Be your own boss? Maybe

Franchising, once seen as the easy way to be an entrepreneur, can be a risky business. By Roger Trapp

Franchising is often presented as a low-risk way for would-be entrepreneurs to set up in business. But, according to a new study of the business concept that has taken the world by storm in recent years, it is not always as successful as is generally supposed.

This is because, suggests the author Stuart Price, franchising goes against most of what is currently preached by management gurus. At a time when they are urging companies to be flexible, adaptable and responsive, franchising "places excessive stress on uniformity and conformity," he says, in explanation of his book's title, The Franchise Paradox.

Mr Price, a consultant specialising in the food and drink industries at KPMG Management Consulting, adds: "How can franchisers enforce standardisation, rather than encourage innovation, and also simultaneously expect fewer failures than independent businesses?

"No one would expect that a company which was prevented from using new ideas and entrepreneurial insight, would survive for long."

Instead of suppressing franchisees' scope for innovation, he urges companies to harness it. "As the pace of product alterations and change continues to accelerate, the capacity to manage successful innovation becomes a critical source of competitive advantage, sustainability and brand value," he says.

"In this environment, the importance of replication and standardisation would appear to offer only short-term benefits to brand value. In order to compete effectively and facilitate survival, the franchiser must harness franchisees' innovative capability in a positive way, by, for example, employing methods similar to strategic alliance."

Pointing out that franchisees tend to be entrepreneurial in their outlook, he says that their daily contact with customers puts them in a position to provide valuable feedback on their demands and needs and come up with ideas for satisfying them. Indeed, the book explains how such staples as McDonald's "Egg McMuffin" and "Big Mac" and the "value meals" offered by Kentucky Fried Chicken and Burger King were developed with the assistance of franchisees.

In addition to putting across this main message, Mr Price looks beyond the myths of an approach that has permeated virtually every service industry, including print shops, fast-food outlets, milk delivery and petrol station shops, to argue that all is not rosy.

While it is often claimed by the industry that franchises are financially five times safer than other small businesses, he points out that success rates vary from business to business - because of such traditional reasons as culture and decision-making.

According to his study of 1,600 UK retail franchises, 70 per cent of franchisers withdraw from the market within the first 10 years of being in business, while 50 per cent leave within the first five years. Though the reasons for withdrawal range from lack of sufficient capital to a perception that the business is not sustainable, the withdrawal rate has implications for those considering becoming franchisees, says Mr Price.

While he has high regard for some businesses, such as the fast-food operations McDonald's, KFC and Burger King, the print shop Kall-Kwik and the drain clearer Dyno-Rod, he stresses that the concept is not universally successful, and that investors - who can be required to put up sums ranging from pounds 50,000 to pounds 1m - need to be wary.

Moreover, those considering such a move need to realise that though advertisements for franchises often play on the idea of "becoming your own boss", becoming a franchisee is some way from genuine self-employment. While it fits the legal definition, the franchise concept's requirement of strict adherence to a variety of rules and regulations means that it is not self-employment "in the true sense", he adds.

Though he says that his research does not always make him friends in the franchise industry, Mr Price stresses that he is a "great fan" of the concept at its best, when "the hype about the franchising industry is absolutely true". But he warns that using specific cases to promote a whole industry is "misleading".

`The Franchise Paradox - New Directions, Different Strategies' (Cassell, pounds 65).

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Morrissey pictured in 2013
people
Sport
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Media

Data Analytics Manager

competitive: Progressive Recruitment: My client who are a leading organisation...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Data Scientist

competitive: Progressive Recruitment: A data analytics are currently looking t...

Insight Analyst Vacancy - Leading Marketing Agency

competitive: Progressive Recruitment: A leading marketing agency have won a fe...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices