Franchise business ownership: a comparative study on the implications of military experience on franchisee success and satisfaction.

Author:McDermott, Martin J.
Position:Abstract
 
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INTRODUCTION

This study concentrates on a distinct problem pertaining to franchising. First, it is averred one of the biggest dilemmas confronting franchisors is finding qualified franchisees for their franchise system. Scholars have argued and written about the challenges of franchisee recruitment and selection. Moreover, franchising has become an accepted means of business development and distribution in the United States and through many parts of the world. At first glance, it might seem like franchising provides instantaneous success. However, a review of the literature suggests that even with the popularity and growth of franchising, choosing capable franchisees continues to be franchisor's most difficult challenge (Wattel, 1969; Goncalves & Duarte, 1994; Saraogi, 2009; Ramirez-Hurtado, Rondan-Cataluna, Guerrero-Casas, & BerbelPineda, 2011). These studies imply the difficulty of selecting capable franchisees has existed for over 40 years. Some researchers have attempted to understand this challenge by studying traits of successful franchisees (Wattel, 1969; Withane, 1991; Ramirez-Hurtado et al., 2011). Interestingly, many franchisee traits sought by franchisors are found in military veterans. They include discipline, risk taking, appreciation for national affiliation, openness to training, ability to follow a system, loyalty to organization, ability to follow a routine, and desire for support (McDermott, 2010).

Problem Background

Franchisees are portrayed as a crucial factor in thriving franchise organizations (Michael & Combs, 2008). Pursuing this further, Ramirez-Hurtado et al., (2011) propose the correct choice of a potential franchisee can produce positive outcomes for the franchisor. Consequently, a poor selection in a potential franchisee can produce continuous problems for the franchise organization such as legal issues or hurting the brand. For instance, Altinay and Okumus (2010) suggest poor franchise recruitment can lead to lack of commitment and de-motivation on the part of the franchisee.

Certainly, an initial literature review shows many military veterans steering toward a career in entrepreneurship. For example, a study by the Small Business Administration (SBA) conducted by Hope, Oh, and Mackin (2011) indicated veterans in the private sector are at least 45 percent more likely than individuals with no active-duty military experience to be self-employed. Meanwhile, there may be several influences for many military veterans steering towards a career in entrepreneurship. The first factor pertains to a high-unemployment rate. For example, Brands (2012) posits soldiers returning from America's latest wars faced an uncertain future. The unemployment rate in 2011 among the 2.2 million men and women who served during the past decade in Afghanistan and Iraq averaged 12.1 percent, higher than the national rate of 8.9 percent. Finally, for younger veterans between the ages of 18 and 24, important years for entering the labor force, the unemployment rate reached a frightening 30.2 percent compared to a national average of 16.3 percent.

In addition to a high unemployment rate, many individuals that have served in the military as a career are also competing in the labor pool. For example, age is the basis of civilian retirement whereas length of service is the foundation of retirement in the armed forces. Individuals that served in the military are free to retire after 20 years of service. The typical officer departs from the military at age 45 (Spiegel & Shultz, 2003). Because career military veterans start their second profession at what some may consider an older age, members from the armed forces may find it challenging acquiring employment therefore turning to a career in entrepreneurship. Hope et al. (2011) point out one possible consideration for military-veterans turning to entrepreneurship might have to do with pensions. For instance, self-employed military retirees have a higher average income from pensions compared to those individuals who have not served in the military. Vigoda-Gadot et al., (2010), suggest early military retirement and consequently starting a new career is commonplace. Hence, it pertains to the wider global labor market where a military career tends to end earlier enabling the opportunity for a new occupation.

Rationale For The Study

This study sought to discover if military-veterans' level of overall satisfaction in owning and operating a franchise is significantly higher than those franchise business owners who have not served in the military. Ahmed (2011) proposes measuring satisfaction is essential as it offers many positive returns for an organization. From a conceptual point of view, empirical studies investigating a higher level of job satisfaction has significant implications for important organizational outcomes such as a high level of employee engagement (Ahmed & Ahmad, 2011; Abraham, 2012), improved employee effectiveness (Robbins, Millett, Cacioppe & Waters-Marsh, 1998; Abraham, 2012), enhanced productivity (Bateman & Organ, 1983; Schneider, 1987; Harter, Schmidt & Hayes, 2002; Gallup, 2005; Ahmed & Ahmad, 2011; Abraham, 2012), and low employee turnover (Smith, 1992; Robbins, Millett, Cacioppe & Waters-Marsh; Ahmed & Ahmad, 2011; Abraham, 2012; Carlson, 2014). Other outcomes resulting from a higher level of overall satisfaction include more satisfied customers (Dubrin, 2001; Gallup, 2005; Abraham, 2012), increased performance (Schneider, 1987; Argyle, 1989; Judge, Thoresen, Bono & Patton, 2001; Ahmed & Ahmad, 2011), and a higher level of motivation and dedication (Harter, Schmidt & Hayes, 2002; Gallup, 2005; Abraham, 2012). While there has been discussion on the level of impact satisfaction has on the suggested outcomes, it would be reasonable to imply the benefits of satisfaction are mostly positive and not negative outcomes.

From a practical perspective, Morrison (1996) indicates amicable franchisor/franchisee relations appear to be a key determinant of the future success of a franchise. It is anticipated that franchisees relative job satisfaction plays an essential role in maintaining this relationship. The next section will address the conceptual framework for the study.

Conceptual Framework

The concept of franchising and the military are the theoretical foundations of the study. The conceptual framework of this study suggests a proposed relationship between franchising and the military. The framework of this study is based on military providing a readiness to be an entrepreneur and more specifically a franchise business owner. While successful franchising is dependent on finding individuals to follow their system, the military breed's young men and women to appreciate, follow, and execute a system. Therefore, those individuals with a military background may make strong candidates for franchising because they know how to follow and implement a system. This proposed relationship may provide a solution to a consistent problem for franchisors: finding capable franchisees.

Statement of Potential Significance

There are several potential benefits to the study. First, the study may prove significant to the franchising and military community. Unquestionably, franchising is a central part in today's economy. For example, Welsh, Desplaces, and Davis (2011) suggest franchising is a major economic source of power. The International Franchise Association suggests 1 of every 12 retail businesses is a franchise; direct contributions to the U.S. economy include almost $881 billion in output, over 11 million jobs, almost $279 billion in payroll, and over 900,000 establishments. Total contributions to the U.S. economy attributable from franchised businesses are over $660 billion in payroll, almost 20 million jobs, and approximately $2.31 trillion in output.

Finally, this study could provide potential benefits to the military community. Brands (2011) shows the unemployment rate is high for many military that have come home from the recent war in the Mideast. Consequently, prior research shows many military steering towards a career in entrepreneurship. Hope et al., (2011) suggest veterans are more likely to start their own business.

LITERATURE REVIEW

This literature review addresses two main research streams: franchising and military-veterans. It begins by introducing scholarly research on franchising. Next, it discusses relevant studies on the influence military experience has on entrepreneurship as a second career, focuses on parallel studies on franchisee satisfaction and lastly, identifies needs for more research.

Traits and Characteristics of Successful Franchisees

The literature on franchising suggests franchisees that do well and thrive possess certain qualities and traits (Wattel, 1969; Withane, 1991; Michael & Combs, 2008; Saraogi, 2009; & Ramirez-Hurtado et al., 2011). One of the earliest findings on the traits of successful franchisees can be found in Wattel's (1969) qualitative study investigating the abilities and personality traits sought by franchisors in the franchisee selection process. Wattel points out successful franchisees should have extremely cooperative traits, as well as the aptitude and motivation to keep to the policies, choices, and every day practices formed by others. The franchisee's life is based more on following routine than frequent decision-making. Finally, these findings propose that individuals who enjoy following rules and a schedule might be good candidates for franchising. Although based on anecdotal evidence, Wattle's findings support the notion that discipline and adherence to rules are conducive to franchisee success.

Studies also identify the ability to tolerate risk as a key characteristic of successful franchisees. For instance, Withane (1991) presents an examination of franchisee's thoughts, views, and explanations for becoming franchisees. Withane notes franchisees identify risk taking to be a key reason for...

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