The growth of franchising in America and Europe since the 1970s[1-4] has led to this business form assuming increasing impor-tance in a number of academic debates, including the fields of law, marketing, organi-zation theory, services growth, etc. One of the most interesting issues here is the potential of franchising to provide self-employment opportunities. After all, not only are most franchisees small businesses, but so are most franchisors. For instance, in Britain, half of the franchise systems in existence in 1995 were less than five years old and 43 per cent had ten outlets or less[5]. Franchises are based, ideally, on a proven and tried-and-tested recipe for business success. The importance of replication and standardization which this implies would appear to offer a short-lived licence for success in a world undergoing an ever-accelerating rate of change. Thus, the question arises – how do franchise organizations innovate and cope with change? An adjunct to this question is the issue of the role of franchisees who, while not independent in the sense of the conventional small business person, certainly do not see themselves as conventional employees either, and have certain expectations of participation in the processes of which they are an integral part. In today’s environment of rapid technological and market change, shortening product life cycles and changing customer tastes, the strategic management of innovation has attracted increased attention among researchers, particularly pertaining to innovation management and implementation. For example, recent strategic management discourse has been emphatic on how sustainable competitive advantages and superior economic rents derive from the process of innovation. Much of this debate has concentrated on structural, environmental and individual correlates of innovation, rather than developing an eclectic or multidimensional model of the correlates of innovation.Further, while this stream of research and debate has added to the level of understanding of the process of innovation within organizations generally, few texts have examined the causes of, and barriers to, innovation within franchises specifically. This article begins to redress this issue. In particular, it suggests that franchisee autonomy can have a major influence on rates of franchise system innovation. The article represents a distilled overview of what the authors see as the key literature relating to the overridingly important challenge of franchise system innovation.
It does not claim to offer franchise practitioners prescriptive check-lists and “quick-fix”
solutions to their everyday operational problems,though it does point in the direction of broader policy directives. It presents 12 general propositions, distilled from a welter of research conducted, largely, on operational franchise systems, and is intended as a step forward in the task of developing a general model of franchising.
It has been inferred by agency theorists[14,15] that franchising, in itself, is a form of innovation deriving from resource constraints[16].This arises from two perspectives. Initially,franchising permits the parent company to overcome problems of “shirking” and motivation,and thus is a method of reducing the costs associated with managing employees.Others argue that, of ultimate significance to the franchisor, is that franchising is a hybrid capital market[17]. Franchising not only entails semi-ownership, without incurring costs, but provides a constant stream of finance to the franchisor.
There are a variety of definitions of innovation and the relevant literature usually draws a distinction between “innovation” and “invention”[18,19]. “Invention” usually implies
“breakthrough” (often of a technical nature),while “innovation” implies successful commercial use of such an invention, or some novel administrative use of a previously established body of knowledge. Obviously innovations can vary in scale and, for the purposes of this paper, even very modest innovations are of relevance since the cumulative effects of continuous small-scale innovation, multiplied across many business units, can bestow significant competitive advantage[8,20,21]. Technical innovation involves ideas for new products, processes or services. Administrative
innovations permeate fields such as recruitment policies, allocation of resources
and the social structure of organizations. On occasions, the two may be inextricably interlinked[22]. For instance, the early successes of the McDonald brothers in their San
Bernardino fast-food restaurant in the 1950s combined strong elements of both technical and administrative innovation.Initially the McDonald brothers sought technical innovations designed to save labour and speed up the process of delivery to the customer. They began inventing the essential tools of the early fast-food industry[23] such as the hand-held stainless steel pump dispenser
which required just a single squeeze to dispense the required amount of ketchup and
mustard evenly on a bun – a variation of this device is still in use in McDonald’s burger
bars today. Boas and Chain[24], claimed: Each innovation made the service more uni-form; each refinement served the cause of standardization, volume and profit. Speed
constituted the essence of Hamburger Science.Allied to this level of technical innovation came a move away from cooking being a personalized art form, towards the construction of a factory-styled, “Fordist”, assemblyline working like a “crack drill team”[23]. Factory production techniques and principles, “Fordism” and “Taylorism”, had been around for some time but their disciplined application to an antiquated restaurant trade which had traditionally operated on a largely ad hoc and highly personalized basis was truly innovative and initiated the industrialization of service[25]. To some degree, the cultural aspects of managing franchisees are, in themselves, highly relevant to innovation. The franchise literature argues that effective management of franchisees requires a multitude of skills and an organizational culture which is suited to franchising[26]. Franchise management inevitably entails administrative innovation since it requires different skills from those required to manage employees. For some, this is a potential source of conflict since the
franchisor is unable to alter the organizational climate sufficiently to encompass the rigours of franchisee management and the changing nature of the franchisor-franchisee relationship over time.
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