BUSI 423 Week 1 Discussion Board Forum 1 Thread Example

Discussion Board Forum 1 Thread: Franchising and Entrepreneurship

BUSI 423 Franchising, Discussion Board Forum 1 Thread

Thread by [Student Name]

The forum prompt and the examples are composites; the Franchise Bible and the research cited are real, and the structure follows Liberty's public course guide for BUSI 423.

A common view holds that buying a franchise is the opposite of entrepreneurship. The franchisee, on this view, is a manager who pays for someone else's idea and follows a manual. I want to argue that a franchisee is an entrepreneur, though of a particular kind, and that the difference matters for anyone deciding whether to buy.

Grossman and Katz (2017) describe what the franchisee actually buys: the right to use a trademark and a proven operating system, along with training and ongoing support, in exchange for an initial fee and continuing royalties. What the franchisee does not buy is a guaranteed income. The franchisee still signs the lease, borrows the money, hires and fires the staff, and wins or loses customers in a particular location.

Kaufmann and Dant (1999) addressed this question directly. They argued that franchising belongs within the domain of entrepreneurship research and that both parties play entrepreneurial roles. The franchisor is entrepreneurial in creating and spreading a business concept, while the franchisee is entrepreneurial in investing personal capital, accepting risk and building a business in a local market. The roles differ in the kind of innovation each involves, not in whether risk and initiative are present. A franchisee trades the freedom to design the business for a system that has already been tested, but does not trade away the risk of running it.

Consider two coffee shops on the same street. The independent owner chose the menu, the decor and the suppliers, and spent a year learning which drinks sold. The franchisee opened with a known brand, a tested menu, a supplier network and a training program, and was profitable sooner. But the franchisee also pays royalties on every sale, cannot add a local pastry without approval and depends on the franchisor's reputation, which a scandal elsewhere in the system could damage. The franchise lowered some risks, such as untested products, and added others, such as fixed fees and reliance on decisions made elsewhere.

Grossman and Katz (2017) also point out that the franchisee must still make the decisions no manual can make: choosing a location within the territory, hiring the first employees, deciding how much personal money to commit and when to open a second unit. Each of those is an entrepreneurial judgment with the franchisee's own capital at stake, and getting them wrong can sink a unit in a system that is thriving elsewhere.

That trade is the practical lesson. Someone who wants to invent a business should not buy a franchise; someone who wants to build and run one, using a tested design, may find franchising a sound form of entrepreneurship. Before buying, the prospective franchisee should ask which risks the system actually reduces in this market and whether the fees are worth that reduction. A brand that is famous nationally but unknown locally, for instance, reduces less risk than its reputation suggests. Those are entrepreneurial judgments, and making them well is the first sign that the franchisee is more than a manager.

References

Grossman, R., & Katz, M. J. (2017). Franchise bible: How to buy a franchise or franchise your own business (8th ed.). Entrepreneur Press.

Kaufmann, P. J., & Dant, R. P. (1999). Franchising and the domain of entrepreneurship research. Journal of Business Venturing, 14(1), 5-16. https://doi.org/10.1016/S0883-9026(97)00095-5