Franchising, as an organisational form, continues to increase in importance. However, as contextual environments become increasingly complex and dynamic, so innovations are sought to improve operating efficiencies, initiate or renew life-cycle stages, and realise a closer fit between organisations and the rigours of their markets. There are a number of correlates of innovation in franchising, including external environmental conditions, organisational culture and climate, and franchisee characteristics. This paper argues that franchisee autonomy plays a pivotal role in influencing innovative behaviour, and hence the development of sustainable competitive advantage. As such there is a requirement for franchisor to develop organisational cultures and structures which nurture innovativeness among franchisees.