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Franchising is an important source of retail business development, both in the U.S. (U.S. Department of Commerce 1988), and in other industrialized nations (Stanworth and Purdy 1994). For the would-be entrepreneur, becoming a franchisee has emerged as a popular alternative to opening a fully independent retail outlet. Some of the systems these franchisees join have become large publicly-traded companies with thousands of franchises and billions of dollars in sales, and some individual franchisees ultimately become the operators of large multi-unit franchises. For the most part, however, individual franchise units are still typically small, family-owned and family-run businesses.
Most business format retail franchises are slim-margin, cash-based operations, and are often staffed by family members for both cost saving and shrinkage control. As one franchising researcher put it, many franchises rely on "the casual use of family labor for business administration" (Felstead 1993). Given franchising's relevance to the development of small family-owned businesses, it is curious why so little attention has been paid to the decision of would-be retailers to eschew independent operation and become franchisees.
Because the ultimate decision whether to franchise a product or service concept rests with the franchiser, research into the motivation underlying the creation of a franchise relationship has focused almost entirely on the franchisor. An impressive amount of theoretical and empirical economic research has been conducted to explain why firms choose to distribute their products or service offerings through franchise channels (see for example, Oxenfeldt and Kelly 1968; Caves and Murphy 1976; Rubin 1978; Williamson 1979; Brickley and Dark 1987; Martin 1988; Norton 1988; Lal 1990; Lafontaine 1992; Kaufmann and Lafontaine 1994; Lafontaine and Kaufmann 1994). On the other hand, the reasons why individuals join franchise systems and the characteristics that predict which individuals are likely to be interested in becoming franchisees have received little attention (Peterson and Dant, 1990; but see Bradach and Kaufmann 1988; Stanworth, et al. 1989; and Stanworth and Purdy 1994).
In this article, we explore some of the reasons why individuals become franchisees instead of employees or independent operators. We examine the characteristics that typify franchisees, and attempt to formulate a method for identifying likely prospects. We begin by discussing some of the theoretical bases which have been offered as a rationale for the creation of...