1.0 Introduction
1.1 Background of Study
The franchise model gained greater traction in the early 20th century, particularly in the United States, with companies like Coca-Cola and General Motors employing franchised networks to expand distribution. However, it was not until the post-World War II era that franchising began to flourish as a mainstream business model. This period witnessed the rapid expansion of fast-food giants such as McDonald’s and KFC, which utilized franchising as a vehicle for growth and market penetration. These companies demonstrated the power of franchising in building global brands through local entrepreneurship (Hoy, Stanworth, & Purdy, 2006). The success of franchising in developed economies sparked interest in its adoption in emerging markets. In Africa, and specifically Nigeria, franchising began to gain attention in the late 20th and early 21st centuries. The initial adoption was slow due to limited awareness, regulatory challenges, and infrastructural constraints. However, the increasing presence of international brands, rising middle-class consumer demand, and youth-driven entrepreneurship have catalyzed the growth of franchising in Nigeria (Oyelaran-Oyeyinka, 2006).
The franchise model has gained widespread popularity in both developed and emerging economies, including Nigeria. in the Nigerian context, franchising has been adopted in various sectors such as food and beverage, fashion, education, hospitality, and retail. With a growing population, increasing urbanization, and a youthful demographic, Nigeria presents a fertile ground for franchise-driven entrepreneurial growth. Many local and international franchise brands are expanding their footprint in the country, contributing to employment generation and capacity building among aspiring entrepreneurs (Oyelaran-Oyeyinka, 2006).
Today, the franchise model is recognized as a tool for enhancing entrepreneurial development, especially for individuals who may lack the capital or experience to launch independent businesses. It has become a popular option for reducing startup risks while still allowing entrepreneurial expression within the structure of a proven business system (Combs, Ketchen, & Short, 2011). The franchise model allows entrepreneurs to leverage established brand equity, operational procedures, and ongoing support from the franchisor, which can significantly enhance their chances of success compared to independent business start-ups (Peterson & Dant, 1990). Franchising, therefore, represents a strategic blend of independence and guidance, empowering entrepreneurs to grow their businesses while minimizing common pitfalls associated with new ventures. In Nigeria and other emerging economies, the franchise model has shown great potential in sectors such as food services, retail, hospitality, and health care, where consistent quality and brand recognition are crucial to consumer loyalty.
Entrepreneurship has emerged as a pivotal driver of economic development, innovation, and job creation across the globe. In this context, the franchise business model has become a popular strategy for expanding entrepreneurial opportunities, especially for individuals seeking to enter the business world with a reduced risk of failure. A franchise is defined as a legal and commercial relationship between the owner of a trademark, brand, or business model (the franchisor) and an individual or group (the franchisee) who is authorized to operate a business using the franchisor’s brand and business practices (International Franchise Association, 2022). Therefore, this study seeks to explore the effect of the franchise business model on entrepreneurial growth, with particular emphasis on how it enhances entrepreneurial capacity, reduces entry barriers, promotes innovation, and contributes to long-term business success.
1.2 Statement of Problems
Investigation revealed that the franchise business model is often proposed as a strategic alternative that reduces the risks associated with independent startups and supports entrepreneurial growth. Also, many aspiring entrepreneurs remain unaware of how franchising works, or they face barriers in accessing franchising opportunities due to high initial fees, lack of franchisor support, or rigid operational requirements (Oyelaran-Oyeyinka, 2006).
Furthermore, many aspiring entrepreneurs remain unaware of how franchising works, or they face barriers in accessing franchising opportunities due to high initial fees, lack of franchisor support, or rigid operational requirements. Also, there is insufficient empirical data on whether the franchise business model is truly fostering long-term growth for franchisees or merely creating semi-dependent business operators with limited autonomy (Combs, Ketchen, & Short, 2011). It is against the backdrop that this study seeks to address these gaps by examining whether the franchise business model is truly contributing to entrepreneurial growth in Nigeria.
1.3 Aim and Objectives of Study
The aim of this study is to examine the effect of the franchise business model on entrepreneurial growth.
The specific objectives of the study are:
- To assess the level of awareness and adoption of the franchise business model among entrepreneurs.
- To examine the extent to which franchising supports business sustainability and expansion.
- To identify the challenges faced by franchisees in operating within a franchise system.
- To evaluate the role of franchisors in facilitating entrepreneurial development.
- To investigate the impact of franchising on job creation and income generation for entrepreneurs.
1.4 Research Questions
Based on the objectives of the study, the following research questions will guide the investigation into the Effect of Franchise Business Model on Entrepreneurial Growth:
- What is the level of awareness and adoption of the franchise business model among entrepreneurs?
- To what extent does the franchise business model support business sustainability and expansion?
- What are the major challenges faced by entrepreneurs operating under a franchise system?
- How do franchisors contribute to the development and success of franchisees?
- In what ways does the franchise business model influence job creation and income generation for entrepreneurs?
1.5 Research Hypotheses
Based on the objectives of the study, the following hypothesis is formulated to guide the research:
Hypothesis One
- H0: There is no significant relationship between the franchise business model and entrepreneurial growth.
- H1: There is a significant relationship between the franchise business model and entrepreneurial growth.
Hypothesis Two
- H0: The franchise business model does not significantly support business sustainability and expansion.
- H1: The franchise business model significantly supports business sustainability and expansion
Hypothesis Three
- H0: The franchise business model has no significant impact on job creation and income generation for entrepreneurs.
- H1: The franchise business model has a significant impact on job creation and income generation for entrepreneurs.
1.6 Significance of Study
The findings of this research will be beneficial to franchisors, as it will shed light on the support systems and strategies that are most effective in enhancing franchisee performance and entrepreneurial growth.
Furthermore, policymakers and government agencies involved in entrepreneurship development will find this study useful for formulating supportive policies and regulatory frameworks that promote franchising as a tool for economic empowerment.
In addition, this study will add to the growing body of literature on entrepreneurship and franchising, especially in the context of emerging economies like Nigeria, where franchising is still evolving. Academic institutions and researchers will be able to use the results of this study as a foundation for further research in related areas.
1.7 Scope of Study
This study focuses on the effect of the franchise business model on entrepreneurial growth within Lagos State, Nigeria using Domino’s Pizza Nigeria as a case study.
1.8 Limitations of the Study
Several limitations were encountered during the course of this study, which may have influenced the results and conclusions.
- Delay from Respondents: Many participants experienced time constraints or hesitated to commit to the study due to their busy schedules. This delay limited the volume of data that could be gathered within the planned timeframe.
- Financial Constraints: Due to budget limitations, there was insufficient funding to expand the research to a larger sample size or to include more varied geographic locations, which might have provided a broader perspective.
- Response Bias: The study will involve surveys and interviews with cooperative managers and members. Response bias may occur if respondents provide socially desirable answers or if there is reluctance to disclose negative financial information due to privacy concerns or fear of repercussions.
- Time Constraints: This constraint impacted the depth of the investigation, as the study had to be completed within a specified period, which limited opportunities for extended follow-ups or additional data gathering.
1.9 Definition of Terms
Franchise Business Model:
A franchise business model is a method of doing business where an entrepreneur (the franchisee) obtains the right to operate a business using the branding, systems, and support of an established company (the franchisor) in exchange for fees or royalties (Michael, 2003).
Entrepreneurial Growth:
Entrepreneurial growth refers to the expansion and development of an entrepreneur’s business activities over time, including increased sales, market reach, employment generation, and overall business sustainability (Brush, 1992). It reflects the progress an entrepreneur makes in scaling their business and achieving long-term success.
Franchisor:
A franchisor is the original business owner who grants the franchisee the license to operate a business under the franchisor’s established brand and system. The franchisor provides ongoing support, training, and operational guidelines to help maintain brand consistency and ensure franchise success (Combs, Ketchen, & Short, 2011).
Franchisee:
A franchisee is an individual or group that purchases the rights from the franchisor to operate a franchise business. The franchisee invests capital and effort to run the business while adhering to the franchisor’s prescribed standards and practices (Justis & Judd, 2003).
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