Why franchisors recruit franchisees from the ranks of their employees

A shortage of suitable franchisees has long plagued the Australian franchise industry impacting franchisors’ capacity to grow their chains. This exploratory research identifies, defines and examines an unresearched category of franchisees that of internally recruited franchisees, who prior to their franchise recruitment were employees of the franchisor. This category has previously been ignored by the literature even though estimates of some chains place the proportion of internally recruited franchisees at over 40 per cent. Employing qualitative interviews with key franchisor decision makers this research begins to address this gap. This study investigates what factors drive franchisors to recruit franchisees from the ranks of their employees and how they perceive this impacts on the achievement of franchising’s four strategic imperatives of unit growth, system uniformity, local responsiveness and system-wide adaption. Seven drivers for the internal recruiting of franchisees were identified: company owned units, significant system hierarchy, larger unit scale, unit viability, system maturity, capital freedom and strong growth in unit numbers. A preliminary model of factors influencing the propensity of franchise systems to recruit franchisees internally is presented. This research provides the first contribution to the franchise literature on the internally recruited franchisee phenomenon. In a practical sense this study should influence the recruitment practices of franchisors.