Defining Entrepreneurship within the Franchise Model

by Michael Wojtas

Is anyone who starts a business an entrepreneur? “Management guru Peter Drucker would have answered with a definitive ‘no,’” writes entrepreneurial advisor Vivek Wadhwa on techcrunch.com. “[Drucker] wrote, 'Not every new small business is entrepreneurial or represents entrepreneurship…entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship.'” This point of view would support the old notion that separates franchisees from other entrepreneurs.

But franchisees would take exception with that, and a more nuanced view of entrepreneurship appears to be prevailing. In their book titled Good Capitalism, Bad Capitalism, continues Wadhwa, “Carl Schramm and Bob Litan wrote that all who take the risk are entrepreneurs, but that there are two types of entrepreneurs: ‘replicative entrepreneurs,’ who constitute the vast majority of small businesses (such as restaurants and dry cleaners), and ‘innovative entrepreneurs’—the rare few who bring new products/services to market or who pioneer new production methods (such as Walmart, eBay and Dell).”

Conversations with successful local franchisees would also reveal a mentality that upsets Drucker’s more narrow definition. By working within the franchise model, these entrepreneurs have found the means for a lucrative business that allows for autonomous decision-making and leaves room for growth and change, but also comes with a tested marketing platform and the wisdom refined by years of company-wide trial and error.

The Entrepreneurial Spirit
“Interstate Battery basically requires us to be independent,” says Jake Hagerdorn, a local store manager and sales representative for the company. The sheer size of the $1.5 billion corporation—which employs more than 1,400 workers nationwide and in several Central American nations—might leave some to wonder how working under such a large corporate umbrella can leave franchisees the space to make their own decisions. For those readers, Hagerdorn offers an explanation.

Interstate has something called a Radar Tool—a continually updated database that monitors which batteries are being sold, who is buying them, and even what they are being used for and why. Not only does this system keep the nearly 60-year-old company up-to-the-minute current, it promotes independence among distributors, as the parent corporation lets individual stores determine what works best locally. In return, the managers are asked to report back about activity in the area.

“Please, be independent. Do what you do—and tell us about it,” says Hagerdorn, when asked to characterize the message that his store gets from upper management. Because sales strategies must be region-specific, “Every good Interstate store manager has to think of this as running their own business,” he adds. “It’s basically like running my own operation without having to incur all the costs.”

While Hagerdorn’s experience with Interstate Battery supports the concept of the autonomous franchisee, he notes that his prior experiences did not offer the same sort of breathing room. “At other companies I’ve worked at, we were so restricted,” he explains. “They would say, ‘This is how to advertise and this is how much to spend on it.’ Here, they make recommendations and give structure, but also the opportunity to go outside of the structure.”

John Ginder, president and chief operating officer of RE/MAX Unlimited in Peoria, speaks openly about independence and its correlation to his work with the real estate giant. “RE/MAX is not intrusive,” he says. “They’re more of a hand that helps upward than a hard hand that tells you how to run your business.

“They don’t impose many rules on us as to how we run our operation,” he continues. “We’re independent entrepreneurs in our own business. We choose what policies to enact; we have our own independent contractors’ agreement and our own employee policy manual.”

So what does a corporation the size of RE/MAX gain from allowing their agents so much leeway? Ginder’s response echoes Hagerdorn’s depiction of Interstate Battery.

“Corporate RE/MAX freely admits that the best ideas come from the field, so we’re encouraged to develop our own systems and training,” he explains. He adds that RE/MAX nurtures this kind of autonomy in part because the founders of the company prized this characteristic.

Dave Liniger, co-founder and current chairman of the national company, occasionally brings agents from successful branches like Ginder’s to RE/MAX corporate headquarters in Denver. “Liniger wants our ideas so he can tweak them,” says Ginder, explaining why RE/MAX allows agents to chart their own success. “He’s taking what we think of and seeing how he can adapt them for future use.”

Ginder feels that the corporate attitude at RE/MAX “enhances and encourages the entrepreneurial spirit.” But Ginder and Hagerdorn also offer insight into the benefits of having a large corporation to turn to when necessary.

A Helping Hand
“I worked with independent companies for 15 years before I came to RE/MAX,” recalls Ginder. “This has been my best entrepreneurial venture—no comparison.

“In those other situations,” Ginder continues, “you have to go and dig up the information yourself—it’s not supplied to you.” RE/MAX, on the other hand, offers employees a database with more than a thousand videos designed to provide reference material for a variety of issues, from finance and sales to marketing and even stress management. There is also an online chat in which franchisees can post problems for other agents to see and offer advice.

Ginder does not shy away from using the tools that are given to him. In the face of trying situations, he says, “The interaction among RE/MAX agents is great.” When an issue cannot be easily resolved, the parent company is available to talk things out over the phone and sometimes will even send a representative from Colorado to work things through in person.

Such firsthand support is an essential part of the company’s operations. “Over the years, I’ve been surprised about this big corporation’s interest in a smaller franchise in Peoria,” notes Ginder. “We do not get lost in the shuffle. We get personal attention.”

Excellent communication between franchise and franchisee is also part of the foundation at Interstate Battery. “The resources we have are top-notch, making it extremely easy to take the best care of my customers that I can.” Corporate help, says Hagerdorn, is always “just an 800-number away.” Interstate also has an online program that franchisees can consult when they come across a battery that they haven’t seen before.

Informational support isn’t the only way that franchisers aid their franchisees, though. “Marketing techniques and branding are a huge part of what you’re buying,” Ginder explains. “You want that kind of recognition.”

Kevin Willenborg, owner of three local Hallmark stores, echoes this sentiment. “We want to capitalize on the Hallmark logo and branding as much as we can,” he says. Willenborg’s relationship with Hallmark provides another example of the flexibility that can arise within a franchise relationship. Though he works with the nation’s largest greeting card company, by taking a chance on a personal passion, he has proven that entrepreneurs can at once be both replicative and innovative.

An Independent Streak that Works
Willenborg incorporated his love of picture framing—something he had picked up in his work for a previous business—into one of his stores. He claims to be “one of the only Hallmarks in the country that does picture
framing.”

“The corporation doesn’t necessarily know how it works, but they know it’s something that fits their personal expression—something they want in their stores,” he adds. Willenborg thinks of Hallmark less as a traditional franchiser and more as a sort of “glorified vendor” because, while many of his store’s products come from the corporation, a large portion of his revenue is derived from the framing side of the business.

Because Willenborg’s unconventional store continues to make money, the parent company is happy to give him the opportunity to run his business the way he pleases. “It’s a great relationship,” he says, summing up the working bonds between himself and the corporation. “I always knew I wanted to work for myself, I just didn’t know what it would be.”

The attitudes and practices revealed by Willenborg, Ginder and Hagerdorn go a long way toward supporting a broader definition of entrepreneurship and combating the outdated notion that franchisees are not independent entrepreneurs. While providing an overall “replicative” entrepreneurial framework, franchises that offer a level of autonomy to their franchisees can initiate innovations that arise from the ground up. Semantics aside, it is undeniable that franchisees are risk-takers and job creators, as essential to our economic well-being as any other type of entrepreneur. iBi

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