Abstract
The business format franchise is the gold standard for franchising. It delivers a uniform, standardised and consistent product, and this is indeed one of its key strengths. Franchising is nevertheless a practical commercial strategy. Successful franchisors build formats, devise systems and develop network expansion models which accommodate the unique characteristics of the business and the prevailing market conditions as well as wider social trends. This paper challenges the standard franchising paradigm and suggests that there are four distinct franchising models—business format franchising, brand franchising, quasi-franchising and flexible franchising—and presents a taxonomy to accommodate them. The focus of this paper is nevertheless on flexible franchising—a new franchise model which eschews the formulaic uniformity of conventional franchising and explicitly and intentionally embraces and incorporates as its integral feature the franchisee’s flexibility to bring his or her own brand of entrepreneurship to the franchised business. The development of flexible franchising in practice is examined through case studies on two innovative Australian franchise systems.
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Notes
- 1.
A convenient summary of the benefits of business format franchising is set out in the Report by the House of Representatives Standing Committee on Industry, Science and Technology, Finding a Balance: Towards Fair Trading in Australia, May 1997, p. 84:
Substantial benefits exist for both franchisees and franchisors under the system. The franchisor derives income from any initial franchising fee and from access to a continuing cash flow through product sales and from licence fees without having to provide additional capital or to directly manage the franchisee. The franchisor gains from access to established business systems, developed products or services, training and business advice, group advertising and lower risk.
- 2.
Frazer et al. (2016) estimate that in 2016 there were ‘70,700 business format franchised units and 8300 company owned units, producing a total of 79,000 units operating in business format franchises in Australia’. This number represented almost 4% of small businesses in Australia. The survey estimated an additional 6500 fuel retail and 4618 motor vehicle retail outlets (Frazer et al. 2016, p. 6).
- 3.
Frazer et al. (2016) estimate that in 2016 ‘the total sales revenue of business format franchises was $66.5 billion (compared with $65 billion in 2014). Together with motor vehicle sales of $43.4 billion and fuel retail of $36 billion, the total sales revenue for the entire franchising sector was estimated to be $146 billion (compared with $144 billion in 2014)’ (Frazer et al. 2016 p. 6).
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Degani Website: https://degani.com.au/
Eview Website: http://www.eview.com.au/
Great Harvest Bread Co Website: https://www.greatharvest.com/
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Di Lernia, C., Terry, A. (2019). Business Model Innovation in Franchising: Rethinking the Franchising Taxonomy. In: Windsperger, J., Cliquet, G., Hendrikse, G., Srećković, M. (eds) Design and Management of Interfirm Networks. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-030-29245-4_4
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