Is the franchising model attractive to independent small business operators?

Abstract

A shortage of suitable franchisee applicants has been identified by franchisors as a major hindrance to franchise sector growth in Australia. However, there has been little investigation into this issue within organisational choice research. This represents an important gap in the literature. In order to explore the issue of franchisee shortage, it was necessary to determine why individuals chose to enter franchising as a franchisee or why they chose to become small independent business operators. Interviews with 10 franchisees and 10 independent small business operators were conducted in Brisbane, Australia. The interviews investigated the characteristics of franchisees and independent small business operators, and looked for differences between the two groups. Whilst their risk profiles were similar, franchisees were less likely to conduct much research prior to making a business choice. Franchisees considered ongoing support, the provision of training and a proven system with established processes to be very important. Alternatively, independent small business operators preferred to exercise absolute control over their businesses, relying on knowledge and skills gained in prior employment and valuing their independence. Franchising appeared to offer the dual benefits of facilitating entry into business in an unfamiliar industry for inexperienced operators as well as providing a vehicle for growth and expansion for investors with previous corporate management experience. Opportunities for franchisors to attract independent business operators include addressing the negative image attached to franchising and demonstrating that the franchise system is not restrictive for entrepreneurs.