Small business growth through franchising : A qualitative investigation

Abstract

Although franchising has long been recognised as an attractive means of growing a business, the impact of franchising for small businesses is an area that is relatively less researched and understood. Whilst resource scarcity and agency theory suggest many potential benefits to franchised firms, small businesses wishing to franchise are likely to encounter a number of challenges in translating their business concept into a successful franchise operation. This paper seeks to provide an insight into the challenges franchised firms are likely to face and considers the implications of franchising for small businesses' growth. Given the relative paucity of research in the area, this study has utilised a case study approach in order to provide a rich description and insight into the experiences of six businesses which have tried to expand using franchising, three of which have successfully grown, and three of which have subsequently withdrawn from franchising. It appeared that many of the failed companies were not prepared for the differing nature of the franchisor-franchisee relationship. In addition, the findings suggest that for businesses to franchise successfully, recruitment of suitable franchisees is vital. However, in the early days of system development the ability to recruit may be impeded by the system's lack of perceived legitimacy. This is likely to be exacerbated in periods of relative economic prosperity, when all franchise systems appear to find it more difficult to recruit. The results highlight the need for future research to explore further some of the key issues raised.