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Hand in hand comrades? Is "franchise camaraderie" a curse or a blessing?

Date:03 July 2020
Author:Dr. Evelien P.M. Croonen
Assistant Professor Evelien Croonen
Assistant Professor Evelien Croonen

I regularly see beautiful collaborations between local entrepreneurs. Think of entrepreneurs who develop a collective city app with delivery service, or a joint drive-in of catering entrepreneurs during the Corona crisis. These examples show how powerful entrepreneurial cooperation can be. But does this also apply to franchisees within one franchise network? How often does such cooperation actually happen, in which ways, and with which consequences?

In practice, people sometimes speak of "camaraderie" when it comes to franchisees within one network. However, this term does not appear in the literature; there is little research into camaraderie (or collaboration) between franchisees. The available studies can be counted on one hand and produce a very fragmented picture. I myself see that cooperation between franchisees occurs very regularly and can take all kinds of forms. First, franchisees can work together to improve their location performance. They can share functional knowledge with each other, referring customers to each other or purchasing products that their franchisor cannot or does not want to supply. Second, I see franchisees working together to reduce the influence of their franchisor. They then share 'tricks' to bypass the network rules, they start a collective lawsuit against their franchisor, or they jointly step down and start a new network. You probably already see it: the consequences of franchise camaraderie can be positive or negative depending on whose perspective one uses. And sometimes the consequences are not as one would expect at first sight ...

"Camaraderie" from a franchise perspective: win-win-win, or not?

Cooperation seems positive for all franchisees involved: they can conspire during franchise conflicts, and they can benefit and learn from each other. Win-win-win, right? Not entirely. A study by Maryse Brand, Roger Leenders and myself showed that sharing marketing knowledge with one another is a curse rather than a blessing for some franchisees. Franchisees with relatively lower sales appeared to benefit less from a central position in the franchise network. A central position in a network is usually favorable; central partners have many contacts and therefore see a lot of ideas and knowledge 'passing by'. Franchisees with higher sales were able to apply this knowledge in their own location(s); however, this did not apply to franchisees with lower turnover. In fact, for them, acquiring knowledge from their colleagues sometimes turned out to be a bad idea. These franchisees probably have a lower ‘absorptive capacity’ and are not (yet) able to make the translation to their own location. These franchisees spent their precious time and energy gaining knowledge that they subsequently could not apply properly.

Therefore, we cannot simply assume that mutual knowledge sharing between franchisees is beneficial. Franchisees and franchisors must realize that franchisees with lower turnover may need very specific knowledge acquisition strategies to benefit from their colleagues.

"Camaraderie" from a franchisor perspective: a field of tension

Scientific research also teaches us little about the consequences of franchise camaraderie for franchisors. We only know that "cohesion" between franchisees means that franchisees deviate less from the network rules and hide less information from their franchisor. This is favorable for franchisors, but on the other hand, we also see in practice how cooperation between franchisees can have a negative effect on franchisors, especially when there are problems in the network. For franchisors, managing franchise camaraderie is therefore an area of tension: it is nice if franchisees work together and help each other, but in case of dissatisfaction and conflict, franchise camaraderie can also work against the franchisor. Of course, preventing dissatisfaction and conflict is the best thing, but that too is a major challenge.

Finally: more questions than answers…

Thus, the consequences of franchise camaraderie are nuanced, and more in-depth research is needed into its origins and management. For example, how can "weaker" franchisees still take advantage of their colleagues' knowledge? How do franchisees deal with possible mutual competition? Why do some franchisees become opinion leaders, and how does that affect the development of the network? How can franchisors manage the tension of franchise camaraderie? If there are franchisors and franchisees with an interest in these kinds of questions, please let me know!

 

About the author

Dr. Evelien P.M. Croonen
Dr. Evelien P.M. Croonen
assistant professor at the Department of Innovation Management & Strategy
www.rug.nl/staff/e.p.m.croonen/