Franchising as an agent of Creative Destruction


Creative Destruction is a concept which describes a process of death and renewal of life.

It is a process of winners and losers. What is very good for some, is very bad for others.

In an economic sense, franchising can be seen as a purification mechanism that takes:

  • decentralized, dispersed, less efficient personal life savings and converts them into
  • centralized, powerful corporate capabilities that result in the “greater (economic) good” for society.

It is a mining exercise: digging up the ore, crushing, separating, and heating the capital into gold bars, for example.

The gold ore must “die” for the pure gold to “live”.

  • In franchising, Your life savings must die in order for innovation to live.

Deception is a necessary component in this refining process because the owners of the inefficient gold ore may not be willing to volunteer having their life savings taken from them.

Opportunism is often defined as self-interest with deceit. Franchisors are compelled to use opportunism as a means of refining their franchisees’ wealth.

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