OnlineCapital Consulting News and views from OnlineCapital
A growing number of franchisors are looking to the online space to expand the business. They inevitably come up against a wall… by selling online are they taking sales from the franchise network. How is this going to effect the relations with franchisees and how might is effect the sale price of new franchises?
THE growing presence of online systems is raising questions about whether franchisees are receiving their fair share.
Australian Competition and Consumer Commission deputy chairman Michael Schaper says the split of online business is a building issue in the sector.
Franchisors generally retain control of an entity’s intellectual property and stand in the driver’s seat for developing an effective online presence.
This could come at the risk of franchisees, who are geographically bound by their contracts, Schaper says.
“I’m not aware of anything we have come across as yet but we need to think about it,” Schaper says.
“People wouldn’t think about it – they would look to their franchise agreement, and look for their franchise territory, what are the terms of sale, their rent, and so on.”
He says this doesn’t mean franchisees are being exploited.
“The best long-term interests of franchisors is to develop a good network of franchisees that are viable, so that’s not the problem,” he says.
“The problem is the outliers, and we may need to ask whether there is a problem.”
OnlineCapital consultants have dealt with this issue for some of Australia’s largest networks and there are solutions that can be developed in the online technology.
“The contract model is not the only thing – this is a commercial relationship. The success of the franchisor and franchisee is bound, they are interdependent. You make it work for both parties.”
Some basic tips:
* Check your franchise agreement for online rights clauses.
* If you have no rights, speak to your franchisor about changing the contract so you do.
* Ask for payments to be made to the marketing fund, which results in benefits to all.
* Speak with other franchisees about their contract details.
* Talk with your Small Business Commissioner for an alternative resolution to the issue.
