Franchisees Are Entrepreneurs (Let The Debate Begin)

It probably first happened back in the late 1970s or early 1980s, when franchising started to get hot.  Someone who had started a company of their own looked at the people buying franchises, sneered, and said something like “franchisees are people who buy themselves a job. They are not true entrepreneurs.”

That’s just silly.

I could point you to the dictionary definition of an entrepreneur and you’d see that it is: “A person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.”  And franchisees certain fit under that definition. (For those of you who want to quibble about the words “initiative” and “risk” we will return to that point in a second.)

But you don’t need a dictionary. Just common sense. In the for-profit world, an entrepreneur is someone who creates and runs a new business where one did not exist before.  And, no, the McDonald’s franchisee didn’t create McDonald’s. But he certainly created a McDonald’s where there never was one before. Franchisees are entrepreneurs.

But they don’t take many risks, you cry.

Neither do the most successful entrepreneurs. The best ones are the most risk-averse people on earth. They don’t like risk. They accept it as part of the game and then work extremely hard to reduce it to a minimum.

People who have started one or more ventures will tell you: You need to know how much you are willing to lose before you even start thinking about starting something new.  And you need to do everything possible to make sure you don’t exceed that figure.

Successful serial entrepreneurs adhere to the basic principles of risk management: If you’re going to play in a game with uncertain outcomes, 1) don’t pay/bet more than what you can expect as a return, and 2) don’t pay/bet more than you can afford to lose.

Franchises understand this perfectly.

My buddy (and fellow Forbes blogger) Mike Maddock likes to say that “knowledge is learning from your mistakes. Wisdom is learning from the mistakes of others.”

Franchises are wise.  They sign on after the parent company has (hopefully) made all the major mistakes that will come with their new idea. But doing so, franchisees have reduced their risk.

As for initiative, the best ones show tons of it.

I spend a huge part of my life driving between Northern New Jersey and the Southern coast of Massachusetts, as part of my commuter marriage. I know every single franchised restaurant and hotel on that 246-mile route.  One McDonald’s is better than all the others. (Hint it is in Connecticut.) The same holds true for the franchised hotel chains, gas stations and coffee shops along the route. There is one in each category that is clearly superior to the others even if they all have the same Dunkin’ Donuts or Motel 6 sign.

It is the initiative of the franchisee that is responsible for that superior performance.

I am not trying to pick a fight with people who start their own companies from scratch.  I am married to one of them and my admiration is boundless.  And I run my own business, one that I began myself, I know how hard it is.

But, the definition of an entrepreneur is broader than that. It includes franchisees.

Let me know what you think.

Why are we talking about franchisees?

That’s simple.

We are in the middle of an experiment.

For the next two months, you have the chance to shape this space.

From now until the end of October this blog will be devoted to discussing the very tangible problems you have in starting and growing your business—how to get financing; what kind of customers should you target; where and how to market, and the like.

You suggest the topics and talk about the concerns you have (and also what you have found that works well) and your peers will offer their suggestions, and raise concerns of their own.  I will go through everything, cull the best answers/comments/ideas, and as a micro-business owner myself (as well as someone who has been writing about this stuff for more than 30 years) will add ideas of my own.

One of the things that have been clear thus far is people think you still to create something from whole cloth to be considered an entrepreneur. I don’t think that is true. Thoughts?

Paul B. Brown is the co-author (along with Leonard A. Schlesinger and Charles F. Kiefer) of Just Start: Take Action; Embrace Uncertainty and Create the Future recently published by Harvard Business Review Press.

Please note the Action Trumps Everything blog now appears every Sunday and Wednesday.

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 Reprinted with permission.