Chapter One – Introduction
Definition of the Problem
The period during which the entrepreneurial individual is starting a business is a time of excitement, full of possibility. At the same time, however, the start-up period can be fraught with conflict and, if not planned and managed properly, can lay the foundation for conflict to emerge at a later stage in the business (Shaver, Gartner, Crosby, Bakalarova, & Gatewood, 2001). Many different kinds of conflict with a new business can emerge, including debates about the type of corporate structure chosen, the clear identification of roles that each member of the business will play, the source of funding to sustain the business during the start-up period, and the goals and tasks of each phase of the business. There is a general assumption that starting a franchise will eliminate many of these problems, as the franchise model offers the entrepreneur a template that answers many of the questions which often generate conflict in other types of businesses (Dant & Peterson, 1990). As seminal and recent research has suggested, however, this assumption is often erroneous; it appears that franchises are just as susceptible to start-up conflicts as any other type of business.
The problem is that despite the research that is available to confirm the hypothesis that franchise businesses are, in general, as prone to start-up conflicts as any other type of business, there is not adequate research information available to substantiate this claim for fast food restaurants. In particular, there is no research available about new types of fast food franchises, such as Chipotle, that do not have quite the same kind of branding and history as larger franchises, such as McDonalds, Burger King, and Subway. Research is needed to determine what specific kinds of conflicts are common among the new generation of fast food franchises. The outcomes of such research can help both franchisers and franchisees become more adept at planning the start-up phase of the business.
There are two research questions guiding the proposed study:
1) What kinds of conflicts are commonly experienced by entrepreneurs who are starting a franchise operation with one of the new generation fast-food restaurants?
2) What are the qualitative impacts of these conflicts on the employees and the operation of the business?
Review of the Literature
Franchising has become an increasingly popular form of starting a business in the United States over the past 20 years (Dant & Peterson, 1990). On the surface, it seems that starting a franchise is relatively easy compared to starting one’s own business from scratch. The franchisee receives a template to be imported into his or her business, and this template provides a model for many structural and operational details of the business, from the physical appearance and lay-out of the store to the advertisements and promotions that are offered to the public. Although starting a franchise does involve significant expenses, many entrepreneurs who do not have a substantial infusion of capital opt a franchise business over an independent business because this option permits them to move from being an employee to a business owner much more quickly than the conventional model of business (Dant & Peterson, 1990). One of the main reasons that this is the case is because the franchisee is able to benefit directly and immediately from the brand recognition of the franchise (Dant & Peterson, 1990).
While there are clear advantages of becoming a franchisee, it is often the case that entrepreneurs overlook some of the potential challenges of the start-up phase of franchise operation, particularly when they have overestimated the value of the advantages of franchising over any other type of business model (Castrogiovanni, Justis, & Julian, 1993). As Castrogiovanni et al. (1993) note, new franchisees often assume that the market penetration of a franchise is sufficient to generate visibility and business; however, this is a dangerous assumption that can result in business failure. Castrogiovanni and his colleagues pointed out that many franchisees simply buy into the business without evaluating the soundness of the business concept, the complete terms of the agreement that are ongoing beyond the initial phase of operations (such as purchasing the goods needed for operations), and without asking what types of support will be provided over the life of the business. For these reasons, the start-up phase of the franchise may seem stable and supportive, and franchisees may be oblivious to dangers ahead. Because they have not made contingency plans for problems, then, they find themselves surprised by unanticipated challenges that could have been planned for and avoided during the critical phase of start-up.
Such concerns have not been investigated extensively by researchers, particularly with respect to the new generation of fast food franchise chains, such as Chipotle Mexican Grill. In its nascent stages as a franchise, Chipotle does seem to be performing relatively well, mainly because it has two attractive qualities that many of its competitors do not: (1) it is one of the only nation-wide fast-food chains that focuses on providing ethnic food to a diverse clientele, and (2) it promotes its food as a fresh and healthy alternative to fried, high-calorie, high-fat foods (Foreign Policy, 2001). Despite these attractive qualities that make Chipotle stand apart from the competition, it is still too young as a company to be able to evaluate the strength of its business concept when compared to other fast food franchises that have held market dominance for decades (Combs, Ketchen, & Ireland, 2006). Even though Chipotle Mexican Grill is owned by McDonald’s Corporation, this fact does not necessarily signify that Chipotle will enjoy the same kind of success that McDonald’s has enjoyed. In fact, despite that the fact that McDonald’s Corporation owns Chipotle, Chipotle’s advertising often pits it against the burger franchise, even though they are sister companies (Price, 2002).
Chapter Three -Methodology
The research design that is being proposed for the study is qualitative in nature. While quantitative data are generally believed to be more scientifically rigorous (Zweig & Dawes, 2000), the researcher’s ability to gain access to the financial data of individual franchises and the corporate parent is limited. For this reason, the researcher has decided that a qualitative methodology, based on the case study model and the use of in-person interviews, will provide a foundation of exploratory research in an area that has, to date, received minimal research attention.
The procedure that the researcher intends to use is a qualitative interview method. In order to implement the research design, the researcher will first contact two Chipotle Mexican Grill franchises that have opened within the past six months. During this contact, the researcher will speak directly with the franchisee and will explain the purpose and nature of the research and to request their participation in the study. In this initial contact, the researcher will explain how the study will be carried out, who will ideally be involved as participants, how the information will be used, and to what ends. If the franchisees agree to participate in the study, they will be asked to sign informed consents acknowledging their voluntary participation in the study, as will any employees in the franchises who also participate in the study. The researcher will inform all participants that there will be no monetary or material compensation given in exchange for their participation in the study, and they will be informed that they can withdraw from the study at any time. Further, the participants will be informed that all information and responses obtained in interviews will be kept confidential by presenting responses in the aggregate. By not attaching specific responses to individuals, the researcher helps protect employee participants from any potential recrimination from their employer for remarks perceived as negative about the franchise or the company. By presenting interview response data in the aggregate the researcher will also help diminish the possibility that participants will skew their responses positively for fear of employer retaliation.