The Franchise Business Guide to E-commerce

If you’ve made the decision to franchise your growing business, or you’ve already taken the plunge, you will likely find that the e-commerce sector is a challenging frontier to tackle. After all, when governing the management of just one online store is fairly difficult, maintaining involvement in a growing chain must be even harder.

So what do you need to know, and how can you give your franchise the best possible chance of succeeding in all its online iterations?

In this article, we’ll look at how e-commerce affects conventional franchise configurations, and consider what exactly franchising means in the online marketplace.

Ecommerce Further Challenges Conventional Franchises

If your franchise business is of the traditional kind, and is (or will be) focused on physical locations, it’s still important that you think carefully about e-commerce.

This is because brick-and-mortar stores that don’t invest time and resources into establishing and polishing websites and social media accounts place themselves at a severe disadvantage.

And it is of particular significance when it comes to franchises, because you’re not only affected by your main website and social media accounts; you’re also affected by the chain-specific websites and social media accounts, regardless of whether you’re ultimately in control of them.

When considering new franchisees, contemplate the following: If you ran the online activity of every franchise location, how would you practically handle it? Do you have the resources to do it in-house? Would you be comfortable outsourcing it? And if you left the location-specific online activity to the franchisees, could you trust them to follow your brand guidelines and maintain your reputation?

Suppose that you set up a franchisee with an offshoot of your main website, thus equipping them to handle online orders. What would you do if they messed it up?

As you can see, growing a franchise not only expands the complexity of regular business but also expands the complexity of doing everything necessary to stay competitive in a hotly-contested online marketplace.

E-commerce ‘Franchising’ Is Very Different

Traditionally, franchising has functioned in the following way; a franchise business allows its franchisees to use its name, branding, suppliers and product lines for a fee, but often doesn’t get involved beyond that. The franchisee buys or rents its franchise location and generally operates separately from its franchisor (both geographically and mechanically).

In the e-commerce world, it’s extremely common to see a mostly-inverted version of this business arrangement. E-commerce stores usually license product lines, but frequently go beyond that to license centralized shipment systems, leaving practical elements to the existing distribution networks but using their own branding at the front end.

This raises a major question: What exactly counts as franchising in the e-commerce world? The consensus opinion seems to be that franchising requires the sharing (and valuing) of a brand name, but this is only the case online in very rare instances.

Does sharing a website hosting framework such as WordPress count as franchising? What about an online store builder? Since Shopify provides guidance, support and back-end functionality for a recurring charge, you might think that it does, but its stores don’t trade as Shopify; they merely acknowledge that their websites run on it.

As meaning shifts with the times, I’d say the only sensible thing to do is take the broadest possible view of franchising, so we’ll do just that here.

Franchise Value Has Become Service-Based

Before the days of e-commerce, back when the brand name and products were the most important things for licensing, agreements were fairly standardized, and franchisees wouldn’t have much say in the terms beyond agreeing to the costs.

Now, though, while brand names are just as influential as ever before, the biggest brands have no particular reason to dilute their reputations online; just one website can serve the entire world, all built on a complex and wide-reaching back end of suppliers and partners.

Furthermore, product line exclusivity is increasingly rare, and often hard to justify. Massive online exposure through sites like Amazon is generally the goal for e-commerce products, and there’s only rarely a compelling reason to keep a product isolated to a particular vendor.

As such, most of the value in an online franchise today comes from the nature and quality of the service it provides. If your franchise business doesn’t have a strong service to offer, it might not be the best fit for online-only licensing.

Online Franchising Allows For Fast Expansion

If you’re just starting out as a franchise business, and you provide a service that could prove integral to the operation of an e-commerce business, then you have an incredible opportunity for exceptionally fast growth.

After all, while you will likely need to scale your resources (power, storage space, etc.), your franchisees won’t need physical stores, or the additional staff such stores would require. Provided they are fully committed, there won’t be any major stumbling block to prevent them from getting up and running in no time.

And while you’re unlikely to attract the kind of sizeable investment that might go along with a conventional franchise setup with a fully-branded location, you can make up for that through distributing your service to many more clients. Instead of building towards 40 physical locations across your country over the course of several decades, you can become an important provider to 100 companies worldwide in a year or two.

If you have a valuable and repeatable business model, the power and reach of e-commerce mean that there has never been a better time to begin licensing your business and building a profitable franchise.

That said, it does also mean that there’s a great deal more competition out there, requiring you to be creative, consistent, and fully aware of how your reputation can be affected by those to whom you license your work.

Plan carefully, make use of all avenues available to you, and you’ll have an excellent chance of establishing a highly-successful foothold in the e-commerce marketplace.

Victoria Greene is an e-commerce marketing expert and freelance writer with an interest in how businesses expand, connect, and collaborate online. You can read more of her work on her blog Victoria Ecommerce.