Are Franchisees Entrepreneurs or Employees? Why Should You Care?

Since the late 1970s franchising professionals have debated whether or not franchisees are entrepreneurs. The debate still goes on; some claim franchisees are just employees who buy themselves a job, while others claim franchisees are just entrepreneurs who choose to buy a business instead of building one. Some people base their argument on the literal definition of the term “entrepreneur” while others go further and take into consideration its connotations. You may say that it all boils down to semantics, so who cares, right? Well, all franchisors should care. This is not a philosophical or academic question; it’s a strategic and operational one.

The term “Entrepreneurship” is not restrictive and unyielding; instead it’s fluid and flexible. In franchising, we must look at this term not as an absolute, but more as a scale, not as the literal definition, but more as the complex concept it captures. And, the success of your franchisees, as well as their ramp-up and satisfaction, depends on how well you understand what the Entrepreneurship Scale means to your system. 

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Franchisees, like all people, are complex beings—each one holds a different combination of personality traits, experiences, expertise, learning styles, preferences, strengths, weaknesses, beliefs systems, and habits that make them unique. To hold the perspective that all franchisees are entrepreneurs or that no franchisees are entrepreneurs is equally dangerous. Both premises are oversimplifications that can take a franchisor in a totally wrong direction. Instead, consider that every franchisee falls on a different position on the Entrepreneurship Scale. Thus their success greatly depends on how well you define and mold your business model, the franchise sales process, the training and support programs and the tools you incorporate in your business so as to address these differences. If you don’t, successful results will remain a game of luck instead of one of skill. It’s just that simple!

Although franchise success starts with a valid business model, the success of individual franchisees begins with a clear definition of that model as well as of your culture, and furthermore hinges on your proficiency at granting franchises to those people who better match your company. For example, franchisees who are closer to employees on the Entrepreneurship Scale tend to get better results in a company that has a highly supportive culture and a more structured model with stricter controls, clearer benchmarks, and systems.  On the other hand, those closer to the entrepreneur end of the scale will be more productive in less restrictive systems. So, if tight controls are important to you, a person closer to the ultimate employee will be a better match for your company. 

The irony and challenge of franchising is that most franchisors search for individuals whose traits are closer to those held by the ultimate entrepreneur. Let’s face it, most of us prefer to deal with people who are self-motivated and totally committed to success. These people move faster through the sales process and are quicker to make a decision. Yet, this type of individual is by nature more independent. Think about it, the people who are more likely to invest in your system are the same people who will be most prone to resist the system in which they invest. On the other hand, those people who tend to be better at following your system are less inclined to choose business ownership, and thus to invest in your franchise offering.

Although the success of individual franchisees starts with a good a match, it doesn’t end there. No matter how hard we try or how many tools we use to benchmark and select franchisees, there is simply no way to ensure a perfect match every time. After all, we are dealing with people and the reactions of the most predictable of human beings can’t be fully anticipated at all times and under all conditions. This means that franchisees are always going to be a mix, some closer to our ideal combination and some farther away from it. Therefore the success of every single franchisee ultimately rests on how well you adapt your system, training, communications, and support to each individual so as to empower him or her to follow your system as closely as possible. The ultimate paradox of franchising is that in order to get the consistency and uniformity inherent in franchising, we must use tailor-made training and support systems.

Franchisees who are closer to the ultimate employee end of the scale will require more support, more caring, more direction, and more coaching and communication in order for them to be able to absorb the information and apply it. On the other hand, franchisees who are closer to the ultimate entrepreneur will need less direction, more listening, less structure, and if you want to keep them from deviating from your system, you have to keep a closer eye on them since they will have a greater tendency to do their own thing which can damage your brand and also cause them to fail.

So, does the debate about whether franchisees are entrepreneurs or employees matter? You bet it does! Success in franchising is crafted, not something that just happens by pounding franchisees to follow the system. Understanding the nature of franchisees and how they learn is a crucial step in designing franchising systems that engender success.

Comments

  1. Brian K. Miller says:

    Great article Lizette. But that’s no surprise, since you one of the “thought” leaders in franchising. I once heard the term “intrapreneur” and felt it described franchisees perfectly. We want people that have that fire in their belly, and understand the business doesn’t make the owner successful, the owner makes the business successful. Yet, we expect them to follow a system. Maybe they don’t have the initiative to build a system from scratch, but they understand they can use their unique abilities to be successful using someone else’s system. Intrapreneur’s are generally proactive people who get things done. Intrapreneur’s can be found inside companies as employees, and often they are the people who continually get promoted because they are the “go-getters.” I think your article is dead on. If we find someone that is too entrepreneurial, they generally won’t like following a system and in some extreme cases, it creates a blind spot for them, where the need to be “right” overrules the logic of following a proven system. However, on the other hand if you award a license to someone that is too close the pure employee mentality, their behavior may be too reactive vs. presenting the behavior it takes to be successful as a franchisee –being proactive. Having said, that Intrapreneur’s need a track to run on, and it’s the responsibility of the franchisor to provide excellent training in both sales and operations. More importantly, they need to also create an on boarding system that provides the support that is necessary throughout the entire ramp up period. In school we learned the 3 R’s meant: Reading, Writing and Arithmetic. And that provided the basics for us to be successful students. In franchising it’s the right franchisee, the right model and the right training which spell success.

    • Thank you for engaging in the discussion Brian; and,for your wise addition of the term Intrapreneur…. Indeed, these are the types of people who make ideal franchisees. I was thinking further about franchisees who are closer to the ultimate entrepreneur. I love how you point out their need to be “right”. I have seen that this need is sometimes even greater than the desire to succeed….and we all know where that leads. I am and will always be fascinated by this topic. Thank you again for such well thought out comments!!!

  2. Lizette,

    What a great article. Having lived on both sides of this equation I can see this picture crystal clear. Both sides have great intentions, however, when things don’t go just right, the finger pointing begins and disappointment sets in. Your view accounts for the challenges and rewards that are faced by all.

    Once again you demonstrate your uncanny ability to deliver , on point, a view that takes both sides in order to solve the equation.

  3. Well, this is a hard question. I have worked at both ends of the stick and even been the in between of the both of them by working for the McDonald’s Corp to work with Franchise Operators do a better job because they have to follow McDonald’s Blue Book Policies. When I was at Hamburger University in Oak Brook, IL I heard a lot of how the corporation tries to install Ray Kroc’s business practices into the franchise’s mind. If you own a right to sale Big Mac’s you must follow the corp’s way of doing things. Now as the CEO of a business I have every right to run it the way that I see fit, good or bad. That is the price you have to pay for being on your own. But it is still freedom, real freedom to have your own company and to do your own homework to make your company run in the black. I do have to say there is a difference in being a Franchise Operator and CEO of your own company and I know the different for sure.

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