Entrepreneurial franchisees

Today's business environments are becoming increasingly complex and dynamic, and competition continues to intensify. Entrepreneurship is gradually being recognised as an important strategy for achieving sustainable competitive advantage and superior performance within regional, national and global markets. Studies have shown that the effects of entrepreneurship on organisational performance include business growth, for example, increase in sales, market share and profit. Indeed an increasing body of research suggests that organisations that are not open to entrepreneurial initiatives, in a world that is changing extremely rapidly, may want to question whether the adoption of a non-entrepreneurial culture is appropriate.

Although entrepreneurship is often associated with the formation of new firms, the term is much broader than this. It also encompasses the creation of new combinations and innovations within existing organisations - in other words, the introduction of new product lines, new service offerings, new methods of production/operation, new sources of supply and the opening up of new markets. These suggest that, clearly, entrepreneurial activities and orientations should be applicable and beneficial to various types of firms, regardless of whether they are large, small, new or established organisations.

All that said, there are usually controversies as to whether franchisees can act entrepreneurially within their outlets. This is mainly because the business format franchising concept is built on uniformity throughout a system. As a result, the mechanisms for harnessing entrepreneurial behaviours among franchisees remain virtually unexamined. Yet the promotion of an entrepreneurial culture could also enable franchised firms to increase their adaptability to the different local market conditions in which their franchisees operate.

The following discussion provides recommendations on how to nurture an entrepreneurial climate within franchise systems, while at the same time protecting the franchisor's brand. The suggestions were developed from a series of interviews and surveys that I conducted with a sample of just over 100 franchisors and franchisees, operating in various regions and industry sectors in the UK, as well as in other countries.

Organisational values

A firm's core principles are key to fostering (or constraining) corporate entrepreneurship within an established organisation.

In order to encourage the recognition and exploitation of entrepreneurial opportunities among franchisees, franchisors need to institute values that would strengthen entrepreneurial awareness and dynamism within their systems. These could include:

•    Granting franchisees some form of entrepreneurial autonomy in their day-to-day operations
•    Establishing open means of communication for information sharing among franchisees; setting up regional, national and international franchisee forums for the discussion and generation of entrepreneurial ideas
•    Having organisational values that are competition centred
•    Incorporating entrepreneurship related issues into franchising contracts
•    Having a management support system for promoting entrepreneurial activities.

Franchisors whose interests lie in developing a strong entrepreneurial system may consider implementing the above organisational antecedents of entrepreneurship. In addition, franchisors should communicate these organisational values widely and effectively to their franchisees in order to ensure that they all fully understand the culture of their firms, with regards to entrepreneurship.

Recruitment and selection of franchisees

The selection of appropriate franchisees is a major prevalent problem within franchise systems. In the recent, annual NatWest/British Franchise Association Survey (2008), a lack of suitable franchisees was reported to be an on-going problem among franchisors. Without a doubt, the careful selection of appropriate franchisees plays a vital role in the maintenance of a healthy franchisor-franchisee relationship and in the growth of the franchisor's system.

Franchisors are faced with the crucial task of identifying potential franchisees who are most likely to succeed in the long term, drawing on factors such as the availability of sufficient financial resources, previous experiences and personal qualities. However, it appears that many franchisors do not explicitly include entrepreneurial attributes in their franchisee selection criteria.

It is important to ensure that adequate measures are employed to recruit the right set of franchisees who provide the best fit for the franchisor's entrepreneurial expectations, in order to maintain a sustainable entrepreneurial firm. Although it remains a subject of debate whether robust entrepreneurial traits can be identified, recent studies have suggested that with the use of reliable and well-validated instruments, it should be possible to recognise an entrepreneurial individual successfully. Therefore, entrepreneurial individuals could be recognised from the pool of prospective franchisees via psychometric tests.

Entrepreneurship training programmes

People have often pondered whether entrepreneurs are born, or whether they are made. Although some outstanding individuals are born entrepreneurs, research conducted in recent years, especially in business schools, has suggested that the qualities and behaviours typical of an entrepreneurial personality can be learnt and developed.

Based on this premise, franchisors may want to provide opportunities for the acquisition of entrepreneurial attitudes among their franchisees. These could involve creating personal development training programmes to augment any specific entrepreneurial skill(s) that may be lacking in franchisees. For example, specialised in-house seminars and workshops can be organised to provide educational processes and hands-on techniques, which can enable entrepreneurial flairs to flourish. These could focus on promoting personal and team qualities that are relevant to entrepreneurialism, for example, learning processes on creativity, risk-taking, proactivity, and opportunity recognition. Franchisors could also supplement these internal programmes with the recommendation of relevant external (networking) events.

Moreover, many franchisors tend to realise that a lot of their franchisees are not usually comfortable with marketing. As a result, it appears that franchisors pay considerable attention to the provision of marketing training, while relatively neglecting entrepreneurship training. Franchise systems can incorporate entrepreneurial dimensions into their existing marketing tutoring. These may further enable franchisees to introduce innovative approaches into various aspects of their firms' marketing activities, a process now frequently referred to as 'entrepreneurial marketing'.
 
Monitoring of entrepreneurial initiatives

While some franchisors have certainly recognised the importance of encouraging entrepreneurialism within their systems, others have argued that providing room for entrepreneurship within franchised outlets may be damaging to an established business format.

The latter view is not surprising, given that franchisors generally want franchisees who will follow their systems, and not people who will reinvent the wheel. However, with properly structured processes, entrepreneurship may not necessarily disrupt a franchisor's standardised procedures and operations.

When attempting to foster entrepreneurial capacity within a franchise environment, strong frameworks for the close monitoring of entrepreneurial activities should be put in place. These will guide against franchisees going beyond the set boundaries and remit of the business.

The frameworks could involve the use of formalised approval schemes for finalising franchisees' entrepreneurial ideas. Franchisors may also employ experienced business development coordinators to act as middlemen between them and their franchisees. Hence, the adoption of formal monitoring mechanisms to evaluate, screen and supervise franchisees' entrepreneurial efforts may help to protect a system's brand from prohibited changes.

The author wishes to acknowledge the support of the Economic and Social Research Council (ESRC), grant number PTA-026-27-1853.