects for capabilities and knowledge for franchisees. As far as
personality and attitude is concerned, industry, motivation and perseverance were named top three. In the category
financial indicators, respondents consider credit, personal cash and personal assets as most relevant for selecting a
candidate. Olm et al. examined also other characteristics, which show that reputation, family commitment, and
health are highly relevant for selecting franchisees. Out of all factors considered, personality was ranked highest,
financial second, skills third, and background last (Olm et al., 1988).
It soon becomes clear that different researchers consider a large variety of selection criteria to be relevant.
This may depend on the variety of sectors surveyed, the size of the company, the age, and the internal strategy
(Rahatullah et al., 2009). Within the proposed model, these select criteria are categorized and formed into a
framework where the outcome is the performance of the franchiseship.
International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 389 The Clute Institute
Franchisee Selection Model
Taking relevant literature into consideration, a model for successful franchisee selection is developed.
Within this model, individual abilities and characteristics are bundled to display improved performance of the
franchiseship. The model seeks input characteristics to find candidates with higher potential for success, which
imply higher profits for franchisors and franchisees alike. The proposed model, as displayed in Figure 1, uses
entrepreneurial, leadership, and sales abilities, as well as financials background. The author assumes these
characteristics to influence the performance and also the success of the future franchisee.
Figure 1: Franchisee Selection Model
The goal of this paper is finding skills and requirements of promising candidates to define a franchisee
partner with above average performance potential. Favorable franchisee selection shall spur promising franchise
partnership in the future for a win-win situation for both, franchisors and franchisees.
METHOD
Data were collected during February and March 2014. Interviews, including closed and open questions,
which were executed with German and Austrian franchise experts. Experts are associated with the German
Franchise Association, or members of committees founded by the German Franchise Association. Members of the
committees are either consultants or decision-makers in the franchisee selection process of their respective
companies. Consultants are lawyers and general business consultants. A total of 33 answers were counted. The
interviews were either oral via telephone conversation, or on a written basis via emailed questionnaires. The open-
ended questions were taken into account for this contribution and analyzed by comparing answers.
RESULTS AND DISCUSSION
When asked about the success of franchisees, two types were suggested - investor and active franchisees.
Twenty-eight experts named franchisees, who actively participate in the business and its daily operations, to be more
successful than investor franchisees. Nevertheless, the answers for specific companies or systems may differ from
the general view, as investor franchisees are said to be more financially stable and have a larger likelihood of buying
necessary services to improve the business, compared to actively participating franchisees.
When asked about a self-made definition of a successful franchisee, a large range of descriptions was
given. Analyzing the answers, the author grouped the most repeatedly named descriptions into four categories -
satisfaction in partnership, sales and profit, common goals, and system conformity.
International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 390 The Clute Institute
The first group - satisfaction in partnership - contains various aspects of harmony, equal partnership, value
toward the other party, and feeling well taken care of. According to Lusch (1976, p. 139), dissatisfaction in
partnership leads to “additional legislation to regulate franchisor-franchisee relations.” Also, high levels of
satisfaction and trust trigger exchange partner cooperation and relational congruence (Weaven et. al, 2014, p. 100
citing Payan et al., 2005). For this reason, the result of mentioning satisfaction as a top four leading category is
justifiable and confirms previous results of the mentioned authors.
The second group - sales and profit are two financial aspects that are named frequently when defining a
successful franchisee. However, ‘profits’ are more relevant as the number of sales may not classify a profitable
business. In addition, ‘sustainable profits’ keep the business going and allows return on investment in the longer run.
Furthermore, ‘investments for future business potential and growth’ are named frequently. Nevertheless, most
experts mention, that ‘sales’ and ‘profit’ together form a successful franchisee.
The third group is common goals. Most interviewees name ‘working together’ and ‘being actively involved
in the system’ as reasons for being successful. Pushing for ‘mutual goals’ and ‘working hard are elements of
success, as well as ‘continuous motivation’ for oneself and others. The “we-thinking” has to prevail as the system
can only be successful if its partners are successful. Improving the existing concept by a common effort can lead to a
more efficient concept. One answer by an expert expresses social activities outside the system to be an indicator for
a successful franchisee. The interviewee opinionates, that community support shows engagement with others and
spurs mutual goal orientation. The group of ‘common goals’ supplies most feedback of all four groups and can
therefore be recognized as highly relevant to the definition of a successful franchisee.
The fourth group is system conformity. Interviewees mention a ‘common brand and appearance’ as a sign
of belonging together and pushing success. Being ‘loyal to the system’ and ‘adhering to its rules and regulations’ is
considered a step toward favorable outcomes, which implies trust and strong belief in the actions of the headquarter
instructions. It shows trustworthiness amongst German and Austrian systems. ‘Identification with the system’,
‘living the system’, ‘walking the same walk, and talking the same talk’ makes franchising a strong player and allows
win-win situations for all parties. Table 1 summarizes all four main categories.
Table 1: Own Definition Of Successful Franchisee Defined By Franchise Experts
Satisfaction In Partnership
Sales And Profit
Common Goals
System Conformity
Happy entrepreneur
Sales oriented
Communicative and
networking
Adheres to CI
Feels well taken care of by
franchisor
Economic success
Strong in applying business
concept
Trusts in concept and its
application
Seeing franchise system as
family
Economic success of partners
Good team player
Exited franchisee with strong
brand and system loyalty
No conflict with franchisor
More successful than
competitor
Pro active, contributes with
ideas, entrepreneurial spirit
Follows the system
Profitable, solid business
Engages in social activities
outside work
Loyal to the system
Ready to invest to grow into
next life-cycle
Supports other franchisees
Identification with system
Economically satisfied
partners, who recommend
the system
Ambitious, goal oriented,
willing to accept criticism
System conform behavior,
loyalty to the system
Sustainable profit
Interactive exchange of
experience
Follows rules of the system
Makes above average profit
and pays above average
royalties
Puts entrepreneurial mission
and visions in action
Continuous motivation
Motivates staff
Putting system criteria in
action
Suggests possible
improvements of the system
International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 391 The Clute Institute
Another question in the survey asked about decisive selection criteria when recruiting new franchisees. The
author again grouped the most frequently named answers into four major categories - sales abilities, financial
background, entrepreneurial talents, and leadership abilities.
The first group is sales abilities and relates to sales and profit from the question before. The ability to
‘close sales’, ‘being strong in sales’, ‘having sales knowledge and experience’ and ‘being a sales person or
professional’ are named most often when defining highly important selection criteria. It shows that although the
franchisee is an entrepreneur, busy with management and strategy of the company, experts suggest that franchisors
look at the ability to sell products or services themselves. This qualification demonstrates the necessity as it was
named frequently.
The second group refers to financial background of a franchisee candidate. Having ‘sufficient financial
funds’ to start the business is named a decisive qualification for starting out. Sufficient funds are the base of starting
up and continuing, as necessary investment may range from a few hundred Euro to over a million Euro. The
entrepreneur needs enough money to cover at least the period until operating with a profit. If a candidate does not
possess sufficient funds, ‘third-party’ financing or ‘borrowing’ must be possible.
The third group is entrepreneurial talents and displays most extensive descriptions, some of which are
repeatedly named. They include ‘entrepreneurial talent’, ‘spirit’, and ‘thinking’. In addition, ‘business knowledge’
and ‘experience’ are also counted numerous times. Furthermore, ‘being active’, ‘willing to work hard’, ‘being
committed’, and ‘standing conflicts’ are also mentioned when considering decisive selection criteria. The collection
of characteristics describes a ‘strong fighter mentality’ and puts emphasis on independent work for future benefits.
The fourth group is leadership abilities and is named several times as crucial criteria. Franchisees are seen
‘objective’, ‘assertive’, ‘communicative’, and ‘educated leaders’ who can ‘train others’ and are ‘trustworthy’. They
are meant to ‘lead their staff and clients by charisma and sympathy’. Future, franchisees should have knowledge
and experience’, as well as they should ‘lead by example’. Followers shall ‘acknowledge the leader’s expertise’, as
he or she shall be ‘transparent and fair’. Table 2 summarizes all four main categories.
International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 392 The Clute Institute
Table 2: Decisive Selection Criteria Defined By Franchise Experts
Sales Abilities
Financial Background
Entrepreneurial Talents
Leadership Abilities
Sales knowledge
Minimum 10 thousand Euro
equity
Strong self-motivation
Leadership abilities
Sales experience
Equity and possibility to
finance
Stands conflicts
Personnel leadership
Strong closing sales
Equity/ financial securities
Business knowledge
Leadership experience,
including work experience/
experience in the business
sector
Sales and organization
experience
Has sufficient financial funds
Entrepreneurial motivation
Engage in sympathy having
charisma
Able to acquire clients
Financial liquidity
Growth philosophy
Leading
Strong sales abilities
Sufficient resources
Adaptive, understanding
Objective
Sales person
Sufficient own resources
Discipline
Trustworthy without being
critical
Sales experience
Implement instructions and
keep motivation up
Able to train
Sales oriented
Business sector experience
Communicative
Sales abilities
Experience in entrepreneurial
sprite
Assertive
Talented in sales
Realization of actions
Leadership abilities
Sales professional
Business knowledge
Service oriented
Willing to work in operations
Broad minded and outgoing
Leadership experience
Basic business knowledge
Manage and lead staff
Openness
Team player in a network
Experience in the business
sector
Sufficiently educated/trained
for the technical part of the
job
Proactive not reactive
Leadership experience
Active
Good communicator
Needs more continuity than he
thinks
Fair and transparent
Entrepreneurial thinking/
spirit
Trustworthy
Working independently
Leadership qualities
Expertise
Leadership competencies
Reliability
Equilibrated partnership
Needs potential to be
entrepreneur
Has to enjoy work
Social competencies
Friendly, people oriented
Committed
Willing to listen and apply
franchise suggestions
CONCLUSION
General franchisee selection can be improved by the findings presented in this paper. The results show a
slightly different picture than overall international literature assumes. However, the findings fit the proposed model
and even increase the number of the most relevant characteristics by sytem conformity, the need of common goals,
and satisfaction in the partnership. Nevertheless, some limitations apply. The possibility that German and Austrian
experts may have an average opinion different than other nationalities may be due to the relatively small number of
33 answers. Although numerous experts mentioned that their answers might differ if asked for a specific business
International Business & Economics Research Journal March/April 2015 Volume 14, Number 2
Copyright by author(s); CC-BY 393 The Clute Institute
type. However, this study made no difference of selection between business sector and displays a general overview
of expert opinions.
Feedback from the survey shows the definition of successful franchisees defined by experts can be
categorized into four groups - satisfaction in partnership, sales and profit, reaching goals together, and system
conformity. The second categorization is sale abilities, financial background, entrepreneurial talents, and leadership
abilities. The definition of the groups shows that financial data and being profitable at the end are seen most relevant
when discussing either improved performance of franchiseship, business operations, or successful business partners.
Further relevant criteria for a future franchisee are entrepreneurial qualities, as well as leadership, conformity,
satisfaction, and teamwork attitudes.
Overall, the study has shed light into relevant franchisee selection criteria and showed that the model,
which is based on franchise literature and tested on experts, can temporarily be accepted. In the future, the model in
this paper will be adapted to fit a more complex set of criteria. The final goal is a tested and verified model for
application in practical business operations during franchisee selection processes.
AUTHOR INFORMATION
Christiane Gaul holds a Bachelor of Arts in Spanish and a Bachelor of Science in International Business from the
College of Charleston, South Carolina (USA), as well as a Master of Business Administration and a Master of Arts
in Latin American and Caribbean Studies from Florida International University, Florida (USA). She decided to
dedicate her Ph. D. research at the University of Lativa, Riga (Latvia) to international franchising, while working
actively in the private franchise sector in Germany.
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... As reviewed above, although franchise studies have increasingly considered the antecedents and consequences of knowledge sharing, the theoretical approach still remains underexplored and the empirical evidence is still very limited. In particular, despite the strong relevance to franchisee selection criteria (Jambulingam and Nevin, 1999;Altinay and Okumus, 2010;Gaul, 2015), no previous study has examined how the personalities and attitudes of the franchisees influence knowledge exchange with the franchisors. Furthermore, as empirical research on the consequences of knowledge sharing is limited, a large asymmetry exists between the research of predictors and consequences of knowledge sharing. ...
... Second, this study provides useful selection criteria for franchisors to recruit potential franchisees. A critical challenge that franchisors should deal with to expand their franchise networks is to find the right franchisee partners (Jambulingam and Nevin, 1999;Altinay and Okumus, 2010;Gaul, 2015). Although a proper selection of franchisees can effectively drive the expansion of a given franchise system, poor choices can result in persistent businessrelated problems and challenges, including relational conflicts, opportunistic behaviors and low system performance (Jambulingam and Nevin, 1999). ...
... Although a proper selection of franchisees can effectively drive the expansion of a given franchise system, poor choices can result in persistent businessrelated problems and challenges, including relational conflicts, opportunistic behaviors and low system performance (Jambulingam and Nevin, 1999). Regarding this issue, researchers have generated a variety of personal characteristics and traits to predict optimal candidates; these characteristics and traits include innovativeness (Jambulingam and Nevin, 1999), personal commitment to business (Jambulingam and Nevin, 1999), entrepreneurial talents (Gaul, 2015) and leadership abilities (Gaul, 2015). ...
Purpose The purpose of this paper is to deepen the understanding of the predictors and outcomes of knowledge sharing in a franchise system. An integrative framework is proposed to examine the influence of franchisee self-leadership on knowledge sharing and its subsequent influence on franchisee satisfaction and compliance. Design/methodology/approach On the basis of a survey of 111 franchisees of two leading bakery franchise brands in Korea, this study confirmed data validity and tested hypotheses by adopting partial least square–structural equation modeling. Findings Regarding the predictor of knowledge sharing, this research found that franchisee self-leadership has a positive effect on knowledge sharing. As outcomes, it found that active knowledge sharing has a positive effect on franchisee satisfaction and compliance. This study also shows that knowledge sharing mediates the relationship between self-leadership and franchisee satisfaction. Practical implications This research advises franchisors to actively develop programs and communication channels for knowledge sharing with franchisees to induce high levels of compliance and satisfaction. Furthermore, as selecting potential franchisees is key to the success of franchising, this research highlights the significance of self-leadership as a crucial personal trait of franchisees. Originality/value Despite the rapidly growing academic interest in franchise knowledge sharing, sparse theoretical approaches and empirical evidence are available. To address these limitations, this research presents an integrative model and empirical evidence.
... These studies reinforce our understanding that franchisees knowingly choose this format while abandoning the alternative of becoming independent. This can be explained by the need for security -a prominent characteristic of franchisees as compared to entrepreneurs (Bennett et al., 2010;Gaul, 2015;Guilloux et al., 2004;Repack et al., 2014). Common franchisee motivations included the desire to become their own boss and the need for self-fulfilment as an entrepreneur on one hand, and the perceived security of a proven business format, trademark, and the possibility of assistance from the franchisor on the other (Bennett et al., 2010;Gaul, 2015;Guilloux et al., 2004;Repack et al., 2014). ...
... This can be explained by the need for security -a prominent characteristic of franchisees as compared to entrepreneurs (Bennett et al., 2010;Gaul, 2015;Guilloux et al., 2004;Repack et al., 2014). Common franchisee motivations included the desire to become their own boss and the need for self-fulfilment as an entrepreneur on one hand, and the perceived security of a proven business format, trademark, and the possibility of assistance from the franchisor on the other (Bennett et al., 2010;Gaul, 2015;Guilloux et al., 2004;Repack et al., 2014). In a recent study, Méndez et al. (2014) made a comparative survey of students who preferred to become franchisees and those who chose an independent business format. ...
... However, since both groups applied rational-thinking models, it does not explain why franchisees felt more satisfied with their choice than entrepreneurs. This may derive from a sense of greater security as compared to starting a new business from scratch (Bennett et al., 2010;Gaul, 2015;Guilloux et al., 2004;Repack et al., 2014), in particular when most of the franchisees belong to one of the successful and viable franchises operating in Israel. ...
... Apart from private units and cooperative retail chains, there are most often small and medium-sized companies with foreign or national capital, organized in franchising networks, whose functioning is dependent on the franchisor. A franchise network organization is a collection of independent entities with no capital ties, constituting a contractual network [70,71]. Contractual agreements can be hard franchise networks, e.g., Żabka, Dino, ABC, Stokrotka (100% of purchases are made by the stores at the Eurocasch wholesaler) or soft franchise networks with Polish capital (only 30% of purchases must come from the Eurocasch wholesaler), e.g., Lewiatan, Chata Polska, and Delikatesy Centrum. ...
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This paper uses Census microdata to examine how starting a business as a franchise rather than an independent business affects its survival and growth prospects. We assess factors that influence the decision to become a franchisee and use various empirical approaches to correct for selection bias in our performance analyses. We find that franchised businesses on average exhibit higher survival rates than independent businesses; but importantly, the difference is small compared with claims in the trade press. The effect is also short lived: conditional on surviving a year or two, we no longer find survival (or growth) differences. We then explore two potential sources for this small survival advantage, namely franchisors’ screening process and the benefits arising from the brand and business know‐how provided by franchisors. We find evidence that both of the sources contribute to the franchising advantage.
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Franchising has been present in Croatia since the 1960s when Diners Club started its Diners Club Adriatic franchise and although it is present for almost 50 years, it is still in its early development phase. There are only 180 franchise chains, out of which 25 are of Croatian origin (WFC, 2016) operating at 1,000 locations and employing around 17,000 people. Franchising is a relationship between two parties – franchisors and franchisees. Franchisees are often perceived as “light” entrepreneurs or frantrepreneurs (Sundbo et al., 2001) and they are people who want to start a business. They do not need to have skills, but they have the ability and motivation to follow a proven business system and they considered to be somewhere between employees and entrepreneurs. If entrepreneurs want to succeed with their business they usually need different skills. In case they lack some of the needed skills, they can take different courses, but in most cases, they will try to improvise, which can jeopardize their potential success in business. On the other hand, franchisors are providing training to their franchisees as part of their contractual relationship. Thus, franchisees receive different education for the potentially missing skills needed for the success of their businesses without any additional costs, since franchisors want to have successful franchisees. So, the question arises, and this is the aim of our paper – what is more important for the success of franchisees (frantrepreneurs) – having money or having skills? The paper looks upon Croatian franchisees from different industrial sectors and tries to answer the set question. Research will be done through interviews with several franchisees in Osijek who have started their entrepreneurial “adventure” through franchising. Based on their responses we will answer our research question and propose further research.
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Although there is considerable research examining the effects of influence strategies on relational outcomes, research has been silent on the effectiveness of influence strategies in achieving the primary objective: channel member compliance. The authors develop a theoretical model that predicts that noncoercive influence strategies (Rationality, Recommendations, Information Exchange, and Requests) with an argument structure that contains more thorough content result in relatively greater levels of compliance. The model further predicts that coercive influence strategies (Promises and Threats) result in compliance only when target dependence levels are high. The authors develop a new influence strategy, Rationality, which represents a noncoercive strategy with a full argu- ment structure. In general, empirical findings support the theoretical model. However, in contrast to expectations, the use of Recommendations had a negative effect on compliance. Post hoc analysis revealed a significant inter- action between trust and Recommendations on compliance, thus providing an explanation for this unexpected result. When trust is low, Recommendation strategies are counterproductive. The authors discuss implications of the findings and directions for further research.
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Purpose – This paper aims to identify the partner selection criteria employed both by franchisors and franchisees in master franchise agreements and evaluate how different selection criteria interact within the selection process and influence the decisions taken. Design/methodology/approach – A single embedded case study of an international hotel firm was the focus of the enquiry. Interviews and document analysis were used as the data collection techniques. Findings – The findings reveal that the establishment of franchise partnership involves a mutual and careful evaluation between franchisors and franchisees to assess whether their partnership criteria are compatible. The partner selection approach determines the extent of importance attached to different task- and partner-related selection criteria. In addition, the study identifies the role that different selection criteria play at different stages of the process. Research limitations/implications – The findings are based on a single case study in the international hotel industry and therefore may not be generalisable to other firms or industry sectors. Moreover, the study comprised master franchise agreements, and this contextual variable may impact on the findings determined. Practical implications – This paper illuminates the challenges both international franchisors and franchisees face in selecting their partners and proposes that both franchisors and franchisees should employ clearly defined selection criteria, utilise a defined selection process and choose their selection approach carefully in recruiting partners. Originality/value – This paper cross-fertilises the strategic alliance and franchise literature to evaluate the interplay of partner selection criteria, process, selection approach and international franchise recruitment. The findings contribute to the understanding of a largely neglected area, franchise partner selection and recruitment, by taking a holistic approach and incorporating the views of both franchisors and franchisees.
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This paper aims to investigate international franchise partner selection from the perspective of different decision making models and analyse the influence of organisational factors on the franchise selection decision making. Empirical data were collected from a leading international hotel group through multiple data collection methods. The research findings indicate that the participant organisation mainly exploits a processual approach to decision making. Power over the decision making shifts to different levels where the necessary information can best be accumulated and interpreted in different stages of the process. Different organisational parameters interact and exert influence upon each other while a franchise organisation decides to choose the most appropriate franchise partner.
Chapter
The task of competition policy is to eliminate or to prevent restraints of competition and not to cause them. For this reason, all legal restrictions of entrepreneurial freedom of action in competition must be examined regularly on the “test bench” of deregulation. The most recent cartel-law interventions in the vertical coordination of the value chains and the resulting rigid limitation of freedom of action in consumer-goods distribution are currently the subject of controversy and viewed increasingly critically in all related disciplines.
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Purpose – The purpose of this paper is to present an integrative systems model of knowledge management (KM) across the franchisor-franchisee-customer triad. The conceptual development of this paper focuses on the areas of knowledge development, knowledge transfer and knowledge use within the context of dyadic monitoring, and key relational outcomes (partner congruence, relationship quality, perceived conflict, opportunism), and performance results (franchisor, franchisee and customer welfare). Design/methodology/approach – This paper critically reviews the relevant literatures in order to address three conceptual goals exemplified by the following research questions. How does knowledge development and organizational learning effectively facilitate knowledge transfer and knowledge usage in franchise systems? What role does monitoring play in the relationship between the knowledge management processes and the welfare of franchisors and franchisees? How does the process of knowledge management (development, synthesis, transfer, usage) influence franchisor, franchisee and customer welfare? Findings – An extensive review of the literature results in ten key research propositions being offered and these are graphically presented in the conceptual model in Figure 1. This model represents a multi-level perspective of KM which provides a solid platform for future empirical studies and further academic discussion. Originality/value – This paper makes two key contributions. First, through adopting an integrative KM perspective it draws attention to many (as yet) unanswered questions concerning the franchise relationship. Second, it re-positions KM research beyond consideration at a singular (firm, employee, supplier or customer) level by focusing on intra-firm and firm-customer linkages in the value creation process.
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Purpose – The purpose of this paper is to present an integrative systems model of knowledge management (KM) across the franchisor-franchisee-customer triad. The conceptual development of this paper focuses on the areas of knowledge development, knowledge transfer and knowledge use within the context of dyadic monitoring, and key relational outcomes (partner congruence, relationship quality, perceived conflict, opportunism), and performance results (franchisor, franchisee and customer welfare). Design/methodology/approach – This paper critically reviews the relevant literatures in order to address three conceptual goals exemplified by the following research questions. How does knowledge development and organizational learning effectively facilitate knowledge transfer and knowledge usage in franchise systems? What role does monitoring play in the relationship between the knowledge management processes and the welfare of franchisors and franchisees? How does the process of knowledge management (development, synthesis, transfer, usage) influence franchisor, franchisee and customer welfare? Findings – An extensive review of the literature results in ten key research propositions being offered and these are graphically presented in the conceptual model in Figure 1. This model represents a multi-level perspective of KM which provides a solid platform for future empirical studies and further academic discussion. Originality/value – This paper makes two key contributions. First, through adopting an integrative KM perspective it draws attention to many (as yet) unanswered questions concerning the franchise relationship. Second, it re-positions KM research beyond consideration at a singular (firm, employee, supplier or customer) level by focusing on intra-firm and firm-customer linkages in the value creation process. An executive summary for managers and executive readers can be found at the end of this issue.
A trend has been developing in the United States towards the use of vertical marketing systems. Of the many types of vertical marketing systems, franchising has become one of the most dominant. This is evidenced, in part, by the nearly one-third of retail sales in 1973 that were through franchised retailers (US Department of Commerce, 1974). The success of the franchise form of distribution hinges upon franchisors and franchisees both contributing skills and resources, frequently however franchisees and franchisors become dissatisfied with the other's contributions and actions. This dis-satisfaction in some cases leads to substantial friction. Although it is not clear that conflict (friction) will always decrease channel efficiency it is probably safe to assume that continued conflict would be dysfunctional in a franchise channel. It is therefore the purpose of this article to discuss and empirically test several propositions about the franchisee's satisfaction with his franchisor.
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We report the results of a survey of key thought leaders within the entrepreneurship field centered on the relationship between franchising and entrepreneurship. Specifically, we asked members of the Entrepreneurship Theory and Practice editorial board whether they consider franchisors to be entrepreneurs, whether they consider franchisees to be entrepreneurs, whether they consider research on franchising to be entrepreneurship research, and how they view the quality of franchising research compared with the quality of entrepreneurship research in general. Their collective responses offer important implications for franchising research. One implication is that franchising research needs to become more theoretically robust. A second is that the concepts of opportunity recognition, risk, organizational size, stage of organizational development, and organizational autonomy need to be taken into account when studying franchising.