Opportunity identification and evaluation in franchisee business start-ups

Abstract

Purpose

The purpose of this paper is to examine franchisees’ business start-ups from an entrepreneurial perspective, adopting a process representative of entrepreneurship to examine opportunity identification and evaluation by franchisees and to analyse factors that influence this process.

Design/methodology/approach

A qualitative study was employed and data collected using semi-structured interviews with a sample of service industry franchisees in Macau.

Findings

The study identifies that social networks play a key role in opportunity identification and that franchisees’ goals influence the criteria used and information search activities undertaken while evaluating franchise opportunities.

Research limitations/implications

The study makes two contributions to franchise literature. It identifies that social networks can serve as substitutes for lack of prior knowledge in franchise opportunity identification. It also identifies the interrelated nature of franchisees’ goals based on the activities and criteria used to evaluate franchise opportunities, and the importance of relational criteria when franchisees lack prior industry knowledge. It therefore also contributes to franchise/entrepreneurship literature by identifying the interrelated nature of the factors contributing to the dynamics of franchise chain growth.

Practical implications

Franchisors should explore how to better use franchisees’ social networks and identify the longer term goals of prospective franchisees to support market penetration and franchise chain growth. Franchisees are advised to use independent information sources to evaluate franchise opportunities using goal-informed objectives and demand and relational criteria.

Originality/value

The study presents a more comprehensive understanding of franchisees’ decision-making process when joining franchise chains by identifying the activities undertaken and criteria used to identify and evaluate franchise opportunities.

Citation

Brookes, M., Altinay, L., Wang, X.L. and Yeung, R. (2016), "Opportunity identification and evaluation in franchisee business start-ups", Journal of Service Theory and Practice, Vol. 26 No. 6, pp. 889-910. https://doi.org/10.1108/JSTP-04-2015-0089