Franchising and Entrepreneurship

Entrepreneurial opportunities differ in a core manner from franchising opportunities. It is well known that franchising is the 'way to be in business for yourself but not by yourself'. This is where the main difference of entrepreneurial and franchise opportunities lies. This essay firstly examines the existence of entrepreneurial opportunities and analyzes their discovery. Further, the essay moves on to prove that the decision of self-employment comes before the decision to become a franchisee, presenting and analyzing Kaufmann's (1999) process model.

Further, the essay examines the discovery of franchise opportunities by prospective franchisees and how it is linked to the motivation theory of franchising. The theoretical motives of prospective franchisees as well as the motives from real life derived from the two case studies in the essay are presented. In addition to the above, the essay explains why it is important that both entrepreneurs and franchisees to understand what an opportunity is.

In the final section, the franchise opportunity is analyzed from both the franchisor and franchisee perspectives and is questioned whether the franchise opportunities are really worth it for franchisors. MAIN BODY Franchise or Business Opportunity: The difference The core difference between a business opportunity and a franchise one is that in business you start your own business and basically you are on your own. In franchise opportunity however there is a tight partnership with the franchisor that will exist as long as you are in business.

Many individuals choose to start their own business from scratch while others choose to take advantage of business opportunities that are already tested ideas in the market and have shown themselves capable of making a profit. It is easy to confuse franchises and business opportunities as they may look the same but in fact they are different. It is essential to know the difference between them which can distinguish a successful business venture from an entrepreneurial disaster. Next step of the essay is to analyze the existence of entrepreneurial opportunities as well as the existence of franchising opportunities.

Are they really similar or far different? The Existence of Entrepreneurial Opportunities: Opportunity recognition is a central aspect in entrepreneurial theory as entrepreneurship cannot exist without having and exploiting the entrepreneurial opportunities. In addition to Shane and Venkataraman's (2000) definition of entrepreneurial opportunities, Casson (1982) has defined entrepreneurial opportunities in a similar way. According to Casson (1982) "entrepreneurial opportunities are those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production".

Kirzner (1997) stated that entrepreneurial opportunities are different from the set of all other opportunities for profit, especially those opportunities that are exploited in order to enhance the efficiency of existing goods, services, raw materials and organizing methods. The reasoning behind Kirzner's statement is that entrepreneurial opportunities require the discovery of new means-ends relationships, where the opportunities for profits involve optimization within existing means-ends frameworks. Kirzner's statement however, does not mean that entrepreneurial opportunities are not opportunities for profit.

It is important to state here that according to Schumpeter (1934) when the beliefs of sellers and buyers about the value of goods and services are different then these resources can be sold above or below their marginal cost of production. Another researcher that reinforces the above statement is Kirzner (1997) who believes that the reason why entrepreneurial opportunities exist is because different community members have different beliefs about the value of resources, given that there is a potential to transform them into a different condition. Moreover, people's beliefs are affected by private information, superior intuition etc.

they make different decisions about what new markets could be created in future and what prices to set. The essay continues to examine the discovery of the entrepreneurial opportunity and questions its main requirements. The Discovery of Entrepreneurial Opportunities: Discovery of entrepreneurial opportunities occurs when an individual identifies that a set of resources is not placed in its "best/maximum use". This may mean that this set of resources are priced too low or either is believed that these resources could be sold in different time and location, perhaps in different format as well.

Casson (1982) argued that if the above entrepreneurial opportunity was correctly exploited then this would result in entrepreneurial profit, whereas if the opportunity was incorrectly exploited the entrepreneur would incur entrepreneurial loss. Why is it important for the entrepreneur to understand what an opportunity is? It is worth saying that the entrepreneur can profit from an opportunity only if he/she recognizes the existence and value of the opportunity.

Hayek (1945) says that all opportunities must not be obvious to everyone all the time. Kirzner (1973) strongly agrees with Hayek's opinion and states that at a particular time; only a small part of the population will discover a particular opportunity. According to Harvey and Evans (1995) sensitivity to entrepreneurial opportunities that will come up is a necessary ingredient of success. However, Harvey and Evans (1995) state that this opportunity should match with the market demand whether entrepreneur is supplying a product or service.

I strongly believe that recongising the opportunity on time and realizing its value is an important step into entrepreneurial success. Thus, understanding what an opportunity is and recognizing it is a crucial advantage in entrepreneurial activities. The discovery of franchise opportunities by prospective franchisees: After questioning the importance of opportunity understanding from the entrepreneur it's the time to analyze the franchising opportunity and how the individual reaches the decision to become a franchisee.

The European Franchise Federation gives the following definition of franchising: Franchising is "a mode of distributing goods or services based on a network of independent partners. Franchising operates on the basis of a contractual agreement between two independent business parties, the franchisor and the franchisee, in which the franchisor grants the franchisee, for the term of the contract, the right to buy and operate the franchisor's branded and formatted business system for a fee and according to the prescribed rules and procedures developed for the system by the franchisor.

" [Source: www. eff-franchise. com]. As described by the International Franchise Association (1988) franchising is "a way to be in business for yourself but not by yourself". According to Trutko et al. (1993) and Stanworth et al. (1997) its current growth rate may be slowing down, however, there is a phenomenal growth over the past four decades due to several reasons.