The Problem and Solution to Recruiting Entrepreneurial Franchisees

vets_miles-zachary_professional_pic.jpgRecruiting entrepreneurial franchisees seems intuitive, but comes with challenges that may undermine a franchise and hurt the bottom line

It seems logical. A great way to recruit hardworking, dedicated franchisees is to appeal to their “inner entrepreneur.” That is, better potential franchisees will be attracted to franchises that explain the franchising opportunity using entrepreneurial language, like “be your own boss”, “opportunity to grow a business” and “gain your independence.” Indeed, many franchises use precisely these phrases in recruitment materials. After all, franchisees are entrepreneurs, right?

The frustrating answer to this question, like many in business, is ‘it depends’. Primarily, it depends on the person. Some franchisees possess traits we typically associate with entrepreneurs – i.e., they are innovative, proactive and willing to take risks. Other franchisees are more akin to managers – i.e., they are organized and willing to lead, but not necessarily looking to “shake things up.”

But for franchises, is it better to recruit an entrepreneur or a manager? Somewhat surprisingly given the conventional wisdom, recruiting more entrepreneurial franchisees may invite trouble. According to our research, franchises that attempt to brand their franchise opportunities to attract more entrepreneurial franchisees generally perform worse than those that do not.

But why?

Consider the franchising business model. The basic idea is to recruit individuals with industry experience and the financial resources to open a business offering the franchise’s products and services to customers. Franchisees benefit from a proven business strategy and established brand awareness and franchisors are able to rapidly expand their business with minimal capital investment. Win-win.

The problem with recruiting entrepreneurial franchisees is they may not be satisfied with simply following the proven recipe laid out by the franchisor. Instead, they may decide to develop and offer new products and services, create unconventional advertisements and promotions, or stray away from routines outlined in the operations guide. While there are a few examples of rogue franchisees developing the next big thing, such as the Egg McMuffin or the Big Mac at McDonald’s, many changes introduced by a franchisee are more likely to undermine the brand than elevate it.

That’s because customers of franchises tend to favor consistency over novelty. For instance, while McDonald’s and Burger King are unlikely to win any awards for the quality of their food, customers gravitate toward them because it tastes good enough and is consistent with their expectations.

So, when franchisees begin tinkering with franchise products and operations, they may change the predictability of its offerings and hurt customer experience, which is likely to adversely affect the performance of both the franchisee and franchise overall.

However, it doesn’t have to be this way. Some potential franchisees may be capable of balancing their entrepreneurial tendencies with strict operational guidelines. But who?

Given the critical importance of franchisee recruitment to franchise success, we investigated whether targeting entrepreneurial recruitment efforts toward certain groups is more or less beneficial. In a study recently published in the Journal of Business Venturing Insights, we used data on Franchise 500 franchises from 2008 to 2012 to examine the consequences of targeting military veterans with entrepreneurially oriented recruitment materials.

We found that military veteran recruitment flips the influence of entrepreneurial language in franchise recruitment materials on franchise success from negative to positive. That is, franchises seem to benefit from entrepreneurial rhetoric in franchise recruitment material, but only for those franchises that also target military veterans.

We argue that this is because many military veterans possess a unique configuration of innate traits and learned skills that allow them to act entrepreneurially, but within predefined guidelines.

For franchises, our results suggest that they should be careful what they wish for. It is folly to desire entrepreneurial franchisees, then be disappointed when their ambitious and innovative nature leads them to make changes that undermine the franchise system. Remember that the rhetoric used in recruitment materials will influence the types of individuals that apply for a franchise.

Our findings also highlight the importance of fit in franchisee selection. Military veterans appear to be generally capable of operating autonomously, but with the confines of the franchise agreement. This is a particularly exciting finding given that so many veterans have a difficult time re-assimilating into civilian life. Indeed, it may be that military veterans are ideal franchisees.

That said, there might be other types of individuals capable of reconciling the entrepreneur and manager roles within franchising. Franchisee recruiters should be cognizant of this issue and place considerable emphasis on both recruitment and selection of franchisees accordingly.

Dr. Zachary is an assistant professor of management at Auburn University. Also contributing to this article: Dr. Jeremy Short, the Michael F. Price Chair in Entrepreneurship and professor of entrepreneurship at the University of Oklahoma, and Dr. Dave Ketchen, Harbert Eminent Scholar and professor of management at Auburn University. Any inquires can be submitted to mazachary@auburn.edu.