Work­ing within the re­straints of an­other per­son’s sys­tem is not for ev­ery­one, es­pe­cially if you have an en­tre­pre­neur­ial spirit.

Inside Franchise Business - - Contents - AN­DREW TERRY

Pro­fes­sor An­drew Terry talks busi­ness.

One of the most hack­neyed phrases in fran­chis­ing is that “fran­chisees are in busi­ness for them­selves but not by them­selves”. As with so many other hack­neyed phrases, it is a vic­tim of its own suc­cess.

It is be­cause it so suc­cinctly sums up the re­al­ity of fran­chis­ing that is has be­come overused. Fran­chisees do run their own busi­nesses and are legally and fi­nan­cially in­de­pen­dent of the fran­chisor, but they do so in ac­cor­dance with, and with the use of, the fran­chisor’s sys­tem un­der li­cence. In other words, fran­chisees in­deed run their own busi­ness, but within the con­straints and con­trols of the fran­chisor’s busi­ness.

Run­ning a busi­ness within a busi­ness should be a piece of cake. Busi­ness for­mat fran­chis­ing, the con­tem­po­rary fran­chise model, is so called be­cause the fran­chisor pro­vides a com­plete and com­pre­hen­sive blue­print – an en­tire busi­ness for­mat and man­age­ment sys­tems for run­ning a busi­ness.

Busi­ness for­mat fran­chis­ing is a so­phis­ti­cated busi­ness re­la­tion­ship whereby a fran­chisor de­vel­ops an in­di­vid­ual way of do­ing busi­ness and per­mits the fran­chisee to use that sys­tem, in a con­trolled man­ner, in their own in­de­pen­dent busi­ness. It is char­ac­terised by an on­go­ing busi­ness re­la­tion­ship be­tween the fran­chisor and the fran­chisee that in­cludes the prod­uct, ser­vice and trade­mark as well as the en­tire busi­ness con­cept it­self – a mar­ket­ing strat­egy and plan, im­age, com­pre­hen­sive stan­dards, sys­tems and for­mat, work­ing man­u­als, train­ing, qual­ity con­trol and a con­tin­u­ing process of help, guid­ance and su­per­vi­sion.

What could be eas­ier than plug­ging into the proven sys­tem of the fran­chisor? Well, plenty. The will­ing­ness and the ca­pac­ity to work within an­other’s sys­tem is not for ev­ery­one. A fran­chisee needs to be en­tre­pre­neur­ial enough to leave the se­cu­rity of em­ploy­ment and as­sume the fi­nan­cial, man­age­rial, time and other com­mit­ments of busi­ness pro­pri­etor­ship, yet flex­i­ble enough to run the busi­ness in ac­cor­dance with de­tailed and pre­scribed sys­tem pa­ram­e­ters. This is not for ev­ery­one.

The term “in­trapreneur” has been de­vel­oped to de­scribe fran­chisees whose en­tre­pre­neur­ial am­bi­tions have to be re­alised within an­other’s sys­tem. Liv­ing some­one else’s dream is not for ev­ery­one.

Sev­eral years ago when writ­ing about fran­chises, I told the story of a high-school friend who, af­ter 30 years of em­ploy­ment with a sig­nif­i­cant or­gan­i­sa­tion whose poli­cies, strate­gies and busi­ness prac­tices he never agreed with, re­signed in frus­tra­tion and went look­ing for a fran­chise to buy. I made him prom­ise me he would never be­come a fran­chisee as it would lead only to re­crim­i­na­tions and re­grets and grief. He would have driven the fran­chisor mad, and the fran­chisor would have driven him mad. Noth­ing would ever be right.

Fran­chis­ing may have been a good fit for my friend, but only as a fran­chisor who could build the

The will­ing­ness and the ca­pac­ity to work within an­other’s sys­tem is not for ev­ery­one.

busi­ness he wanted and have the ul­ti­mate con­trol over those li­censed to use it.

Some fran­chise sys­tems, of course, of­fer a fran­chisee more scope for en­trepreneur­ship. Es­tab­lished fran­chise sys­tems fre­quently pre­fer multi-unit fran­chisees – fran­chisees who can run mul­ti­ple fran­chise out­lets. The fran­chisor in ef­fect del­e­gates a range of re­spon­si­bil­i­ties to the multi-unit fran­chisees, who em­ploy and train man­agers to run their units.

Run­ning a multi-unit busi­ness, of course, poses greater chal­lenges than a sin­gle out­let, but in ei­ther case the fran­chisees must be pre­pared to be in­trapreneurial while work­ing within the fran­chisor’s sys­tem.

Plato and Socrates sadly never turned their mind to fran­chis­ing, but had they had been asked by a prospec­tive fran­chisee about the wis­dom of run­ning a busi­ness within a busi­ness, they might well have replied with t he an­cient Greek apho­rism that res­onates through their writ­ings:

“Know thy­self”.

Pro­fes­sor of Busi­ness Reg­u­la­tion, Univer­sity of Sydney Busi­ness School, and mem­ber of the FCA Hall of Fame.

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