Background: These days in uncertain circumstances and economic downturn, innovation is very important for organizations. This applies also on Dutch franchise retail organizations (DFRO’s) and its suppliers, which are in focus in this thesis. The authors argue that shop employees working in the physical shops are a valuable source of innovation and can function as a pass-through of consumer information to the management of a DFRO and its suppliers.The main question is, if and how DFRO’s and its supplier use shop employees as a source of innovation? Purpose: To describe and explore the involvement of shop employees in the innovation process of Dutch franchise retail organizations and its suppliers; and to find out possible advantages and disadvantages of shop employees’ involvement in the innovation processes, and directions of innovation in which shop employees are involved. Method: This thesis is written from a social constructivism perspective with the use of a deductive approach. A holistic multiple case-study of eight Dutch franchise retail organizations was applied by using qualitative method. To collect the empirical data 23 semi-structured interviews with shop employees were conducted in combination with several observations. The collected empirical data was analyzed by using cross-case synthesis method. The research quality is based upon trustworthiness and authenticity. Results and conclusions: The highest degree of involvement of the shop employees in the innovation process by both management and suppliers takes place in the last three stages of the innovation process, which are validation, commercialization and evaluation, in offer- and support-related directions of innovations. In other words, the shop employees are more involved in the innovation process in their own working environment rather than in the decision-making level. The results of the study show that shop employees are willing to be more involved in the innovation process and see more advantages than disadvantages for management, ...