Franchising: Entrepreneurship in a Parallel Universe Robert Desman, Associate Professor of Management and Entrepreneurship Michael J. Coles College of Business, Kennesaw State University 1000 Chastain Road, Kennesaw, Georgia 30144, U.S.A. Abstract Economist Joseph Schumpeter posited that entrepreneurship is "creative destruction" and this study concludes that no other business form can claim more "creative destruction" than franchising. Franchising spans 75 industries and has created business opportunities for over 600,000 small business owners in the U.S. alone. Boasting an annual unit-growth-rate of 3%-5% and a sales-growth-rate of 5%-7%, the franchise sector opens one new business unit every eight minutes of each business day and represents one of every twelve business enterprises. An estimated 1,226 franchise systems in the U.S. have created 8.5 million jobs with the average franchise unit employing from 8 to 15 persons. Among the numerous international geo-expansion entry strategy options, franchising is the consensus choice for minimizing risk and complexity. For the aspiring entrepreneur, the franchise provides numerous advantages over "start-ups," buy-outs," and "spin-offs." As both an entry and expansion vehicle, franchising provides positive leverage for the franchisee and franchiser alike. In spite of its relevance to the study of SMEs and Entrepreneurship, the subject of franchising appears to interest few outside the franchising community itself. Researchers in the more-traditional business areas have given it little attention. This study is an initial inquiry into the entrepreneurial nature of franchising and its implications for the SME. Among the conclusions reached are: a) franchising, as an institution, embodies the gamut of entrepreneurial acumen and behavior and should be accorded greater attention by researchers in the field, b) franchise affiliation can be a powerful weapon in the strategic arsenal of the SME, and c) the depth and subtlety of the institution of franchising constitutes fertile territory for academic inquiry. Background Proliferating at a rate of one every eight minutes of each business day, franchise business spans seventy-five industries (Exhibit 1), represents 8.5 million jobs, US$150 million in initial investment (exclusive of real estate), and US $803 billion of annual sales revenues in the United States alone. One out of every twelve business enterprises in the U.S. is a franchise unit and it is estimated that franchises will account for fifty percent of all retail sales in the U.S. within the next four years (42 percent in 1998) and US$ 1 trillion in annual revenues. Approximately one-third of all U.S. franchisers have international outlets generating over ten percent of their annual income. In the EU, 2,900 franchisers operate 130,000 units, and the
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