Franchisees’ Activities as Entrepreneurship
2013 (English)Conference paper (Other academic)
During the last decades, franchising has turned into one of the fastest-growing business forms. Research in franchising has been viewed through the four major perspectives of economics, strategy, marketing and entrepreneurship. Although there is a consensus that the franchisors’ activities are considered as entrepreneurship, this notion is disputed with regard to franchisees. A paradox in entrepreneurial activities of the franchisee has caused doubt in considering franchisees’ activities as entrepreneurship. On the one hand, in a franchisee context, some believe opportunity is always identified and that the franchisor helps the franchisees in exploitation. On the other hand, the opposing view considers a franchisee as an entrepreneur who focuses on opportunity, risk and innovation. Ignoring the franchisees’ capabilities and abilities in innovation and introducing new products can prevent a franchise system from taking advantage of environmental change. Therefore, due to the importance of identification of unique aspects of entrepreneurship research rather than unique definition of entrepreneurship, and attention to entrepreneurial process as a core unit of analysis, this research will examine whether franchisees’ activities can be considered as entrepreneurship. According to the Shane model, the entrepreneurial process involves the existence of profitbased (objective) opportunities, risk-taking and some kind of innovation. Nature of opportunity in franchised outlets is closer to Kirznerian's view than Schumpeterian's view. Sources of opportunities in franchised outlets are not so clear, like the introduction of a new restaurant in a storefront where none had existed before. In Schumpeter's view, according to different types of innovation, franchisees’ operations involve product-market innovativeness to include market research, product design, and innovations in advertising and promotion. Regarding risk-taking as the third dimension of the entrepreneurial process, franchisees risk their capital. Although it seems in franchise systems that risk for the franchisee is, to some extent, shared with the franchisor, no franchisor will be able to eliminate the financial, business and personal risk of the franchisees. The franchisor also transfers the risk of expanding into new markets to the franchisees. In sum, franchisees do almost all of the functions of other entrepreneurs, except generating new ideas in the initial step of running a business.
Place, publisher, year, edition, pages
Franchisee, entrepreneurship, innovation, entrepreneurial opportunities, risk-taking
Engineering and Technology Economics and Business
IdentifiersURN: urn:nbn:se:liu:diva-103321OAI: oai:DiVA.org:liu-103321DiVA: diva2:688371
WEI International Academic Conference Proceedings, 94-104, January 14-16, 2013 , Antalya, Turkey