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Innovation In Franchise Business Essay Example

Innovation in Franchise Systems

Recently, a great number of franchise businesses operating as organisational set-ups have developed around the world. Franchisors may tactically choose to use the scheme in their business so that they can improve competitiveness on equal terms with other similar business enterprises. Most of the highly performing industries in the world have opted to run their businesses using the franchise method because it is an effective means of decentralizing their operations. In addition, multiple chains are created, without the franchisor incurring extra costs in building sites for its supply chain or the cost involved in running it. However, this does not dispense the head companies from contributing towards the effectiveness of the franchise business. They have a responsibility that they should bear in order to enhance the success of the business.

The efforts implied by this responsibility are directed towards the individual distributors commonly referred to as the franchisees. For instance, the head companies should assume certain responsibilities that may act to promote innovative behaviours among the franchisees. In doing this, they should make sure that they are not interfering with the franchise system standardization. This paper seeks to discuss and analyze the different activities that the franchisors perform in order to promote innovative behaviours among the franchisees, without damaging the franchise system standardization. The current paper has identified recognition of new ideas in annual general meetings, the use of a franchise council and the presence of franchisee in the franchise headquarters being a champion of innovation as some of the key issues that franchisors should do to enhance franchisee’s innovative behaviour.

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Standardization Process

The practise of franchising is generally designed around standardization. Standardization in franchising is the process of attempting to minimize variance of operations through the development of business practices and patterns that must be adhered to by all the practitioners. The franchisor introduces rules and policies to ensure that his/her unique business practices are replicated throughout the entire franchise system, without any omission or commission of his/her business policies. The success of the franchise system depends greatly on the adherence to the standard system, which entails the provision of standardized services and products across all the parts that the franchise system serves (Cox & Masonn 2007).

Standardization Process versus Promoting Innovativeness

The franchisor must exercise the responsibility of controlling the franchisee so that he/she can minimise the risk that can arise in terms of opportunistic agents, adherence to the franchise contract and for the purposes of protecting the brand name (Zachary, McKenny, Short, Davis, & Wu 2011), According to the agency theory, business ventures such as franchise must ensure that the business is cushioned from losses through either increasing the monitoring activities or allocating an enduring decision making rights to the individual franchisee. In contrast, with increased behavioural uncertainties among the consumers of the products and services, the leadership of the franchise should be inclined to bestow more freedom for decision-making among its franchisees. In this case, local entrepreneurs (franchisees) will be able to analyse the local market trends that influence the buying patterns of the consumers and act according to the specific feedback from the data they collect.

Methods Franchisors Can Use to Promote Innovativeness among Franchisees

One of the methods that the franchisors use to ensure that the franchisees are innovative while still compliant with the laid out regulations is selecting those that have low entrepreneurial tendencies. This tactic ensures that there will be minimal tendencies by the franchisees to disregard the standard process. In addition, the franchisees selected must ensure that they adopt the consistent brand image so that efficiency and standardization is achieved.
Although, to a great extent, some franchisors would accept to work with entrepreneurial franchisees due to their innovative capabilities, the possibilities of deviating from the standard system limit their choice. With reference to organisational identity theory, different franchisors are likely to accept entrepreneurial franchisees, those who can be independent business thinkers, proactive, innovative and risk taking (Barthélemy 2008). This can be achieved only if the organisation and customs of the franchise practices values are aligned with the organisational identity of the franchisor. The support systems from the franchisor must contain an endorsement showing his/her intentions to facilitate the franchisee entrepreneurial behaviours (Blut, Backhaus, Heussler, Woisetschlager, Evanschitszky & Ahlert 2011).

Franchisors can try to encourage the creation of franchise-based communities or the ‘franchise associations’, which can be rich storehouses for institutional knowledge. This knowledge can be very useful in the formation, distribution and safeguarding the firm’s particular intelligence (Lawrence & Kaufmann 2011). Franchise associations may assist the different players to introduce strong ideas that could contribute to the success of the firm.

Encouraging the creation of the local or grassroots’ associations will lead to members hosting local meetings, which may also be used to celebrate the innovations that the local members may have made. The leaders of these local groups can be trained on how to handle the innovation in such a way that it does not breach the expected standards of the firm. According to Dada and Watson (2013), the existence of such support mechanisms emanating from the top management team of the firm will positively motivate the franchisees to indulge in various creative activities (Dada & Watson 2013). Local leaders of the associations will be the people who will perform functions of quality assurance to ensure that the standards of the operations are adhered to.

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From another point of view, franchisors can encourage the franchisees to operate mini-chains that resemble the franchisors business values with limited scope of innovation. For example, they may exercise greater operational flexibility and independence but will be less urged to maximize on the available opportunities (Clarkin & Rosa 2005).

The chain of communication for decision-making purposes should be decentralized to ensure that viable ideas are implemented within the shortest time possible. The reduction of the decision-making layers is important for a franchise (Atuahene-Gima & Wei 2011). In this case, ideas coming from individual franchisees will be implemented within the shortest time possible. This encourages them to introduce more ideas. Consultation with the lower level distributors (franchisees) also acts to minimize the possibility that the franchisor can make uninformed decisions, which may affect their brand. From the franchisee’s point of view, being consulted gives them the hope for a well sustained system, which makes them engage in long-term planning activities, something that encourages creativity and thus innovation.

Franchisors should grasp background knowledge that all the global societies have their diverse ways of doing things (Combs, Michael & Castrogiovanni 2009). Practices differ from one person to another, and culture is one of the aspects that are likely to affect the mode of operation of every business. If the franchisor allows the franchisee to source for information on how different business practices can be implemented in diverse areas, the franchise business is likely to thrive. Again, the decisions made should be limited to the local players who may have local leaders responsible for guiding the operations of the business within that particular locality or region (Atuahene-Gima & Wei 2011).

A research conducted found out that most of the franchisors use coercive, both formal and informal mechanisms to contain and monitor the performance of franchisees so that they can be able to protect the image of their brand (Zachary, McKenny, Short, Davis, & Wu 2011). The excessive control mechanisms may lower the morale of the franchisee because different people harbour the need for independence, autonomy and self-fulfilment according to Maslow’s hierarchy of needs theory (Maslow 2013).

Normally, multiple units, master franchisee have been brought close to the franchisor himself/herself and can be able to share the relevant information with the seniors more easily than the single unit franchise owners (Covin & Lumpkin 2011). In return, they are allowed to engage in uncontrolled innovative practices involving cooperate entrepreneurship, activities the single unit owners may not be permitted to do (Zachary, McKenny, Short, Davis & Wu 2011). Rules and regulations of the franchise businesses should be standardized for everyone, with all the players being exposed to similar operational conditions. For example, single unit franchise owners should also be allowed to practice regulated business activities that allow them some room for innovation while, at the same time, observing the standard regulations.

Some of the greatest factors that promote entrepreneurship, especially in the franchise business, are the existence of organisational support with informal intra-organisational boundaries, open forms of communications, as well as rewards and support from the management. Maintaining consultative approaches with the franchisees will assist in the success of the franchise because it is more likely to promote the cooperation between the two parties. It is also directly linked with enhancing the innovation and satisfaction and thus improve the performance of the franchisee (Dada, Watson & Kirby 2012).

From relational exchange theory, symbiosis strategy can be used to promote innovation among the franchisees. Creation of relational value in investment can be important to both the business owner and the employee. In the franchise business, the owner is the franchisor while the employee is the franchisee. The franchisor must demonstrate high level of trust towards the franchisee (Barthélemy 2008). For example, he/she must trust that the franchisee will uphold the best ethical practices that are in line with the standards of the business. In return, the franchisee will feel valued and motivated to engage creatively in the activities of the business. This creates total partnership satisfaction. Furthermore, researches conducted have proved that high level of trust from the employer to an employee is likely to increase their level of commitment and creativity (Barthélemy 2008). In such a way, this increases the chances of the franchisees to become more innovative because creativity drives innovation.

However, the trust should not be used as an absolute measure of awarding autonomy. Although some researchers argue that autonomy among the franchisees would assist to improve the level of sales in the franchise business, others contend with the fact that excessive freedom may act to damage the system (Zachary, McKenny, Short, Davis, & Wu 2011). For example, there could be a tendency of free-riding by most of the franchisees through the use of the brand name of the firm. Some can capitalize on the given freedom to engage in entrepreneurial activities that ultimately deviate from the core principles of the business entity.

As opposed to the traditional employment procedures, franchisees are employed but, at the same time, given enough space for individual decision-making on several issues such as deciding when to work. There is a partial sense of feeling one being his/her own boss. To reduce frustration associated with the traditional working environment, franchisors could ensure that they devote some time to training their workers on how to think broadly in an ever-changing and competitive environment. They should offer their franchisees free learning guidelines that serve to equip them with the necessary sales skills (Barthélemy 2008). Updating them on the current sales technique is one way of attracting innovative behaviours.

Franchisors should involve the franchisees fully, almost similar to a partnership system. Franchisees are treated like genuine parts of the system’s decision making processes. This will act to motivate the franchisees. In the same manner as the Total Quality Management( TQM) system works, the franchisor should aim to treat the franchisees as ‘equals’ though they are aware of their superiority. This kind of a pseudo relationship between the franchisor and the franchisee in the business gives a false illusion that the franchisee fully owns the business, which is in itself a motivating factor. However, the franchisors should ensure that the legal terms in the agreement for operating the business by the franchisees are well stipulated and that there are very minimal, if any, loopholes that the franchisee can use to manipulate the business (Lawrence & Kaufmann 2011).

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Franchisors need to assess and apply rightful control mechanisms relative to the prevailing circumstances of every franchisee. Different franchisees strive to achieve diverse results since they are motivated by different things as they work. Control mechanisms established by the franchisor need to put such factors into consideration. There may be some franchisees who may be employed somewhere else while others may practice franchise as a full time activity.
On the one hand, different researchers contend with the fact that franchisors need to indulge in continuous control mechanisms, which ensure that they protect their reputation towards their immediate as well as anticipated consumers, brand image and the general reputation of the firm (Sherman 2011).

On the other hand, other researchers argue that franchisors need to be aware of the diverse approaches the franchisees might use in performing their business activities to allow for innovation (Kestenbaum & Genn 2008). This will assist them to adopt different control mechanisms to be applied to different people. The application of the different control mechanisms is supposed to ensure that franchisees experience satisfaction based on how they perceive the treatment they receive from the business owners (franchisors). There are certain control mechanisms that lead to dissatisfaction among the franchisees. Sometimes, the control approach franchisors use may inhibit creativity, which also lowers the rate of innovation (Kestenbaum & Genn 2008).

Although the success of the franchise system depends on the efforts of the franchisee, the franchisor also plays a great role to support them. The franchise company needs to make sure that it protects the brand of the company on behalf of the franchisee (Sherman 2011). The reason for this is the fact that it is one of the main tools that they use to sell the products in the local markets. The brand of the company is the first impression the franchisees use to win the trust from potential consumers.

Franchisors should create a system that offers support to the franchise system at all levels. Some of the organisations usually offer support to the entire system. The support can be availed in terms of training, materials and ongoing support plans. Offering guidance and advice is one of the methods that can also be used to enhance creativity among the franchisees. For example, the franchise system may advice the franchisee that simple ideas may create unimagined results in a business; for example, such ideas may include returning phone calls. Frequent encouragement is another possible method that franchisors can use to facilitate innovativeness among the franchisees. Once the franchisee discuss with their upper-lines in the chain, they can be able to frequently get ideas they can use to deal with the daily challenges that they encounter.


There are diverse techniques and methods that franchisors use to enhance innovation among the franchisees in a franchise-based system. The success of any franchise system has been elaborated through the use of different theories, such as agency theory and organisational identity theory. However, as the main player, franchise owners play a crucial role in imparting innovative skills to the franchisees, which enhances improved performance. Some of these activities include offering social support, rewarding innovative ideas, balancing their control mechanisms to fit different environments that franchisees operate from, encouraging and accepting ideas from franchisees, among others. At the same time, the franchisees need to understand that the standard principles of operation should be upheld for success to be witnessed. Successful relationship between the franchisors and the franchisees is a great tool that may motivate the franchisees to indulge in innovative ideas.


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