Written by: Dave Ketchen Jeremy Short Jim Combs Illustrated by: Will Terrell Shading by: Amber Terrell Flat World

Knowledge, Inc. 1 Bridge Street, Suite 105 Irvington, NY 10533 www.flatworldknowledge.com Tales of Garcon: The franchise Players All Rights Reserved© 2011 Jeremy Short, Dave Ketchen, Jim Combs ISBN-13: 978-1-936126-03-3

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

Frequently asked questions about Tales of Garcón A graphic novel textbook? Yes! Tales of Garcón combines the academic rigor of traditional textbooks with the fun of graphic novels. The result is more student learning and involvement. Your students will read this book without complaint. What topics does Tales of Garcón cover? Tales of Garcón offers comprehensive coverage of key issues within family business, franchising, and small business management. What support materials are available? Tales of Garcón and the instructor’s manual together offer a glossary of key terms for each chapter, a detailed summary of each chapter, interviews with entrepreneurs and executives, in-class exercises, recommendations for further reading, and a few special surprises. Seriously, a graphic novel textbook?? Absolutely! Tales of Garcón is Flat World Knowledge’s third graphic novel textbook coauthored by Jeremy Short and Dave Ketchen. The first two (Atlas Black: Managing to Succeed and Atlas Black: Management Guru?) received very favorable coverage from higher education magazines (e.g., Inside Higher Ed, BizEd), business periodicals (e.g., Wall Street Journal, BusinessWeek), academic journals, (e.g., Academy of Management Learning and Education and Business Horizons), and daily newspapers (e.g., Dallas Morning News, Houston Chronicle). According to Dr. Dale Dunn, MBA student and pathologist, “The graphic novel has a definite place as a valid educational tool and as such can offer educators a novel mechanism of teaching while concomitantly providing students a more innovative and memorable way of learning.” Not surprisingly, instructors that have used the Atlas Black books have received their strongest teaching evaluations ever. And finally, here’s what Rich Dad Poor Dad author Robert Kiyosaki said via Facebook and Twitter in reaction to an interview of Jeremy Short about graphic novel textbooks: “Here’s a professor who gets it. Textbooks [stink]. Make school fun and the learning increases.” Have more questions? E-mail us at talesofgarcon@gmail.com.

The Players
Ramón: Garcón’s oldest child and his heir apparent. Ramón is officially the manager of Hotel Garcón, but his immature and goofy nature forces other family members to cover for him. Ramón wants to prove that he is worthy of taking over Hotel Garcón by growing the business in new and exciting ways. Garcón: A renowned entrepreneur and adventurer. Raised by a Creole father and a Latina mother on the family vineyard, Garcón enjoyed a series of harrowing escapades around the world as a young man. Following the disappearance of his beloved wife, Garcón created Hotel Garcón. His outstanding hospitality has made this family business extremely successful. Audrey: A potential franchisee of Hotel Garcón. Audrey also appears to be interested in a personal relationship with Ramón, and she cannot understand why Isabel does not trust her. Isaac: The head bartender at Hotel Garcón. Isaac is treated like a family member by Garcón and his children. Isaac harbors a strong distaste for franchising, and he is very wary of the possibility that Hotel Garcón will be franchised. Isabel: The younger sister of Ramón. Isabel is very intelligent and insightful, and is pursuing a Master’s in Business Administration (MBA). Isabel rightfully wonders why Garcón views her older brother as the next leader of the family business, and she is skeptical of Ramón’s decision-making skills.

Felix: Owner of a franchised hotel located next to Hotel Garcón. For many years, Felix was Garcón’s sidekick during his adventures. Garcón blames Felix for his wife’s disappearance, and the former partners have long been at odds.

Mark: The son of Felix. Mark is also Ramón’s best friend, and he manages his father’s hotel. Mark has long had a crush on Isabel, but Mark lacks the courage to tell her how he feels.

Ice: Isabel boyfriend ’s and her classmate in the MBA program. Ice’s self-confidence is surpassed only by his arrogance. Some claim he bears an uncanny resemblance to mark.

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Table of Contents

Chapter 1 Advertising fees – 12 Business format franchising – 11 Franchise fee – 12 Franchisee – 5 Franchising – 4–5 Franchisor – 5 Free riding – 14 Heir apparent – 2 Product franchising – 10 Residual claimant – 13 Royalties – 12 The Franchise Rule – 22 Chapter 2 Agent – 17–18 Antitrust law – 3 Exclusive dealing – 3 Franchise Disclosure Document – 4–6 Monitoring – 19 Principal – 17–18 Registration state – 11–13 Territory – 2 Tying – 3 Chapter 3 Business model – 12 Family business culture and history – 13 Goal conflict – 3 Industry norms – 16–17 Operational complexity – 12 Operations manual – 12 Succession – 20 Support services – 17 Survival – 21 Chapter 4 Advisory council – 10, 14, 16–23 Area development agreement – 13 Capital scarcity – 2 Conversion franchising – 26 Family council – 10, 14, 16–23 Franchisee association – 23 Franchisee support services – 16–20 Organic growth – 21

Chapter 5 Management fads – 17 Matrix organization – 17 Nepotism – 15 Quality circles – 17 Strategy as pattern – 6 Strategy as perspective – 7 Strategy as plan – 2 Strategy as ploy – 4 Strategy as position – 5 Symbiosis – 5 Chapter 6 Bricolage – 18 Contract length – 19–22 Contract renewal clause – 19 Contract termination clause – 9 Limited liability company – 26 Proven business concept – 2 Selection criteria – 10 Sole proprietorship – 26 Chapter 7 Estate planning – 18 Hold up – 4 International expansion – 7 Master franchising – 11 Obsolescing bargain – 1 Passive ownership – 13 Underinvestment – 5

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Tales of GARCóN
The Franchise Players
Chapter 1: The Game's Afoot

HOTEL GARCóN

on behalf of the entire Garcón family...

...let me close by thanking you for coming.

although hotel garcón is a small business, we have big dreams. we invite you investors to, uh, invest... in those dreams.

and again, i apologize that my father was unexpectedly detained elsewhere.

1

As the eldest child, I will take the helm after El Almirante.

Ramón, who will take over when your father retires?

No offense, kid, but your sister would be a better heir apparent.

My hair is just as apparent as hers!

If you open more hotels, how can you possibly compete with the big brands?

Well, uh, you see, it’s just that….

I think my brother means that Hotel Garcón offers a personal touch that the giants lost long ago.

You may be right, Isabel, but my board would never approve investing in a boutique hotel. It’s too risky.

Mine either. But please give Garcón my regards when he returns.

Ramón clearly lacks the admiral’s business savvy.

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Now what? El Almirante will be so disappointed!

Don’t worry, RamÓn.

Papa always finds a way to end up on top.

How did the investor presentation go?

Not so good, Mark.

The bankers don’t think we can compete with chain hotels.

Ha!

they don’t realize that the chain hotel I manage next door has half the customers Hotel Garcón does!

Maybe that should have been included in my talk.

Estúpido!!

3

I was hoping to speak to the heir of this fine establishment.

That's me!

What can I do for you? And feel free to provide multiple answers.

I'd like to take you to a place you've never been.

Hogwarts?

I'm talking about franchising,

I don't know. I can imagine quite a bit.

and how it could provide your family more wealth than you can imagine. .

You'll have it.

And more.

4

The word franchise has its roots in the French word franc, which means "to make or set free." Don’t you want to be set free?

Um, set free how?

Don’t think of freedom from something, but freedom to pursue something – – such as building a great brand.

Wow, she speaks French.

What, exactly, is franchising?

It’s simple really. One firm, the franchisor, sells the right to market goods or services under its brand name and using its business practices to a second firm,the franchisee.

So, we’d be the franchisor and you’d be the franchisee.

Exactly! See, we’re practically there already.

I’m in!

5

What my brother means to say is that this seems like a great opportunity, but we need to think about it a bit more.

Well, of course. How about I have my lawyer draw up some preliminary papers and we’ll chat more about this next week?

seems attractive to me!

Could you be more specific?

6

Franchising! Audrey wants to make us rich.

Sure, strangers routinely offer to line our pockets with money.

Indeed, I regularly receive e-mails from overseas to that effect.

Well, franchising has fueled explosive growth for firms like McDonald’s and Subway, but it’s complex. We need some expert advice.

– And I know just the person.

Is it the widow of a deposed but wealthy general?

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Professor! Over here!

Silly me, I assumed you were inviting me to play actual golf.

When Ram n says, “meet me at the first hole,” he means “Buccaneer Cove.”

ó

Arrrr, let’s tee off, me mateys.

I’m not sure I can help you much,

I know little about franchising.

But your title is “Professor of Entrepreneurship.”

Humph!

Following a premade formula is not entrepreneurship.

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Is that all franchising is? following a recipe step-by-step?

Well, not exactly. franchising involves a long-term cooperative agreement between two very different types of firms.

A master and an apprentice?

In a way, yes.

The franchisor develops a business opportunity that has the potential to be profitably delivered in different locations,

and franchisees exploit the opportunity on a local or regional basis.

So there could be a Hotel Garcón in every town in America!

9

I’m a little confused. Our uncle looked into buying a tractor franchise, but that seems a lot different than creating a hotel franchise.

Indeed, franchises for hard goods like tractors, gasoline, and tires are called “product franchises.” They are probably better thought of as distributors. Finished products are delivered to them, and they turn around and sell them to the public.

Product franchises can be traced back at least to the 1830s, when German brewers started offering pub owners working capital and generous credit in exchange for an exclusive supply agreement.

I thought franchising started in the U.S. After all, we’re the best at everything!

Uh, have you tried German beer?

10

Franchising hit our shores in 1851, when the Singer Company began offering people territories for selling their sewing machines.

What you two are considering is called “business format franchising.” This is used in settings like hotels, restaurants, dry cleaning, and real estate

– where a product or service is both created and consumed locally.

That seems a lot more complex than just distributing beer or sewing machines.

Indeed, it is. Kind of like putting through this dragon.

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What does each side of a business format franchising relationship give and get?

Franchisee gets Proven business concept, brand name, and training/support

Let me see the back of that scorecard… Franchisor

(you)
gets fee upfront and ongoing royalties

Yes. These rights would last a certain length of time, such as ten years. So, essentially a franchisee would buy the rights to use the Hotel Garcón concept and our operating procedures. And they would apply to a particular geographic area, perhaps a particular town or state.

We’ve done the hard work, now we just sit back and collect money. Being a franchisor sounds just like tenure!

Collecting franchisee fees and royalties seems wonderful, but franchising has some key risks too.

12

Ramón, have you ever had a lousy meal at a famous fast food place?

Perfect. Have you been to that restaurant chain since? Absolutely not.

YES!

About four years ago, I got food poisoning courtesy of an “Attila Thrilla” from Barbarian Burger.

It doesn’t take much for a brand to be ruined in the eyes of a consumer.

So, bad franchisees can undermine a company.

Audrey would never do anything like that!

Don’t be so sure, Ramón. As residual claimants, franchisees have powerful incentives to cut quality.

I just knew we could not get through golf without a crazy management term. What in the heck is a “residual claimant”?

It’s simple really. After all the bills are paid – royalties, labor expenses, rent, utilities, costs of supplies, everything – whatever money is left over is profit for the franchisee.

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So if a franchisee can cut her expenses, like by leaving burgers out under hot lights for hours instead of throwing them out, then her profits go up!

Exactly. But the brand suffers.

As did everyone riding in the car that day with Ramón.

I see that this next hole has us aiming at a clown’s nose, so our round is coming to an end. Let me recommend a book to you. It’s called Franchising for Nitwits.

That sounds like a book that even Ramón can handle.

Be quiet long enough for me to putt…

Free game!!!

Arrr, you scalawags be on your way, I have 18 more holes of conquest.

14

Hi, kids.

hey, Isaac!

Any bites on your investor pitch?

Only one –

– an angel. With her help, Hotel Garcón may become a household name.

Who told you all this?

Her name is Audrey. She wants to buy a franchise from us, and she seems to have cast a spell on someone.

Franchising!

Translation, selling out. Becoming part of the McDonaldization of society.

That’s not a bad idea. We could have a fun meal with a small but whimsical toy that looks like Isabel that we deliver with room service!!

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That’s not what I meant. Your hotel brings something unique to the community, and you want it to become part of a predictable experience.

An experience that can now be shared by everyone!

Where’s the excitement in that?

That’s why I hate going to chains when I visit the big city.

You’re kind of a dream killer today, Isaac.

That’s your dream?

Why do you think there are so many franchises in big cities? People want the efficiency and predictability that come with standardization.

To create another soulless franchise?

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... And maybe by training our franchisees we can replicate what is unique about the hotel in new locations.

Yes! I knew you’d become a believer.

It still seems like a deal with the devil to me.

Perhaps you’d be convinced if you read this book the professor recommended.

I guess I owe Isabel five bucks for our wager that you’d never open a book after graduation.

17

Here are a few fun facts in the book that show how important franchising is for the overall economy.

The only thing that could possibly be more boring than this mess of stats is a history lesson.

Funny you should say that.

According to the book, a key innovation began in the 1890s, when Coca-Cola started selling its secret formula to franchisees who made coke, bottled it, and sold it to local drug stores.

The original Coke franchise territories were sized based on how far a horsedrawn cart could travel in one day.

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In 1925, A&W Root Beer became America’s first franchised fast food concept, primarily to sell root beer to its exclusive franchisees.

In 1935, Howard Johnson became the first franchised table-service restaurant. By 1941, the system had about 150 stores.

Rapid growth?

150 stores seems small compared to today’s behemoths like Barbarian Burger.

This demonstrated that franchising could fuel rapid growth.

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According to our trusty book, modern franchises like Barbarian Burger trace their roots to the 1950s.

During World War II, General Dwight Eisenhower was very impressed by how quickly people and goods could move from place to place using Germany’s Autobahn.

after “Ike” became president in 1953, he started building the interstate highway system. The interstates created huge opportunities for franchising because travelers grew in numbers, and they wanted consistency in food and lodging.

The growth of television at this time helped a lot too, because television advertising allowed firms to build national brands. These two trends helped brands like McDonald’s, Wendy’s, Kentucky Fried Chicken, Holiday Inn, and Sheraton become household names.

Franchising really is magic.

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Hmm, but sometimes it is black magic.

Apparently the popularity of franchising in the 1950s and 1960s opened the doors to fraud.

Shady operators convinced franchisees to cough up hefty franchisee fees and provided nothing in return.

See, franchising is evil.

But the evil did not go unchecked for long.

starting in the 1970s, the Federal Trade Commission and many states tried to protect franchisees from fraud by regulating franchising.

your luck has run out, punk.

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A key step was the Franchise Rule of 1979, which requires a franchisor to reveal to franchisees important information such as the fees it charges, its financial condition, and what support franchisees receive.

Ugh, no more, my head hurts. Say, you know who might be useful to talk with about all this?

I have to tell them what?!!

Our cousin who owns a spa franchise?

I guess that was kind of an obvious question. I meant it rhetorically.

It’s not a bad idea. I haven’t seen Stephanie in a while and she’s like a sister to me.

Actually, I already have an appointment scheduled today for myself and Mark. Perhaps next week, sis?

Estupido!

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Welcome to Spa*Taneity. We have you two down for deluxe facials.

Facials?

You said you wanted me to go with you to see your cute cousin.

You told me to make an appointment.

And you will! Whilst also being refreshed and rejuvenated.

You two are so cute!

You can sort out your squabble in the waiting room.

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We’ll be with you in just a moment!

Those towels are to cover your hair! not your body!

And you definitely didn’t need to get undressed.

Hey, cousin.

Well, that clarifies some things.

Stephanie, great to, um, see you.

I’m glad to see you too, Ramón, albeit a bit surprised.

Well, I’ve been trying to become part of the leisure class for years. And it seems franchising is the way to do it!

This place is great.

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It’s not all massages and games.

And being a franchisee definitely has pros and cons.

Such as?

On the plus side, we get tons of great products with a well-known brand name.

We also get support from the franchisor, such as training.

And Spa*Taneity has a proven formula, with hundred of outlets across the country.

And it still seems pretty unique. I didn’t even know this place was a franchise until RamÓn told me.

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And the cons?

Well, paying the $25,000 franchisee fee up front was tough to swallow.

I pay 5% of my sales in royalties and another 3% goes to advertising the brand. So only 92 cents of every dollar goes toward keeping the spa going.

And you lose some independence.

For example, Spa*Taneity won’t let us do back waxes although many of our clients have requested them.

I see Mark dodged a bullet here today.

Meanwhile, my ten-year franchising agreement expires in two years, and corporate could decide not to renew it.

And their support isn’t always that great.

Use jalapeÑo slices if you run out of cucumbers.

this profitable territory is ours now.

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Another con is that you aren’t really an entrepreneur.

Isabel’s former professor told me franchisees aren’t entrepreneurs.

What?

I own and operate this business. I considered dozens of opportunities before deciding on Spa*Taneity. That sounds like entrepreneurship to me.

So let’s get to the bottom line. Do you think the hotel is right for franchising?

I guess Isabel’s alma mater won’t be expecting a big donation from you anytime soon.

I really do. The service and the atmosphere are unique, and I believe you and Isabel could train people in the “Hotel Garcón Way.”

Ramón, for your future reference, what your cousin just offered is called a compliment.

Well, there is a big “but”; the idea is great, but you must choose your franchisees very carefully…

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bac a c u GARCóN... k t lb

Audrey, over here!!!

Hi, partners, I’ve got something special for you.

Would you like something to drink… ma’am?

Only if you serve the sweet nectar of wealth.

Good one!!!

What’s all the commotion over there?

Garcón has arrived. It’s show time!

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I regret my absence the last few days. Welcome, my friends, to Some old amigos needed my help with some stray cats.

Hotel Garcón!

Stray cats? That seems beneath the great Garcón!

Is that how your arm was damaged?

Not when the cats are tigers, and they are straying into a village.

Ah….

Appearances can be deceiving.

I am uninjured!

but the tigers learned a valuable lesson…

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Whenever you grow your territory,

you invade someone else’s.

So when times get tough…

People actually like this?

What?

…You must be sure that your partners will not turn tail and run.

I said, I like this!

And now, my friends, let me buy you all a drink. Top shelf, of course! We shall toast to the tiger.

¡ Antes que te cases, mira lo que haces!

Huh?

It means “look before you leap,” amigo!

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Let’s get back to business.

Franchise fee, $1,000. Royalty, 1% of profits…

Seems quite fair, where do we sign?

Hold on, our friend Jeanette has dealt with franchising in her law practice, and she offered to examine the contract.

I don’t see the need, our lawyer has already approved it.

I think you mean your lawyer. We will get back to you after we meet with ours.

El Almirante put me in charge of growing the business,

and I will decide if we franchise!

I think we have a problem.

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From the Desk of Garcón: A Summary of the Tale So Far
Welcome, amigos. Our story begins at Hotel Garcón, my humble oasis for weary travelers who long for our legendary hospitality. I can assure you that their expectations are not only met, but exceeded. Family firms such as ours account for roughly 80% of businesses worldwide. The intermingling of business and family relationships within a family firm often creates interesting interpersonal dynamics, and Hotel Garcón is no exception. Although each of the Garcóns feels a fierce loyalty to the others, a variety of strong opinions exist. There is grave danger here. Variety may be the spice of life, but family discord could ruin our firm’s recipe for success. You have stumbled upon our family at a critical moment. My son Ramón is looking to expand our brand. While I was away on an adventure, Ramón gave a presentation to potential investors outlining the reasons why they should offer financial backing for our growth plans. Although my daughter Isabel reported that the presentation was pitiful, a provocative investor named Audrey was intrigued by the hotel’s growth prospects. Audrey proposed to create a franchising relationship between Hotel Garcón as the franchisor and herself as a franchisee. This would involve Audrey building a hotel and operating it under the Hotel Garcón name. But is my family capable of becoming franchise players? I have entrusted Ramón with making this choice. As my heir apparent, Ramón must learn to navigate tough decisions so that he can one day take the helm of the family business. Ramón seemed smitten with the idea of franchising – and with Audrey – but Isabel insisted on learning more before moving forward. Over a game of mini-golf with one of Isabel’s professors, the siblings discovered that franchising is a long-term relationship wherein each side provides certain benefits to the other. A franchisor (such as Hotel Garcón) provides a proven business concept, a brand name, operational procedures, and training/support. The franchisor also promotes the brand, introduces new products and services, and updates operational procedures as needed. In return, a franchisee (such as Audrey) pays an upfront franchisee fee and an ongoing royalty fee (which is typically a percentage of the franchisee’s sales). In running the franchise, a franchisee agrees to implement the operational procedures under the franchisor’s brand name and to uphold quality standards in their location or region. As fortune would have it, my lovely niece Stephanie owns a spa franchise. Ramón and his best friend Mark visited the spa to learn about franchising from a franchisee’s point of view. Stephanie explained that, in comparison to starting an entirely new business, becoming a franchisee has important advantages, including joining an established brand, using proven procedures for running the business dayto-day, and support from the franchisor, such as site selection, lease negotiation, and training. On the downside, however, franchisees operate on tight margins because they must pay franchise fees and royalties, they have limited flexibility to solve problems and adapt to local demands, they face some risk of nonrenewal when their contracts expire, and franchisor support can vary a lot in quality. Based on her experience, Stephanie believes that Hotel Garcón franchises could be very successful. This news warmed my soul like a soft kiss at dawn. Soon after Ramón’s visit to the spa, I returned from overseas and held court with the hotel’s guests. Surrounded by the festive spirit that is at the heart of the Hotel Garcón experience, Audrey made a formal proposal to Ramón and Isabel to become our franchisee. Tensions erupted between my progeny as Ramón embraced the proposal and Isabel remained very skeptical. It seems that both of them inherited their father’s passion – and his stubbornness. Isaac, our lead bartender and a long-time family friend, was troubled by the dispute and shared his concerns with a mysterious confidant. After completing the story of my most recent adventure, I bought all of our guests a drink. Top shelf, of course!!

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Key Concepts Advertising fees – Money that is collected from franchisees and then used to market the brand. These fees are usually a percentage of franchisees’ sales. The franchisor cannot keep this money; it must be used to support the brand. Business format franchising – A franchise relationship that involves creating and distributing a branded service. Some business format franchises involve the sale of physical products to customers (e.g., restaurants) while others do not (e.g., dry cleaning). Franchise fee – A one-time fee paid by franchisees to the franchisor prior to the opening of a new outlet. Franchisee – A firm that purchases the right to use another firm’s brand name and business system within a specific geographic area for a specific period of time. Franchisees pay upfront and ongoing fees to the franchisor. Franchisees also agree to follow the franchisor’s operational procedures and uphold quality standards. Franchising – A long-term contractual agreement in which one firm (the franchisor) sells the right to market goods or services under its brand name and using its business practices to a second firm (the franchisee) within a specified geographic area and for a specific period of time. Franchisor – A firm that owns a business system and sells to franchisees the right to use the system within a specific geographic area for a specific period of time. The franchisor provides a brand name and associated trademarks as well as operational procedures. The franchisor also promotes the brand, introduces new products and services, and updates operational procedures. Most franchisors provide some support services, such as training and help with site selection. Free riding – When a member of a team does not live up to its commitments and hurts the team as a result. For example, a franchisee can save money by cutting the quality of the service it provides to customers, but this will harm the franchisor’s brand. Heir apparent – The person who is likely to be the next leader of a firm. In some family firms, the choice of the heir apparent is influenced by a gender bias (males are given preferential treatment) and/or a birth order bias (older siblings are given preferential treatment). Product franchising – A franchise relationship that involves the sale of branded goods, such as in soda bottling, auto dealers, and gas stations. Residual claimant – The person or set of people who are entitled to the profits (if any) that remain after all of a firm’s bills are paid. Royalties – Ongoing payments that franchisees make to franchisors for the continued use of the business system. Typically, royalties are calculated as a percentage of sales. The Franchise Rule – Regulations put in place by the Federal Trade Commission in 1979 requiring that franchisors disclose to franchisees key information about (1) the nature of the franchise system, (2) the franchisor’s financial viability, (3) the costs involved in purchasing and operating a franchised outlet, (4) the terms and conditions that govern the franchise relationship, and (5) the names and addresses of current franchisees. The regulations were updated in 2007.

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Further Reading Aronoff, C. E., Astrachan, J. H., Mendoza, D. S., & Ward, J. L. 1997. Making Sibling Teams Work: The Next Generation. Marietta, GA: Family Enterprise Publishers. Barach, J. A., Gantisky, J., Carson, J. A., & Doochin, B. 1988. Entry of the next generation: Strategic challenge for family business. Journal of Small Business Management, 26: 49–56. Barnes, L. B. 1998. Incongruent hierarchies: Daughters and younger sons as company CEOs. Family Business Review, 1: 9–21. Bork, D., Jaffe, D. T., Lane, S. H., Dashew, L., & Heisler, Q. C. 1996. Working with Family Businesses: A Guide for Professionals. New York, NY: Jossey-Bass. Brokaw, L. 1992. Why family businesses are best. Inc., March: 72–81. Dicke, T. S. 1992. Franchising in America: The Development of a Business Method, 1840-1980. Chapel Hill: University of North Carolina Press. Dyer, W. G., Jr. 1986. Cultural Change in Family Firms: Anticipating and Managing Business and Family Transitions. San Francisco, CA: Jossey-Bass. Hartley, B. B., & Griffith, G. 2009. Family Wealth Transition Planning: Advising Families with Small Businesses. New York, NY: Bloomberg Press. Hoy, F., & Sharma, P. 2009. Entrepreneurial Family Firms. Englewood Cliffs, NJ: Pearson Prentice Hall. International Franchise Association. 2010. Building Local Businesses, One Opportunity at a Time. http://www.buildingopportunity.com/. Ketchen, D. J., Short, J. C., & Combs, J. G. 2011. Is franchising entrepreneurship? Yes, no, and maybe so. Entrepreneurship: Theory and Practice, 35: 583–593. Ritzer, G. 2004. The McDonaldization of Society. Thousand Oaks, CA: Pine Forge Press. Shepherd, D. A., & Zacharakis, A. 2000. Structuring family business succession: An analysis of the future leader’s decision making. Entrepreneurship: Theory and Practice, 24: 25–39. Sharma, P., Chrisman, J. J., & Chua, J. H. 1997. Strategic management of the family business: Past research and future challenges. Family Business Review, 10: 1–35. Watson, A., & Johnson, R. 2010. Managing the franchisor-franchisee relationship: A relationship marketing perspective. Journal of Marketing Channels, 17: 51–68.

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Are Franchisees Entrepreneurs?
Don Larose, Senior Vice President of Franchise Development, Express Oil Change, LLC. http://www.expressoil.com* That is a great question. Franchisees may not be “entrepreneurs” in the fullest sense of the word, because by necessity to be a part of a franchise system they must follow the rules and requirements of the franchise system, which limits their decision-making autonomy. Following the franchise system’s requirements are critical in order for a brand to provide a consistent offer to the consumer and have a brand identity. Without that brand consistency, the customer wouldn’t know what to expect, and the value of the business would be greatly diminished. Franchisees are, however, entrepreneurs in the most important meaning of the word, and that is that franchisees put their own capital and net worth at risk, seeking the best return on their investment. Keith Schilleci, President of Momma G’s, Inc. – a company that is building a franchise network around the Momma Goldberg’s Deli brand. http://mommagoldbergsdeli.com* An entrepreneur is a pioneer with an individually designed enterprise, plan, or idea. Entrepreneurs plan, devise, and implement their concept and business model primarily on their own. They control the direction and implementation of their enterprise and accept full responsibility of the outcome. They accept the majority of risk and reward. A franchise offers someone the opportunity to own and operate their own franchise business. There is obvious risk and reward for the franchisee, but the risk and reward is shared to some extent with the franchisor. The business model and concept has been developed and is implemented with the assistance and support of the franchisor. To some degree, a franchisee is dependent on the direction and level of success of the franchisor. In my opinion, a franchisee does not meet the definition of a true entrepreneur. Tom Hunt, Owner and President of PHD Hotels, Inc. – a franchisee of Hampton Inns. http://www.phdhotels.com A franchisee is absolutely an entrepreneur. Anyone who is willing to take a risk by putting their own money and many times all they own on the line for a business is my definition of an entrepreneur. If you want to start your own business by choosing a franchise company, your first risk is the task of searching different franchisors and choosing the right one. I would not consider all franchisors entrepreneurs as many of them are large public companies. Although the CEO of a large public company has a very demanding job, I would not consider them an entrepreneur.

* Reprinted with permission from the Journal of Applied Management and Entrepreneurship

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WWW.FLATWORLDKNOWLEDGE.COM

“Should our family firm expand, or should we be content with the success we enjoy now?”

“Which of my children should succeed me at the helm?”

“How can I ensure that our family firm thrives in the future?”

The founders of family firms wrestle with complex questions like these every day, and the answers are elusive. In Tales of Garcon: The Franchise Players, a charismatic entrepreneur named Garcon tries to direct the destiny of the family-owned hotel that he created. The family’s plans take an unexpected turn when a mysterious investor offers to become the hotel’s first franchisee. Garcon’s carefree son Ramon readily embraces the opportunity, while his cynical daughter Isabel questions the investor’s motives. Written in an engaging style, Tales of Garcon: The Franchise Players covers key concepts from family business management, small business management, and franchising. This graphic novel can serve as the main text for a college course, as a supplement to a traditional textbook, as a reading within an executive program, and as a primer for entrepreneurs who simply want to learn more about how to be successful. As Garcon would say, “Disfruta de la aventura, amigos.” Enjoy the adventure, my friends.

Tales of GARCóN
The Franchise Players
Chapter 1: The Game’s Afoot

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