Franchisors' contribution towards franchisees' business failures

Abstract

Franchising is emerging as a highly effective strategy for business growth, local employment and regional economic development. It is the most realistic and promising formula to emerge yet for the development of business skills and a thriving entrepreneurial culture in South Africa. Many prospective franchisees believe that when they pay their franchise fee, they are buying a business. Very frequently, the franchisor has not made the franchise relationship clear to the franchisee, which results inadvertently in deciding to run things their own way, break the franchise rules and ultimately fail in the endeavor. Thus the aim of this study was to establish whether franchisors have a direct impact towards the success or failure of the franchisee's business. The causes of success and failure are central to entrepreneurial research. Thus one need to understand whether franchisors are in any way involved in franchisees' success or failure. The first chapter of this dissertation is an explanation of the franchise concept. It is in its own a brief summary of what is discussed throughout the study. Objectives of the study, scope of the study and the method of research are all discussed in this chapter.

Chapter 2 discusses many definitions of franchising: the franchise agreement, what the potential franchisees need to familiarise themselves with upon entering this contractual obligation. Advantages and disadvantages for both the franchisor and franchisee are also discussed. The relationship between these two parties is discussed as it serves as a cornerstone towards success or failure of a franchise business. This chapter thus provides a blueprint of what needs to be done in order to make a success of the franchise business. Chapter 3 entails an empirical study by way of questionnaires, designed to ascertain whether franchisors are in any way responsible for the success or failure of the franchisee’s business. Franchisee businesses were selected in the Vaal region and 25 outlets responded to the study. The results of the questionnaire were analysed and discussed in this chapter Chapter 4 summarises the research with conclusions and recommendations from the empirical study covered in Chapter 3. The aim was to ascertain whether research objectives were reached by the study, as stated in the literature and empirical studies. Conclusions were reached with regard to the study and one of the most important facets identified was the franchise relationship. The relationship was identified as the glue that holds the franchise partnership together; the existence and maintenance thereof, is what will make or break the franchise business.