Do I Need to be an Entrepreneur to Become a Franchisee?
The debate about whether you need to be an entrepreneur to become a franchisee or not, has raged in academic circles for some time now. Does a new Franchise need an Entrepreneur to make it successful, or has franchising become less needy of entrepreneurial spirit?
On the one hand there is the contention that some franchisees are less like entrepreneurs than non-entrepreneurial managers. This is despite the fact that there are obvious risks and rewards for the franchisee, similar to being an entrepreneur. The business model and concept in franchises have also already been developed and implemented with the assistance and support of the franchisor.
Why are Franchisees not considered to be Entrepreneurs?
- Entrepreneurs are the kind of people who are willing to take the risks that come with starting a new stand-alone business. These businesspeople would have examined all aspects of their chosen independent business model, and considered the obstacles their start-up business may encounter, making sure that they have planned accordingly.
- By joining a franchise system, on the other hand, you can avoid unnecessary trials and errors involved in starting-up a new business. Investing in a franchises business normally also involve lower investment costs, higher profit margins, as well as proven systems and processes. This means there is a significantly lower risk for the aspiring business owner.
- For this reason, a franchise makes it easier for first-time business owners to succeed, by giving them access to established, successful business processes and systems. An independent business owner has to develop and test his/her systems and processes, magnifying his/her risk of failure.
- The argument that franchisees are not entrepreneurs, is given further impetus by the requirement of the franchise concept to closely follow the rules and requirements of the specific franchise system, limiting the franchisees’ decision-making autonomy.
Where Entrepreneurship is Franchising, can we marry the two?
Franchisees can be regarded as entrepreneurs in the most important meaning of the word – they put their own capital at risk, seeking the best return on investment. In addition, franchisees assume the risks of ownership and sometimes have to be innovative to ensure the success of their franchises.
Contrary to the popular misconception that buying and running a franchise outlet is easy, the truth is that, although a franchise system offers start-up training and long-term business support, the franchise owner, must be willing to run the day-to-day operations and manage every aspect of the business.
In this regard, a franchise owner has to be hands-on in the business and probably work harder, longer hours, than he has ever done before.
Franchisors could also benefit from having franchisees with these entrepreneurial skills. Franchise operators with entrepreneurial skills tend to perform better, and tend to purchase and successfully operate multiple operations over time.
In a successful franchise system, the franchisor and franchisee are required to work together as a team. In this context, the concepts of entrepreneurship and franchising can complement each other well.
In this close relationship, the franchisor provides the proven business model, trademarks, branding, marketing and operational systems. The franchisee often brings intimate knowledge of a specific region, and the ability to closely follow rules and requirements, while building and expanding the franchise brand.
Therefore, just because a franchisee buys assets (often intellectual capital) that limit his/her risk, it does not in any way mean that all risk is eliminated. The need for an entrepreneurial approach and skills can therefore be regarded essential characteristics for prospective franchisees.