Entrepreneurial opportunities and performance in franchising firms

Abstract

For a field of social science to have usefulness, it must have a conceptual framework that explains and predicts a set of empirical phenomena not explained or predicted by conceptual frameworks already in existence in other fields (Shane 2000). This study explored entrepreneurial oppòrtunities within franchising. On the surface, franchising appears to create a system whose underpinnings are standardization, replication, and compliance with detailed long-term contracts--a seemigly unpromising environment in which to explore entrepreneurial opportunities. I argue that heterogeneity and organizational complexity exist among franchising firms, attributes overlooked in studies that characterized the phenomenon narrowly as a uniform, dyadic relationship between franchisors and franchisees. This study found that contractual provisions, franchisee obligations, and organizational hierarchies varied among franchises, and that a relationship existed between the presence of these attributes and differential performance among franchising firms. As a contractual relationship between distinct entities, franchising is governed by a variety of disclosure, trade, and intellectual property laws. Its contractual provisions and formal disclosure documents defme a formal context in which franchising is conducted. In addition to franchising's formal context, an operational realm also exists, one in which daily operations of franchised businesses take place. This study revealed that franchising's operational realm is not always contained within the defined limits of its formal agreements, suggesting greater franchisee discretion may exist than revealed in the agreement. As a result of organizational discontinuities in franchising's formal context, and franchisee discretion within its operational context, diverse opportunities for entrepreneurship exist within franchising beyond the birh of a franchisor's firm.