Edinburgh Napier University

  This paper is part of on‐going research examining the growth of small and medium‐sized enterprises through franchising. It reports the findings of an exploratory investigation that examines why franchising is selected less frequently as a growth strategy in some industrial sectors than it is in others. The applicability of the main theories used to explain the decision to franchise are tested through a study which focuses on the UK construction industry, a sector containing relatively few franchised operations. It reveals that the high human capital requirement of this industry (as proxied by average wages) may make it unsuitable for franchising. Interviews with franchisors operating in the construction industry indicate that, although few operational difficulties are encountered, the franchisors had experienced severe difficulties in recruiting suitable franchisees, possibly reflecting the high human capital requirement of the sector. It is concluded that further research is needed to compare these findings with those from industry sectors in which the level of franchise representation is high, to determine whether some industries are, in fact, more suited to franchising than others.