For the right business, franchising provides a tried and tested means to grow while keeping the financial risks to a minimum. In the offline world, an entrepreneur creates a business model and a brand which can be licensed to franchisees by way of geographical territories.
Typically the franchisee runs the business as his or her own while the franchisor provides not only the right to use the brand but also training, marketing collateral, products and perhaps also a centralised procurement and distribution centre. And rather than financing the growth of the business from the centre, expansion is paid for by the growing army of franchisees.
On the face of it, you might think franchising doesn’t have the same appeal to online businesses. In a marketplace where a single website can address a national market, there is no need to establish networks of franchisees. But as the first point of contact for a consumer or business customer is likely to be via the internet, the model often relies as much on the website as boots on the ground in a given area.
One example of a web-only franchise is local business guide thebestof.co.uk, which covers more than 300 areas across the UK. Unlike franchise businesses with physical locations populating the site with content and advertisers generates revenue, but the model nevertheless requires a local person to sell ad space.
Franchising and joint ventures also come into their own when technology companies and web businesses begin to sell internationally. Online selling is not just about the website. Success also depends on having good distribution and customer service in each of the markets where the company operates. Thus a strong e-commerce brand with a presence in the UK might seek a franchise partner to run the business in North America.
When Danish-born, UK-headquartered takeaway delivery app company Just Eat launched a Canadian operation it used a local partner to build the business on the ground. The technology was supplied by from the UK base while the Canadian partner built the all-important relationships with restaurants on the ground in Canada, establishing the brand in the process. The company later went on to buy out its Canadian partner.
This is #7 out of 10 ways to make money from your tech business idea.
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