How to grow an online business with franchising

Franchise online

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Growing an online venture can be pretty difficult using traditional methods (such as PPC ads, content marketing, etc), but franchising may be a much better idea.

A franchise is basically an agreement authorizing 3rd parties to carry out specific commercial activities.

So Subway, for example, awards a franchise to an entrepreneur who then sets up and operates a Subway restaurant in a specific location. Subway takes a cut of the profits, and in return provide the franchisee with brand recognition, procedures, supply chain, operations, etc.

But online franchising can be far more flexible than traditional franchising because almost everything is Web based, and digital. You can be far more creative in terms of what you expect from franchisees, and what you offer.

What type of online businesses are suitable?

Obviously, there is little point in increasing an online business' physical footprint because that kind of defeats the purpose of franchising online.

So, if you are an eCommerce store that requires a warehouse to store stock, then franchising out this type of operation is probably going to be more trouble than it's worth - because you'll have to oversee the set up and management of new warehouses.

Local Web & mobile apps

If your business model relies on establishing relationships with local SMEs (for example, an app that provides ratings and reviews of local restaurants, or a website that reviews local craft beers, etc) then franchising could be the breakthrough you need.

Instead of growing a single company that operates in multiple cities, find and partner with good people who want to take ownership of their own business. Award an exclusive franchise for each city or town, and let them grow the business for you.

You provide them with a ready made platform, and proof that your business model works (you'll need to be successful at what you do before you can franchise to other people and places), and they provide local marketing and sales.

Pure Web based

Online franchising will also work nicely for purely Web based products and services.

Let's say you have a service that provides some sort of analytical data, and it has had some success in one market. You want to diversify and grow into other markets; so find someone who knows that niche and strike a franchise deal with them.

Provide them with their own "partition" of resources on your site so that they can do exactly what you do. They could have a niche sub-domain, for example, that is an refined and focused version of your own site and service.

Global appeal

What if you had a global service that has a market anywhere in the world - perhaps something like satellite tracking & vehicle routing? Growing organically could take a lot of time and resources, and also be extremely difficult.

Why not award franchises on a per country basis to well connected locals (who stand a much better chance of getting things done)? They get the advantage of an established platform, but provide local knowledge and connections to grow your business quickly.

Franchising vs. affiliates

Affiliate networks have proven to be extremely successful at increasing the visibility, reach and sales of online companies. So why not stick to growing an affiliate network?

The difference comes down to resources:

  1. Affiliates generate leads and sales online
  2. Franchisees generate leads and sales online and in the real world, and provide operations, management, physical presence, support, etc

If you need someone who is going to look after their slice of the business from start to finish; from knocking on doors, attending events, to providing local support and customer service, and everything else you do for your existing clients, then a franchise is the right choice.

If you simply need to grow sales and generate leads, then what you need is an affiliate relationship.

How to franchise

The type of franchise agreement you decide upon really depends on the needs of your current business, and what it takes to convince the "right" people to come on board.

Remember, that if you are asking a talented, hard-working person to invest all their time and effort into a franchise, they will expect an equity stake in their portion of the business. If you aren't prepared to share equity, then you are probably going to be limited to hiring employees and managing them from a distance (also quite a difficult task).

In general, you are offering that person:

  • lower risk
  • turnkey operations
  • proven products & systems
  • existing brand (albeit small at the moment)
  • sales & marketing assistance & experience
  • advice & training

But you are also reducing their freedom in the sense that you need to:

  • retain control of the business
  • have a binding contract

And, of course, let's not forget that when they have a problem it most likely going to be you that has to sort it out (as the senior partner).

In general, before you start looking for franchisees, you need to:

  1. spend a significant amount of time ensuring that your processes are easy to understand and repeat
  2. have a good contract that protects the business and is mutually beneficial to both parties
  3. understand the costs involved and what the franchisee needs to bring to the table in terms of finance and experience
  4. understand the laws and regulations governing franchises in the areas you intend to do business

Useful resources

There's a stack of useful information about how to become involved in franchises at IFA (International Franchising Association).

Have you been involved with an online franchise business? Or, have been involved in an affiliate relationships that would have been better off as a franchise operation?

Share your tips and experiences in the comments.

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