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Franchises without borders

Stephen Spinelli took a fresh look at franchising and found that franchisers can be entrepreneurs if they know how to manage an alliance ...

By Stephen Spinelli 01 March 2007

Stephen Spinelli took a fresh look at franchising and found that franchisers can be entrepreneurs if they know how to manage an alliance relationship.
Franchises without bordersMost of us think about entrepreneurs as people who start a new business. But that is far from the only way to be entrepreneurial. My research has looked at franchising as a growth option for the expansionminded entrepreneur. In fact, franchising, as a strategic partnership model, can help build a highimpact firm.

To arrive at this conclusion, I explored a large franchise company through interviews and observations of the franchiser senior management, their 30 largest multiple unit franchisees, a group of franchisee leaders, and a series of interactive meetings between franchiser senior management and the franchisee leaders. Three other researchers and I sorted and analysed all the data – then we also checked our conclusions against some of the mainstream research about entrepreneurship.

We reached a startling conclusion. Our findings indicate that franchising (as an inter-organisational form) adjusted traditional managerial roles and that the real power of franchising comes to life when it leverages significantly different partner skill sets.

Why a franchise?

The definition of a franchise in the Oxford dictionary doesn’t really denote much vitality: “an authorisation granted by a government or company to an individual or group enabling them to carry out specified commercial activities”. A franchise is formed as a result of two legally independent parties signing a contract (in franchising this is often called a license agreement). This contract calls for a transfer of the business format from the franchiser to the franchisee in exchange for shared rents of the operating outlets. In point of fact, when a vibrant franchise chain exists, it allows an individual possessing a requisite amount of buy-in capital the chance to hop on board a fast-moving commercial train. The franchiser provides the concept, building and operational designs, easy-toorder materials and supplies, and of course promotional considerations.

There are four core reasons to franchise. First, it allows an entrepreneur access to human and financial capital. It also provides short-term growth to meet market competition. A franchise also makes it easier to monitor costs of company-operated units. Lastly, franchising helps you achieve minimum scale efficiency.

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