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Johannesburg - Perhaps one of the most interesting debates around is whether franchising is a form of entrepreneurship.
Critics are split down the middle, with some arguing that running a franchise is a lot like running a business according to a check box report, while others argue that being an entrepreneur is a critical part of running a franchise.
"It is a definitely a form of entrepreneurship," says Bendeta Gordon, a director at consulting firm Franchize Directions, on a Fin24 podcast.
Gordon points out that while there are a number of rules to follow, it is not enough to simply sit back and expect the franchisor to be responsible for bringing business to your door.
"While there might be a lot of national branding by the franchisor, the franchisee still has a lot of freedom to get people in their local areas to support their business," she said.
Johan van Niekerk, an experienced franchisee in the food sector space, agrees: "If you look at how many food franchises there are in the various shopping centres, you realise how much competition there is for that customer."
Van Niekerk adds how important it is to drill staff on being proactive in servicing customers. If the last person in the queue is made to wait too long, they will simply go somewhere else.
The SME (small and medium enterprise) Toolkit prepared by small business funder Business Partners strikes some balance in the debate, noting that whether you invest in your own business or in a franchise, you will be investing all of yourself as well as your resources into the business you choose.
"You owe it to yourself to do enough homework and research to ensure you invest wisely," the firm says.
According to Business Partners, a major benefit of investing in a franchise is that you as the entrepreneur don't need to build brand awareness and loyalty - a costly affair which can require enormous capital outlay.
However, Bruce Wade from the Entrepreneur Incubator is less convinced that franchising is a form of entrepreneurship.
"I have not come across many franchise owners who fall into the typical entrepreneurship framework," he told Fin24.
He argues that franchising is more a case of people being good business managers than good entrepreneurs.
An issue which was raised by business consultant Andrew Sherman in an opinion piece written for the Kauffman Foundation in the US is that one party is building genuine intellectual property or capital, something the franchisee is losing out on. This can lead to animosity about whose interest are being best served.
"Most litigation in franchising and licensing revolves around the gap between the actual needs of the franchisees to remain competitive in the marketplace and the reality of what support the franchisor is capable of providing," Sherman notes.
Another factor to be taken into consideration is how quickly the franchisor can adapt in a changing market place. If entrepreneurial impetus is not coming from the franchisor, franchisees may find themselves not evolving quickly enough.
This is perhaps best highlighted in the US, where the Obama administration is overhauling small business regulation as well as the healthcare sector with potentially difficult legislation.
International Franchising Association (IFA) president and CEO Stephen Caldeira recently told members: "To keep the recovery going, we urge the new Congress and the Obama administration to adopt policies that help, not hamper, businesses' ability to grow and expand."
These include making current tax rates permanent and addressing new healthcare legislation which is "potentially devastating to the franchising community", says Caldeira.
- Fin24
Critics are split down the middle, with some arguing that running a franchise is a lot like running a business according to a check box report, while others argue that being an entrepreneur is a critical part of running a franchise.
"It is a definitely a form of entrepreneurship," says Bendeta Gordon, a director at consulting firm Franchize Directions, on a Fin24 podcast.
Gordon points out that while there are a number of rules to follow, it is not enough to simply sit back and expect the franchisor to be responsible for bringing business to your door.
"While there might be a lot of national branding by the franchisor, the franchisee still has a lot of freedom to get people in their local areas to support their business," she said.
Johan van Niekerk, an experienced franchisee in the food sector space, agrees: "If you look at how many food franchises there are in the various shopping centres, you realise how much competition there is for that customer."
Van Niekerk adds how important it is to drill staff on being proactive in servicing customers. If the last person in the queue is made to wait too long, they will simply go somewhere else.
The SME (small and medium enterprise) Toolkit prepared by small business funder Business Partners strikes some balance in the debate, noting that whether you invest in your own business or in a franchise, you will be investing all of yourself as well as your resources into the business you choose.
"You owe it to yourself to do enough homework and research to ensure you invest wisely," the firm says.
According to Business Partners, a major benefit of investing in a franchise is that you as the entrepreneur don't need to build brand awareness and loyalty - a costly affair which can require enormous capital outlay.
However, Bruce Wade from the Entrepreneur Incubator is less convinced that franchising is a form of entrepreneurship.
"I have not come across many franchise owners who fall into the typical entrepreneurship framework," he told Fin24.
He argues that franchising is more a case of people being good business managers than good entrepreneurs.
An issue which was raised by business consultant Andrew Sherman in an opinion piece written for the Kauffman Foundation in the US is that one party is building genuine intellectual property or capital, something the franchisee is losing out on. This can lead to animosity about whose interest are being best served.
"Most litigation in franchising and licensing revolves around the gap between the actual needs of the franchisees to remain competitive in the marketplace and the reality of what support the franchisor is capable of providing," Sherman notes.
Another factor to be taken into consideration is how quickly the franchisor can adapt in a changing market place. If entrepreneurial impetus is not coming from the franchisor, franchisees may find themselves not evolving quickly enough.
This is perhaps best highlighted in the US, where the Obama administration is overhauling small business regulation as well as the healthcare sector with potentially difficult legislation.
International Franchising Association (IFA) president and CEO Stephen Caldeira recently told members: "To keep the recovery going, we urge the new Congress and the Obama administration to adopt policies that help, not hamper, businesses' ability to grow and expand."
These include making current tax rates permanent and addressing new healthcare legislation which is "potentially devastating to the franchising community", says Caldeira.
- Fin24
