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Paper to be presented at the EMNet-Conference on "Economics and Management of Franchising Networks" Vienna, Austria, June 26 – 28, 2003 Knowledge Management in Franchising Networks Fridtjof O. Langenhan Hansaallee 29 B D – 60322 Frankfurt a. M. Germany Tel: 0049-(0)69-59793195 Fax: 0049-(0)69-59793194 E-mail: [email protected] Abstract: The fundamental idea of franchising is that the franchisor provides franchisees with his franchise package in return for payment. The franchise package contains the franchisor’s knowledge of the successful management of franchisee enterprises. The franchise package can consequently be regarded as the core element of the organisational knowledge base of a franchising network, while the ongoing development and implementation of the franchise package can be regarded as organisational learning processes. This paper examines the question of how knowledge management can be used for the design and targeted control of organisational learning processes in franchising networks. It analyses the function and characteristic features of organisational learning in franchising networks and presents a holistic, process-oriented knowledge management concept for franchising networks. Potential concepts for the methodical-instrumental support of knowledge management in franchising networks are discussed. The findings of the comprehensive empirical survey “Know-How Development and Know-How Transfer in Franchise Systems” are incorporated in the study.

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Page 1: 1 Praktische und wissenschaftliche Einflüsse auf …emnet.univie.ac.at/fileadmin/user_upload/conf_EMNet/… · Web view"Economics and Management of Franchising Networks" Vienna,

Paper to be presented at the EMNet-Conference on"Economics and Management of Franchising Networks"

Vienna, Austria, June 26 – 28, 2003

Knowledge Management in Franchising Networks

Fridtjof O. LangenhanHansaallee 29 B

D – 60322 Frankfurt a. M.Germany

Tel: 0049-(0)69-59793195Fax: 0049-(0)69-59793194

E-mail: [email protected]

Abstract:The fundamental idea of franchising is that the franchisor provides franchisees with his franchise package in return for payment. The franchise package contains the franchisor’s knowledge of the successful management of franchisee enterprises. The franchise package can consequently be regarded as the core element of the organisational knowledge base of a franchising network, while the ongoing development and implementation of the franchise package can be regarded as organisational learning processes. This paper examines the question of how knowledge management can be used for the design and targeted control of organisational learning processes in franchising networks. It analyses the function and characteristic features of organisational learning in franchising networks and presents a holistic, process-oriented knowledge management concept for franchising networks. Potential concepts for the methodical-instrumental support of knowledge management in franchising networks are discussed. The findings of the comprehensive empirical survey “Know-How Development and Know-How Transfer in Franchise Systems” are incorporated in the study.

JEL code:franchising networks, knowledge management, decentralised organisational learning processes, decentralised knowledge

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1 Knowledge Management in Franchising Networks: Neglected Success Factor in Franchising Theory and Franchising Practice?

The franchise package contains the franchisor’s knowledge about the successful management

of a franchising enterprise.1) Kloyer2) stresses the importance of knowledge as a resource for

franchising networks. “The most important resource supplied by the franchisor to the

franchisees is his knowledge, i.e. his expertise. The most important resources provided by the

franchisee for the franchisor are his capital ..., the high motivation of the franchisee because

of his capital investment, his specific knowledge of the market, and the franchise fees.”3)

Lissack4) describes the franchisor as “...a provider of knowledge”.

The franchisor shares his knowledge of the successful management of franchisee enterprises

with the franchisees when he provides the franchisees with his franchise package. The theory

of organisational learning refers to knowledge which is shared by several members of an

organisation as organisational knowledge.5) The franchise package can therefore be

interpreted as the organisational knowledge of the franchising network.

The franchise package undergoes changes as a result of management activities in the course

of management of a franchising network, as the franchise package should undergo continuous

improvement and development.6) From the point of view of organisational learning, the

change in the franchise package can be interpreted as a change in the organisational

knowledge of the franchising network. The change in organisational knowledge is referred to

as organisational learning.7)

1 ) Cf. Skaupy, Walther: Franchising. Handbuch für die Betriebs- and Rechtspraxis. 2nd edition, Munich 1995, p. 11 and 57.

2 ) Cf. Kloyer, Martin: Management von Franchisenetzwerken. Eine Ressource-Dependence-Perspektive. Wiesbaden 1995, p. 14.

3 ) Kloyer, Martin: Management von Franchisenetzwerken. Eine Ressource-Dependence-Perspektive. Wiesbaden 1995, p. 14.

4 ) Lissack, Michael R.: Chaos and Complexity. What does that have to do with knowledge management? In: Knowledge Management. Organization, Competence and Methodology. Vol. 1 of the series Advances in Knowledge Management. Publisher: Jos F. Schreinemakers. Würzburg 1996, p. 73.

5 ) Cf. Pautzke, Gunnar: Die Evolution der organisatorischen Wissensbasis. Bausteine zu einer Theorie des organisatorischen Lernens. Munich 1989, p. 76-78; Schüppel, Jürgen: Wissensmanagement. Organisatorisches Lernen im Spannungsfeld von Wissens- und Lernbarrieren. Wiesbaden 1996, p. 19; Oberschulte, Hans: Organisatorische Intelligenz. Ein Vorschlag zur Konzeptdifferenzierung. In: Managementforschung 6. Wissensmanagement. Publisher: Georg Schreyögg und Peter Conrad. Berlin and New York 1996, p. 51-52.

6 ) Cf. Zofka, Ondrej: Aufbau eines grenzüberschreitenden strategischen Netzwerks für schweizerische KMU am Beispiel des Franchising. Diss. St. Gallen 1996, p.110.

7 ) Cf. Duncan, Robert B. and Andrew Weiss: Organizational Learning. Implications for Organizational Design. In: Research in Organizational Behaviour. Vol. 1. Publisher:

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If organisational knowledge is an important resource in franchising networks and if that

organisational knowledge is to undergo change in the course of the organisational learning

processes, every franchisor should ask himself what steps can be taken to ensure targeted

control of the organisational learning processes.

Knowledge management is a concept which should provide management practice with

specific information for the control of organisational learning processes.1) Franchising

practice thus requires a special knowledge management concept for the control of

organisational learning processes in franchising networks.

To date, neither scientific literature on franchising nor scientific literature on organisational

learning and knowledge management offer any comprehensive and yet specific knowledge

management concepts for franchising networks.2)

The following paper presents a comprehensive examination of the subject of knowledge

management in franchising networks. To begin with, it analyses the great importance of

knowledge management for the success of franchising networks (Chapter II). Chapter III

explains the holistic and process-oriented knowledge management concept for franchising

networks. Potential solutions for the methodical-instrumental support of knowledge

management in franchising networks are discussed in Chapter IV, while Chapter V sums up

the examination findings in the form of hypotheses.

The findings of the empirical survey “Know-How Development and Know-How Transfer in

Franchise Systems” are incorporated in the study. The empirical survey was conducted

between August and October 2001 in the form of a standardised written questionnaire

Barry M. Staw. Greenwich 1979, p. 84; Probst, Gilbert J. and Bettina S. Büchel: Organisationales Lernen. Wettbewerbsvorteil der Zukunft. 2nd edition Wiesbaden 1998, p. 17; Pautzke, Gunnar: Die Evolution der organisatorischen Wissensbasis. Bausteine zu einer Theorie des organisatorischen Lernens. Munich 1989, p. 112.

1 ) Cf. Probst, Gilbert J. et al.: Wissen managen. Wie Unternehmen ihre wertvollste Ressource optimal nutzen. 3rd edition Frankfurt and Wiesbaden 1999, p. 6, 46-47 and 61; Rehäuser, Jakob und Helmut Krcmar: Wissensmanagement in Unternehmen. In: Managementforschung 6. Wissensmanagement. Publisher: Georg Schreyögg und Peter Conrad. Berlin and NewYork 1996, p. 18; Essers, Juup and Jos F. Schreinemakers: The Conceptions of Knowledge and Information in Knowledge Management. In: Knowledge Management. Organization, Competence and Methodology. Vol. 1 of the series Advances in Knowledge Management. Publisher: Jos F. Schreinemakers. Würzburg 1996, p. 102.

2 ) For detailed treatment cf. Langenhan, Fridtjof O.: Wissensmanagement in Franchisingnetzwerken. Theoretische Grundlagen und praktische Gestaltung organisationaler Lernprozesse in Franchisingnetzwerken. Vol. 5 of the series Managementorientierte Betriebswirtschaft. Konzepte, Strategien, Methoden. Publisher: Wolfgang Lück. Sternenfels and Berlin 2003, p. 14-30 (in the press).

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submitted to franchisors and franchisees. The questionnaire was sent to 199 franchisors, who

are full members of the German Franchise Association (response rate1): 44%).2)

The survey of the franchisees was conducted in three of the 199 participating franchising

networks. Of the 104 questionnaires submitted to franchisees, 46 were completed and

returned (response rate: 44%).

2 Importance of Knowledge Management for the Success of Franchising Networks

Knowledge management is aimed at achieving the effective design and the efficient

management of organisational learning processes.3) Knowledge management is a practice-

based development of the theory of organisational learning, aimed at providing recommended

courses of action for the targeted control of organisational learning processes in management

practice.4) It considers the function of organisational learning in franchising networks and the

characteristic features which have to be taken into account in organisational learning

processes in franchising networks.

2.1 Function of Organisational Learning in Franchising Networks

Organisational learning deals with the change in the knowledge base of an organisation. The

following sections investigate the structure of the knowledge base of a franchising network,

as well as the change in the knowledge base of a franchising network, in order to substantiate

1 ) The usual response rate for written surveys is between 5%-30%, it is unusual to achieve response rates of up to 50%. Cf. Hüttner, Manfred and Ulf Schwarting: Grundzüge der Marktforschung. 7th edition Munich and Vienna 2002, p. 71; Meffert, Heribert: Marketing. Grundlagen marktorientierter Unternehmensführung. Konzepte, Instrumente, Praxisbeispiele. 9th edition Wiesbaden 2000, p. 156.

2 ) The German Franchise Association, according to its official member database, had 205 full members on the cut-off date for the survey, 8 August 2001. Six members do not belong to the survey unit. These members were either not active or no longer active as franchisors or referred to doubles in the database. One member had already completed the questionnaire as pretest. The member database of the German Franchise Association is available to the public at url: http://www.dfv-franchise.de/ html/mitglieder/mitglieder.html.

3 ) Cf. Pawlowsky, Peter: Wissensmanagement in der lernenden Organisation. Habil. Paderborn 1994, p. 314.

4 ) Cf. Probst, Gilbert J. et al.: Wissen managen. Wie Unternehmen ihre wertvollste Ressource optimal nutzen. 3rd edition Frankfurt and Wiesbaden 1999, p. 6, 46-47 and 61; Rehäuser, Jakob and Helmut Krcmar: Wissensmanagement in Unternehmen. In: Managementforschung 6. Wissensmanagement. Publisher: Georg Schreyögg und Peter Conrad. Berlin and New York 1996, p. 18; Essers, Juup and Jos F. Schreinemakers: The Conceptions of Knowledge and Information in Knowledge Management. In: Knowledge Management. Organization, Competence and Methodology. Vol. 1 of the series Advances in Knowledge Management. Publisher: Jos F. Schreinemakers. Würzburg 1996, p. 102; Romhardt, Kai: Die Organisation aus der Wissensperspektive. Möglichkeiten und Grenzen der Intervention. Wiesbaden 1998, p. 45 and 47.

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the close links between organisational learning and the management of franchising networks.

The aim is to exemplify the importance of ongoing development of the franchise package as a

particularly important form of organisational learning. The empirical findings on the ongoing

development of the franchise package are intended to indicate the development status of this

form of organisational learning in franchising practice.

2.1.1 The Franchise Package as Core of the Knowledge Base of a Franchising Network

The basic idea of franchising consists of two elements. The franchisor provides the franchisee

with the franchise package. The franchisee pays the franchisor a fee for the use of the

franchise package. The franchise package contains the franchisor’s business management and

technical knowledge about the successful management of a franchisee enterprise.1) If the

franchise package contains knowledge and if provision of the franchise package by the

franchisor in return for a fee conforms with the basic idea of franchising, the provision of

knowledge is thus one of the principal tasks of the franchisor.2)

The franchise package is collective knowledge within a franchising network and is used to

enable the franchisee to cope with his allotted tasks. The collective knowledge to which an

organisation has recourse in order to cope with its tasks is part of the organisational

knowledge base of that organisation.3) The franchise package consequently represents the

core of the organisational knowledge base of a franchising network.

The organisational knowledge base of a franchising network comprises further elements

which do not form part of the franchise package. As a result of the decentralised development

of special knowledge, some individual franchisee enterprises may evolve into isolated

competence centres within the franchising network which solve a certain problem differently

1 ) Cf. Skaupy, Walther: Franchising. Handbuch für die Betriebs- und Rechtspraxis. 2nd edition Munich 1995, p. 11 and 57.

2 ) According to Skaupy, current legal practice stipulates that disclosure of the know-how contained in the franchise package to the franchisees is one of the principal duties of the franchisor. Cf. Skaupy, Walther: Franchising. Handbuch für die Betriebs- und Rechtspraxis. 2nd edition Munich 1995, p. 111. Based on an institutional-economic efficiency comparison, Kubitschek comes to the conclusion that the nature of franchising can be defined as the development and transfer of know-how. Cf. Kubitschek, Christian: Franchising. Effizienzvergleich mit alternativen Vertriebskonzepten. Wiesbaden 2000, p. 235-236.

3 ) For the definition of organisational knowledge base cf. Pautzke, Gunnar: Die Evolution der organisatorischen Wissensbasis. Bausteine zu einer Theorie des organisatorischen Lernens. Munich 1989, p. 63 and 81.

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or more successfully than the remaining franchisee enterprises.1) Although the collective or

individual decentralised knowledge forms part of the knowledge base of the franchising

network, this decentralised knowledge is used exclusively in a certain franchisee enterprise.

This decentralised knowledge inventory is therefore not available to the other franchisees or

to the franchisor.

The question therefore arises of what consequences the identified structure of the

organisational knowledge base of a franchising network has for organisational learning in

franchising networks.

2.1.2 Ongoing Development of the Franchise Package as a form of Organisational

Learning in a Franchising Network

The franchisees use the organisational knowledge contained in the franchise package with the

aim of satisfying their customers’ requirements more successfully than their competitors.

However, neither the customer requirements nor the conduct of the competitors remain

stable.2) The franchise package therefore has to undergo permanent further development in

order to ensure faster and better satisfaction of the customers’ requirements in a constantly

changing environment.

Organisational learning is thus an extremely important factor for the franchisor if these

organisational learning processes lead to ongoing development of the franchise package. The

decentralised knowledge of the franchisees can be of major significance for the ongoing

development of the franchise package, as the franchisees have direct contact with the

customers and can consequently develop ideas which are most likely to correspond to the

customers’ wishes.3)

The interpretation of ongoing development of the franchise package as a form of

organisational learning in a franchising network has consequences for the management of

franchising networks. The franchisor has to take steps to ensure the targeted control of that

1 ) Cf. Zofka, Ondrej: Aufbau eines grenzüberschreitenden strategischen Netzwerks für schweizerische KMU am Beispiel des Franchising. Diss. St. Gallen 1996, p. 68.

2 ) Cf. Bruhn, Manfred: Hyperwettbewerb. Merkmale, treibende Kräfte und Management einer neuen Wettbewerbsdimension. In: Die Unternehmung 1997, p. 340; Lynn Gary S. et al.: Wie echte Produktinnovationen entstehen. In: Harvard Business Manager 1996. No. 4, p. 81-82; MacMillan Ian C. and Rita McGrarth: In Ihren Produkten steckt mehr Gewinn, als Sie denken. Harvard Business Manager 1996. No. 4, p. 71.

3 ) Cf. Zofka, Ondrej: Aufbau eines grenzüberschreitenden strategischen Netzwerks für schweizerische KMU am Beispiel des Franchising. Diss. St. Gallen 1996, p. 110; Skaupy, Walther: Franchising. Handbuch für die Betriebs- und Rechtspraxis. 2nd edition Munich 1995, p. 123; Tietz, Bruno: Handbuch Franchising. Zukunftsstrategien für die Marktbearbeitung. 2nd edition Landsberg am Lech 1991, p. 484.

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organisational learning. These steps for the targeted control of organisational learning are

aimed at ensuring permanent further development of the franchise package as well as

ongoing development of the collective decentralised knowledge inventories and individual

knowledge inventories. The franchisor should therefore develop and implement a knowledge

management concept for that purpose.

2.1.3 Empirical Findings for the Ongoing Development of the Franchise Package in

Franchising Practice

The findings of the empirical survey “Know-How Development and Know-How Transfer in

Franchise Systems” support the assumption that permanent development of the franchise

package is a highly significant factor for the success of franchising networks (cf. Fig. 1).

Fig. 1: Influence of ongoing development of the franchise package and influence of

involvement of the franchisees in the development of the franchise package on

financial success

On average, franchisors and franchisees rate the influence of ongoing development of the

franchise package on the enterprise’s success as high (franchisors: 4.1; franchisees: 3.8).

However, they tend to rate the importance of decentralised knowledge for ongoing

development of the franchise package as lower.1) On average, franchisors and franchisees rate

the influence of involvement of the franchisees in the ongoing development of the franchise

package as moderate to high (franchisors: 3.5; franchisees: 3.6).

1 ) The survey results confirm the findings of a previous empirical survey which showed that the franchisors regard the developpment of innovations as a central task in which the franchisees do not participate. Cf. Meurer, Jörg: Führung von Franchisesystemen. Führungstypen, Einflußfaktoren, Verhaltens- und Erfolgswirkungen. Wiesbaden 1997, p. 243.

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„sehr starker Einfluß“

„kein Einfluß“

Ongoing development of the franchise package

Franchisee involvement

no influence very strong influenceFranchisors Franchisees

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Other findings of the survey show that the franchisors frequently fail to make optimum use of

the potential of the decentralised knowledge of the franchisee enterprises for development of

the franchise package. The franchisors state that concepts developed by the system

headquarters are frequently the basis for ongoing development of the franchise package,

whereas suggestions for improvement and ideas submitted by individual franchisees and

decentralised development of standards of the franchise package in individual franchisee

enterprises only occasionally serve as the basis for further development of the franchise

package (cf. Fig. 2).

Fig. 2: Starting points for further development of the franchise package (n=86)

If franchisees pass on their ideas for developing the franchise package to the franchisor, these

ideas are largely restricted to the limited subject area of products and services, marketing and

sales (cf. Fig. 3).

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„sehr häufig“

System headquarters

Franchisee ideas

Franchiseeprocedures

never very frequently

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Fig. 3: Subjects covered by franchisee ideas for development of the franchise package

according to the franchisors

In addition to their sales expertise, successful franchisees may also have further business

management and technical knowledge. To date, however, decentralised knowledge about

corporate functions which are less sales-oriented is rarely passed on to the franchisor.

A total of 83% of franchisors believe that the ideas of the franchisees for development of the

franchise package are essentially operative (46%) or operative (37%). This means that the

strategic potential of decentralised knowledge mostly remains unexploited in franchising

practice, although decentralised knowledge has great strategic potential as the holders of that

decentralised knowledge are thoroughly familiar with the situation concerned1) and also

constitute a network for market information2).

The responses to the questions about the disclosure of knowledge in franchising networks

also indicate the deficits identified with regard to the exploitation of decentralised

knowledge. Both franchisors and franchisees rate the importance of the dissemination of

decentralised knowledge as lower than the importance of dissemination of central knowledge

for the success of the business (cf. Fig. 4).

Fig. 4: Influence of the dissemination of knowledge on the success of the business

1 ) Cf. Steinmann, Horst and Carola Hennemann: Die lernende Organisation. Eine Antwort auf die Herausforderungen der Managementpraxis? In: Handbuch Lernende Organisation. Unternehmens- und Mitarbeiterpotentiale erfolgreich erschließen. Publisher: Wieselhuber und Partner. Wiesbaden 1997, p. 41.

2 ) Cf. Zofka, Ondrej: Aufbau eines grenzüberschreitenden strategischen Netzwerks für schweizerische KMU am Beispiel des Franchising. Diss. St. Gallen 1996, p. 74.

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Products / Services

Sales

Organisation

Information Systems

Logistics

Human Ressource Management

Marketing

Other

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The survey findings on the high significance of development of the franchise package for the

success of franchising networks contradict the survey findings on the significance of

knowledge management for the development of the franchise package (cf. Fig.5).

Fig. 5: The potential of knowledge management for development of the franchise package

as rated by the franchisors

Only 25% of the franchisors believe that knowledge management can be used to control the

organisational learning processes. A total of 69% (69%=49%+20%) of the franchisors have

so far failed to recognise the benefits of knowledge management for development of the

franchise package.

Franchising practice has by and large failed to appreciate the contribution that knowledge

management can make towards the successful management of franchising networks. The

potential of knowledge management for controlling organisational learning processes is not

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from franchisor to franchisee

from franchiseeto franchisor

between franchisees

no influence very stronginfluenceFranchisors (n=86) Franchisees (n=43)

Expression unknown

Neutral or no new approaches from knowledge management

New approaches from knowledge management

No answer

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recognised in franchising practice, although both franchisors and franchisees confirm the high

significance of ongoing development of the franchise package as a success factor. These

deficits refer in particular to the exploitation of decentralised knowledge in franchising

networks.

2.2 Characteristic Features of Organisational Learning in Franchising Networks

The organisational form of the franchising network has its own characteristic features. The

influence of these features on the opportunities and threats for the control of organisational

learning processes in franchising networks has to be investigated.

2.2.1 Organisational Learning in a Franchising Network as Organisational Learning

by Independent Businessmen within a Cooperative System

The combination of self-employment and membership of a cooperation, which is a typical

characteristic of franchisees, is one reason for the peculiarities of organisational learning in

franchising networks compared with other organisational forms (cf. Fig.6).

Fig. 6: The special features of the franchisee role and the opportunities and threats for the

control of organisational learning processes

Special features of the franchisee role

Opportunities for the control of organisational learning

processes

Threats to the control of organisational learning

processes

- The franchisee as self-employed businessman.

- High motivation and initiative trigger organisational learning processes.

- Withholds his own knowledge- Oriented primarily towards

sales.

- Need for time-consuming persuasion.

- The franchisee as member of a structured cooperation.

- Open to innovation. - Passivity.- Need for a wide scope and high degree of detail of the organisational knowledge.

Self-employed franchisees can be very highly motivated, much higher than branch managers

employed in a salaried position.1) The high motivation and initiative of the franchisees

1 ) Cf. Stanworth, John and Brian Smith: Franchising for the Small Business. Cambridge 1991, p. 29.

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provides specific opportunities for the control of the organisational learning processes in

franchising networks, as someone who is highly motivated and shows initiative is not

satisfied simply with existing solutions, but exploits potential for improvement or seeks new

and better solutions.

Specific threats to the successful control of the organisational learning processes exist if the

franchisees’ wish for independence leads to excessive competitiveness and mistrust vis-à-vis

the other members of the franchising network. Empirical findings1) confirm that mistrustful

franchisees tend to withhold their knowledge from the other members of the organisation.

2.2.2 Organisational Learning in a Franchising Network As Organisational Learning

in Small and Medium-Sized Enterprises

In terms of the number of employees, the franchisee enterprises and the greater part of the

franchise head offices can be categorised as small and medium-sized enterprises.2) The

characteristic features of SMEs can be seen both as an opportunity and a threat for the control

of the organisational learning processes in franchising networks (cf. Fig.7).

Fig. 7: Special features of SMEs and the opportunities and threats for the control of the

organisational learning processes

Special features of SMEs Opportunities for the control of organisational learning

processes

Threats to the control of organisational learning

processes

- Greater adaptability- Higher learning speed- Closer to customers

- Initiation of organisational learning processes with high learning speeds and high customer orientation.

- Loss of adaptation flexibility and adaptation speed as a result of standards imposed by

the franchisor.

- Insufficient business management skills.

- No targeted control of the organisational learning processes.

The combination of adaptation flexibility, adaptation speed and customer proximity provides

enormous opportunities for successful control of the organisational learning processes.

1 ) Cf. Falbe, Cecilia M. and Thomas C. Dandridge: Franchising as a strategic Partnership. Issues of Co-operation and Conflict in a Global Market. In: International Small Business Journal. Vol. 10 No. 3, August 1992, p. 48.

2 ) 87% of the franchisors state that their franchisees employ a workforce of not more than ten. 92% of the franchisors who responded employ a workforce of not more than 100.

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Thanks to the restricted nature of their structures, small and medium-sized enterprises have

immense potential for initiating organisational learning processes.1) However, a threat to the

control of organisational learning processes in franchising networks arises if the standards

and demands imposed by the franchisor restrict the franchisees’ freedom of action to such an

extent that the franchisee enterprises lose the advantage of their flexibility.

Further threats to the control of organisational learning processes are the inherent

disadvantages of SMEs, which frequently suffer from the insufficient business management

skills of the enterprise owners.2) There is a lack of knowledge of the methods and instruments

of knowledge management and of innovation management.3)

2.2.3 Organisational Learning in a Franchising Network as Inter-Organisational

Learning in a Strategic Network

Corporate networks are a specific organisational form of corporate cooperation.4) Franchising

networks can be classified as strategic networks.5) Some of the special characteristics of

strategic networks can simultaneously be regarded as opportunity and threat for the control of

organisational learning processes in franchising networks (cf. Fig. 8).

Fig. 8: The special features of strategic networks, the opportunities and threats for the

control of organisational learning processes

Special features of strategic networks

Opportunities for the control of organisational learning

processes

Threats to the control of organisational learning

processes

- Polycentricity - Promotes decentralised and inter-organisational learning

- Limited control potential. - Loss of strategic leadership.

1 ) Cf. Scheff, Josef: Die organisationale Lernorientierung kleiner und mittlerer Unternehmungen. Entwicklungsstand und Gestaltungsperspektiven. Wiesbaden 2001, p. 192.

2 ) Cf. Lück, Wolfgang: Mittelstand als Motor der Wirtschaft. In: Probleme, Potentiale, Perspektiven für die deutsche Wirtschaft und den Mittelstand. Vol. 2 of the series by Universitäts-Forums für Rechnungslegung, Steuern und Prüfung. Publisher: Wolfgang Lück. Marburg 1993, p. 38 and 43-44; Pfohl, Hans-Christian: Marketing. In: Betriebswirtschaftslehre der Mittel- und Kleinbetriebe. Größenspezifische Probleme und Möglichkeiten zu ihrer Lösung. Publisher: Hans-Christian Pfohl. 3rd edition Berlin 1997, p. 168-169.

3 ) Cf. Kailer, Norbert and Josef Scheff: Personalentwicklung in Krisenzeiten. Empirische Ergebnisse und Schlußfolgerungen. In: Personalmanagement in Abhängigkeit von der Konjunktur. Publisher: Christian Scholz und Hans Oberschulte. Munich 1994, p. 97; Geschka, Horst: Innovationsmanagement. In: Betriebs-wirtschaftslehre der Mittel- und Kleinbetriebe. Größenspezifische Probleme und Möglichkeiten zu ihrer Lösung. Publisher: Hans-Christian Pfohl. 3rd edition Berlin 1997, p. 194.

4 ) For a definition of the term corporate network cf. Sydow, Jörg: Strategische Netzwerke. Evolution und Organisation. Wiesbaden 1992, p. 78-79, 82 and 102.

5 ) Cf. Sydow, Jörg: Franchisingnetzwerke. Ökonomische Analyse einer Organisationsform der Dienstleistungsproduktion und –distribution. In: Zeitschrift für Betriebswirtschaft 1994, p. 97.

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processes

- Divergent practices and basic attitude- Uncontrolled knowledge loss

- Density of network relationships

- More potential for organisational learning

The polycentricity of strategic networks opens up opportunities for the control of

organisational learning processes in franchising networks. Because of its polycentric

structure, the organisational form of the strategic network has particular learning potential in

comparison with other organisational forms, as the potential for self-organisation is

distributed throughout the entire strategic network.1) Self-organising organisational learning

processes can take place in many network enterprises simultaneously and independently of

one another and expand the problem-solving competence of the franchising network as a

whole. The high density of the relationships within a strategic network also encourages

organisational learning.2)

The high potential for self-organisation inherent in the polycentric structure of strategic

networks, however, also poses threats to the control of organisational learning processes. The

high potential for self-organisation, spread across the entire strategic network, means that the

targeted control of the contents, sequences and results of organisational learning processes is

limited.3)

1 ) Cf. Sydow, Jörg: Strategische Netzwerke. Evolution und Organisation. Wiesbaden 1992, p. 252.2 ) Cf. Håkansson, Håkan et al.: Learning in Networks. In: Industrial Marketing Management. Vol. 28 No.

5, September 1999, p. 445 and 447-448. 3 ) Cf. Probst, Gilbert J. and Bettina S. Büchel: Organisationales Lernen. Wettbewerbsvorteile der

Zukunft. 2nd edition Wiesbaden 1998, p. 178; Sydow, Jörg: Strategische Netzwerke. Evolution und Organisation. Wiesbaden 1992, p. 248 and 255; Probst, Gilbert J.: Selbst-Organisation. Ordnungsprozesse in sozialen Systemen aus ganzheitlicher Sicht. Berlin and Hamburg 1987, p. 85; Weissenberger-Eibl, Marion A.: Wissensmanagement als Instrument der strategischen Unternehmensführung in Unternehmensnetzwerken. Munich 2000, p. 106-107 and 195.

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Foundation of the

franchising network

Admission of a franchisee

Activefranchising relationship

Withdrawal of a

franchisee

3 Knowledge Management Conception for the Control of Organisational Learning in

Franchising Networks

3.1 Life Cycle Model of Franchising Relationships as Frame of Reference for

Knowledge Management Conception

The relationships between the individual network enterprises are referred to as franchising

relationships in the following chapters. The development of franchising relationships over the

course of time is referred to as the life cycle of the franchising relationships.1) The life cycle

model of franchising relationships (cf. Fig. 9) is a holistic frame of reference for knowledge

management in franchising networks, as it takes into account the network enterprises and the

relationships between the individual network enterprises.

Fig. 9: The life cycle model of franchising relationships

Organisational learning in franchising networks can be linked to the four phases of the life

cycle model of the franchising relationships (cf. Fig. 20).

1 ) Other life cycle models of franchising do not focus on the relationships between the network enterprises, but on the market maturity of the franchising network as a whole in order to derive franchising network typologies according to life cycle phase, in the same way as for the product life cycle. Cf. Meffert, Heribert: Verhaltenswissenschaftliche Aspekte vertraglicher Vertriebssysteme. In: Vertragliche Vertriebssysteme zwischen Industrie und Handel. Grundzüge einer betriebswirtschaftlichen, rechtlichen und volkswirtschaftlichen Beurteilung. Publisher: Dieter Ahlert. Wiesbaden 1981, p. 109; Reuss, Holger: Konfliktmanagement im Franchise-Vertriebssystem der Automobilindustrie. Frankfurt am Main and New York 1993, p. 58-62; Gregor, Christian and Rainer Busch: Franchising. Ein Instrument zur Ausschöpfung nationaler und internationaler Märkte. In: Marktforschung & Management. 1992, p. 146.

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Fig. 10: The process model of organisational learning in franchising networks

The franchising-specific organisational learning processes form a holistic and process-

oriented model of organisational learning in franchising networks.

The process ‘Initial development of the franchise package’ is aimed at developing the initial

organisational knowledge base of a franchising network which is not yet active in the market.

The development of a marketable franchise package is the focal point of the organisational

learning process, as the franchise package – the range of services offered by the franchisor –

is the core element of the organisational knowledge base.

The process ‘Training and socialisation of the franchisee who is new to the network’ is

allocated to the admission phase. A new member of the franchising network should receive

training or instruction which makes him capable of successfully fulfilling the role of

franchisee as soon as possible. The organisational knowledge base of the franchising network

can be enlarged by the new franchisee, provided that the new franchisee has individual

knowledge to contribute to the franchising network. Both individual learning by the new

franchisee as well as organisational learning by the franchising network as a whole are thus

targets of the process ‘Training and socialisation of the franchisee who is new to the

network’.

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Ongoing development of the franchise package aimed at obtaining competitive advantages

and the successful implementation of the franchise package in the franchisee enterprise are

the targets of the process ‘Ongoing development and implementation of the franchise

package’.

Ongoing development and implementation of the franchise package are inextricably

connected to each other. When centrally developed standards of the franchise package are

implemented in the franchisee enterprises, this triggers processes of self-organisation.1) The

result of these self-organised processes can even be decentralised development of the

organisational knowledge base.

The process ‘Protection and upkeep of the organisational knowledge when franchisees leave

the network’ is intended to minimise the negative effects of the departure of franchisees on

the organisational knowledge base. The aims of the process ‘Protection and upkeep of the

organisational knowledge when franchisees leave the network’ are to prevent uncontrolled

loss of knowledge and to maintain the individual and collective decentralised organisational

knowledge inventories which are linked to the withdrawing franchisee.

3.2 Structuring the Franchising-Specific Organisational Learning Processes through

Core Processes of Knowledge Management

Exploitation of the model of franchising-specific organisational learning processes in order to

analyse the potential of knowledge management in franchising networks and to design

effective knowledge-management measures in franchising practice means that the

franchising-specific organisational learning processes have to be set out in further detail and

given a concrete form. The structuring principles of knowledge management can be applied

for this purpose. Fig. 11 compares three examples of potential approaches2) for structuring

knowledge management.

1 ) Cf. Sydow, Jörg: Strategische Netzwerke. Evolution und Organisation. Wiesbaden 1992, p. 255. 2 ) Cf. Probst, Gilbert J. et al.: Wissen managen. Wie Unternehmen ihre wertvollste Ressource optimal

nutzen. 3rd edition Frankfurt and Wiesbaden 1999, p. 53-58; Güldenberg, Stefan: Wissensmanagement und Wissenscontrolling in lernenden Organisationen. Ein systemtheoretischer Ansatz. 2nd edition Vienna 1998, p. 246; Weissenberger-Eibl, Marion A.: Wissensmanagement als Instrument der strategischen Unternehmensführung in Unternehmensnetzwerken. Munich 2000, p. 35 and 194.

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Fig. 11: Structuring knowledge management in different knowledge management approaches

Modules of knowledge management according to

Probst et al.

Functions of holistic knowledge management according to

Güldenberg

Operative fields of action of knowledge management in

corporate networks according to Weissenberger-Eibl

- knowledge development- knowledge acquisition- knowledge identification

- knowledge generation - identifying requirements- origins- identification.

- knowledge upkeep - knowledge storage - storage - protection

- knowledge dissemination / knowledge sharing

- knowledge transfer - diffusion- sharing- control - transformation- transfer

- knowledge exploitation - knowledge application - exploitation- substitution- internalisation

- knowledge targets- knowledge assessment

- knowledge controlling - assessment- monitoring

The modules, functions and operative fields of action (cf. Fig. 11) can each be seen as cross-

functional core processes of knowledge management. The core processes of knowledge

management in their different approaches have neither a hierarchical ranking nor any fixed

order. Individual core processes can, however, take priority in certain operating situations, or

there may already be mapped out chains of several core processes.1) Each franchising-

specific organisational learning process corresponds to a concrete situation for which a

typical ideal chain of several knowledge management core processes can be developed. Fig.

12 illustrates this, taking the process ‘Training and socialisation of the franchisee who is new

to the network’ as an example.

1 ) Cf. Semlinger, Klaus: Strategische Steuerung von Wissen in internationalen Produktionsnetzwerken. In: Transfer und Steuerung von Wissen. Zur Internationalisierung kleiner und mittlerer Unternehmen. Publisher: Marhild von Behr und Klaus Semlinger. Munich 2001, p. 80.

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Fig. 12: Structuring the franchising-specific organisational learning process ‘Training and

socialisation of the franchisee who is new to the network’ by means of the core processes of

knowledge management

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The ideal structure of a chain of the core processes of knowledge management can be

developed, as shown in the example (cf. Fig. 12), for each of the four franchising-specific

organisational learning processes ‘Initial development of the franchise package’, ‘Training

and socialisation of the franchisee who is new to the network’, ‘Ongoing development and

implementation of the franchise package’ and ‘Protection and upkeep of organisational

knowledge when franchisees leave the network’. The individual franchising-specific

organisational learning processes together add up to a comprehensive and process-oriented

model of knowledge management in franchising networks. The structured franchising-

specific organisational learning processes can be analysed in detail in order to ascertain the

potential role that knowledge management can contribute to the successful management of

franchising networks.1) Structuring the franchising-specific organisational learning processes

by applying individual core knowledge management processes is intended to identify the

scope for design within which knowledge management activities can be used to control

franchising-specific organisational learning processes. Structuring the franchising-specific

organisational learning processes provides franchising practise with concrete fields of action

for ensuring effective knowledge management throughout the entire life cycle of the

franchising relationships.

1 ) For detailed treatment cf. Langenhan, Fridtjof O.: Wissensmanagement in Franchisingnetzwerken. Theoretische Grundlagen und praktische Gestaltung organisationaler Lernprozesse in Franchisingnetzwerken. Vol. 5 of the series Managementorientierte Betriebswirtschaft. Konzepte, Strategien, Methoden. Publisher: Wolfgang Lück. Sternenfels and Berlin 2003, p. 81-99 (in the press).

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4 Potential and Status of Methodical-Instrumental Support of Knowledge

Management in Franchising Networks

Methods and instruments for the holistic support of knowledge management are intended to

provide comprehensive support for the implementation of knowledge management.1) The

following chapter looks at methods and instruments which can be used to support knowledge

management in franchising networks.2) Selected findings of the survey are intended to show

the current status of methodical-instrumental support of knowledge management in

franchising practice.

4.1 Methods and Instruments for Supporting Knowledge Management in Franchising

Networks

Information technology and communications technology are a mandatory element of any

holistic knowledge management conception.3) Databases, computer networks including

Intranet, electronic knowledge carrier cards and electronic knowledge products can all be

used to support all franchising-specific organisational learning processes and all the core

processes of knowledge management.

Benchmarking is an instrument for targeted learning based on a systematic comparison with

other organisations or organisational units.4) The best practices identified by benchmarking

1 ) Implementation refers to all the efforts made to successfully establish a new concept in an existing context. Cf. Reiss, Michael: Key word “Implementierung”. In: Handbuch Unternehmensführung. Konzepte, Instrumente, Schnittstellen. Publisher: Hans Corsten and Michael Reiss. Wiesbaden 1995, p. 292.

2 ) For a general discussion of the methods and instrumente of knowledge management without reference to franchising networks cf. Roehl, Heiko: Instrumente der Wissensorganisation. Perspektiven für eine differenzierende Interventionspraxis. Wiesbaden 2000; Senge, Peter M.: Die fünfte Disziplin. Kunst und Praxis der lernenden Organisation. Fieldbook. Stuttgart 1996; Schüppel, Jürgen et al.: The Knowledge Spiral. In: Knowing in Firms. Understanding, Managing and Measuring Knowledge. Publisher: Georg von Krogh et al. London etc. 1998, p. 230-237.

3 ) Cf. Albrecht, Frank: Strategisches Management der Unternehmensressource Wissen.Inhaltliche Ansatzpunkte und Überlegungen zu einem konzeptionellen Gestaltungsrahmen. Frankfurt am Main 1993, p. 229-230; Bullinger, Hans-Jörg et al.: Mit Wissensmanagement neue Potentiale erschließen. In: Electronic Business and Knowledge Management. Neue Dimensionen für den Unternehmenserfolg. 20. Saarbrücker Arbeitstagung 1999 für Industrie, Dienstleistung and Verwaltung. Publisher: August-Wilhelm Scheer. Heidelberg 1999, p. 57-59.

4 ) Cf. Komus, Ayelt: Benchmarking als Instrument der Intelligenten Organisation. Ansätze zur Steuerung und Steigerung Organisatorischer Intelligenz. Wiesbaden 2001, p. 40.

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are placed at the disposal of the entire franchising network in the form of an optimised or

extended franchise package.

The franchise package should contained detailed documented procedures of processes in the

franchisee enterprise.1) The method of business process modelling support the design and

communication of flow-organisational structures of an enterprise by means of semi-formal

graphic presentation methods. The use of business process modelling can support all the core

processes of knowledge management in franchising networks.

The typical methods and instruments for the management of franchising networks can also be

used for the design of knowledge management. Franchisee meetings and franchisee training

courses support the processes ‘Training and socialisation of the franchisee who is new to the

network’ and ‘Ongoing development and implementation of the franchise package’. The

franchisor’s own pilot business can also support all franchising-specific organisational

learning processes if the pilot business is designed as a permanent learning laboratory.

The appointment of a Chief Knowledge Officer at management level of the franchisor’s

company, the establishment of internal knowledge managers and changing the requirement

profiles for franchisee support agents make sure that knowledge management becomes firmly

rooted in the franchisor’s structural organisation. The carriers of knowledge management are

motivated to make targeted use of the methods and instruments of knowledge management if

a knowledge-oriented incentive system rewards those who achieve the official knowledge

targets of the franchising network.

4.2 Selective Empirical Findings for the Methodical-Instrumental Support of

Knowledge Management in Franchising Practice

The findings of the empirical survey “Know-How Development and Know-How Transfer in

Franchise Systems” show that the starting situation for the implementation of a knowledge

management conception in franchising practice is positive, as franchisee meetings, training

courses and pilot businesses are common. 85 % of the franchisors state that they use

experience forums, 95% of franchisors run training courses and 93% of the franchising

networks have at least one pilot business.

On the other hand, the results of the survey reveal that many franchising networks have

implementation deficits, especially with regard to those methods and instruments which

1 ) Cf. Skaupy, Walther: Franchising. Handbuch für die Betriebs- und Rechtspraxis. 2nd edition Munich 1995, p. 94-96.

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provide comprehensive support for knowledge management in franchising networks. The use

of information technology and communications technology has so far failed to provide

sufficient encouragement for the development of multidirectional and interactive network

relationships (cf. Fig. 13).

Fig. 13: The importance of information technology and communications technology for

different spheres of use

The survey findings show that the franchisees in particular are sceptical with regard to the

importance of information technology and communications technology for the success of

those areas in which they could make their decentralised knowledge available to the

franchising network as a whole.

By far the greater part of the internal business comparisons do not satisfy the criteria of both

quantitative and qualitative benchmarking, but tend to be primarily geared to quantitative

aspects (cf. Fig. 14).

Fig. 14: The instrument of internal business comparisons in franchising networks (n=65)

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very important“

not important

Exchange of experience between franchisees

Information from franchisees to franchisor

Franchise standards passed on to franchisees

Daily communication

Franchisors Franchisees

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To date, many franchising networks are unable to use business process modelling, as graphic

presentation methods for flow-organisational processes are still rare. Only 15% of the

franchising networks use graphic methods to record their business processes. Written

documentation of the details of their daily business processes, on the other hand, is common

(82%).

The survey findings show substantial improvement potential for the use of methods and

instruments for the implementation of knowledge management in franchising practice.

5 Summary of Hypotheses: Knowledge Management Conception for the

Identification and Realisation of Neglected Success Potential in the Use of the

Resource Knowledge in Franchising Networks

(1) The control of organisational learning processes is of paramount importance for the

successful management of franchising networks.

Ongoing development of the franchise package is highly significant for the successful

management of franchising networks. According to the findings of the survey, franchising

practice rates ongoing development of the franchise package as extremely important. 81% of

the participating franchisors believe that permanent development of the franchise package has

a strong or very strong influence on the effect of their franchising network.

Each franchisor should therefore be supremely interested in the targeted control of those

organisational learning processes which change the franchise package.

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Cost analyses

Process analyses, operations analyses

Source of loss analyses

Workshops for cause analyses

Other

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(2) The importance of knowledge management for the successful management of

franchising networks has not yet been recognised.

The survey findings reveal that only a quarter of the franchisors believe that knowledge

management can provide new impetus for the management of franchising networks. A fifth

of the franchisors had never even heard of the expression knowledge management. The

importance of knowledge management has consequently not been recognised, even though

knowledge management can contribute to the successful management of franchising

networks.

(3) Knowledge management can contribute to the successful management of franchising

networks in all phases of the life cycle of the franchising relationships.

The life cycle model of franchising relationships presented in this paper covers the phases

formation of a franchising network, admission of a new franchisee,

active franchising relationship, and withdrawal of a franchisee. The life cycle model allocates

a franchising-specific organisational learning process to each of these phases.

Structuring the franchising-specific organisational learning processes by means of the core

processes of knowledge management forms the basis for the developed knowledge

management conception. Structuring the franchising-specific organisational learning

processes by means of the core processes of knowledge management shows that knowledge

management can support the control of the franchising-specific organisational learning

processes. The decentralised knowledge inventories can be exploited by implementing the

knowledge management conception for the franchising-specific organisational learning

processes. This structuring on the basis of the core processes of knowledge management

illustrates the design scope for the implementation of knowledge management in franchising

practice.

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