Franchising has been a successful, functional business model for decades now, helping major businesses expand their scope and reach clients in areas that had previously been inaccessible to them. Meanwhile, smaller businesses are often rescued from dissolution, as a major player in their given retail sector steps in and ‘takes over.’ This take over has been the focus of many a debate, especially for more conservative types, who have ardently clamored the disappearance of the small, family-owned enterprise, a cornerstone of Australian economy.
Yet in a country with more than 80,000 franchises that are raking in a combined yearly sales figure of $130 billion, as per August 2010, the premise is that the arrangement has proved itself profitable time and again for the country’s franchisers and franchisees alike. However, recent the technological developments of recent times, which have made the Internet largely available to an increasing segment of the population, have brought into the limelight a more specific type of problem: franchisees are forced to close down shop, as the franchiser offers its products for sale directly to the consumer, via its online store.
Online presence and virtualization are undoubtedly changing the business sector as we speak. Entrepreneurs no longer even need an actual headquarters, since virtual office provider Regus (http://www.regus.com.au/products/virtual-offices/index.aspx) is one company that allows businesses to operate mostly in a work-at-home regime. Small businesses are especially favoured by such set-ups, since the lack of rental expenditure drives cost margins ever lower, while call and mail forwarding, for instance, are handled in a professional manner.
A virtual headquarters location could prove successful for franchisees and franchisers alike, especially in those fields in which brand-consumer interaction is taking a resolute turn toward the online world. Currently, big businesses that offer franchise licensing have caught on to the fact that selling online is more profitable, for instance. According to Michael Schaper of the Australian Competition and Consumer Commission (or ACCC), it is still too soon to tell how this will affect the franchise model.
Dr. Schaper advises franchisees and small business owners currently investigating this alternative to bear in mind that the retail sector is one of the fastest changing ones in the financial realm. The Internet has the potential to make geographic delimitations superfluous, which, in time, could spell a radical decrease in the need for actual, physical points of sale altogether. The Sydney Morning Herald also quotes executive director of the Franchise Council of Australia Steve Wright, who very eloquently states that “you can’t get your lawn mowed in the mail, but franchising is in most industries where there’s consumer services.”
Indeed, Wright argues, the Internet might pose a threat to franchising, a field which needs to adapt or become obsolete altogether, yet the positive potential of the online world, for coming up with ever-more opportunities for retail far outweighs this inconvenience. Legal experts, on the other hand, are warning potential franchisees to carefully examine their franchising contracts, since there is no such thing as a standard agreement in the field.
What is more, as Schaper puts it, “even if you sign up today and everything’s OK, in five years’ time the retail sector may be so different that it may not be worth being in that franchise system.” Other franchisers seem to be adapting differently to the advent of online selling. They allow each franchise to run its own, individual online store and sell products to the customer.
This ‘fairer’ model might prove a good overall solution to the conundrum, as numerous franchisees around the country are decrying the imminent end of their businesses. What remains fact, in the face of all the speculation, however, is that all businesses big and small need to adapt to the demands, standards and possibilities of the online world. As headquarters, telephone-answering services and collaborative work efforts move to the virtual realm, it is only logical that the franchise business model might soon follow suit.