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The internet challenge for franchisees

Steve Wright, executive director of the Franchise Council of Australia said that while he noted the internet could pose a concern for franchisees, it was more likely to open up new avenues for selling.

Steve Wright, executive director of the Franchise Council of Australia said that while he noted the internet could pose a concern for franchisees, it was more likely to open up new avenues for selling.

YOU spend thousands of dollars on a franchise, only to discover your franchisor is about to sell the same products or services online. How would you feel? Worried no doubt.

What do you think about franchisors going online? Leave a comment

It's an issue the sector is grappling with, as franchisors seek to move with the times without stepping on their franchisees' interests.

''Franchising's a classic one because over time the idea of a geographical territory could become superfluous,'' said the deputy chairman of the Australian Competition and Consumer Commission, Dr Michael Schaper. ''What happens when you've got a commodity you need to physically distribute but you don't need a face-to-face presence … what happens to the franchisees?

''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.''

Steve Wright, executive director of the Franchise Council of Australia, said it was becoming a significant issue for parts of the sector, particularly those in retail.

''You can't get your lawn mowed in the mail, but franchising is in most industries where there's consumer services,'' Mr Wright said.

''It's a very real issue and it's an issue that franchisors deal with and they make sure they get the buy-in from franchisees.''

While he noted the internet could pose a concern for franchisees, he said it was more likely to open up new avenues of selling, such as in rural towns where a franchise company may not have a base, but people still wanted to buy the product or service.

Pack & Send, a national company that offers postal, freight, courier, packing and removal services, is one such business hoping to expand its reach. Chief executive Michael Paul said the business, which has 106 franchises in Australia and 16 overseas, was preparing to launch its online service in November, after a year of consultations with franchisees. With the small parcel market booming, Mr Paul said the company saw a chance to capitalise.

''We needed to be able to fill the missing gap and that was to be able to handle the smaller parcels packed by customers,'' he said.

Rather than go to a Pack & Send store, customers will be able to opt to go online and check costs, pay and have a courier pick the parcel up from their house.

If the customer chooses this option, the nearest Pack & Send store gets 100 per cent of the profits - minus a ''modest'' percentage of sales to cover tech costs. If the customer chooses to pack a parcel and deliver it to an existing shop, that store takes all profits.

Mr Paul said that, as with any change, there had been some resistance, but the company had chosen to get franchisees involved.

''It [online] is a big innovation and franchisees wanted obviously to understand the strategic reasons behind it. Our process was to prepare a pretty comprehensive strategy document,'' he said.

The franchisor paid for the initial online set-up and hopes to recoup those costs over time.

Dr Schaper said potential franchisees should do their due diligence and check agreements to see if they made explicit provisions for online sales, and where that income would go. They should also conduct their own research on the potential for their sector to change markedly during the life of their contract.

8 comments so far

  • Quite frankly, if you sell a product that can be sold online, you have NO business selling franchises.

    Commenter
    Online
    Location
    Ballarat
    Date and time
    August 06, 2012, 1:06PM
    • Spot on. But it is becoming increasingly obvious to many prospects that franchising can be compared to legalised servitude. A franchise agreement does not allow you to shut up shop as you can in a normal business, so essentially you are driven bankrupt as your personal life savings are slowly drained away under threat of a lawsuit from your franchisor.

      Commenter
      Luke R
      Date and time
      August 06, 2012, 3:26PM
  • Franchises are another sector of the business world that must adapt or disappear. There are good opportunities for a well managed franchise that has a genuine reason to exist. Nowadays the best franchise model is more akin to a co-op. The old model of strictly regulated Franchisor/Franchisee is doomed by on-line business. This story is a pointer to ways that these businesses can adapt and go forward.

    Commenter
    Bruce G
    Date and time
    August 07, 2012, 10:47AM
    • The Discount Drug Stores franchise has overcome the issue of how to cater for the online and e-commerce requirements of their franchisees by using an outsourced solution from technology company Pharmacy4u. Each individual retail outlet has it's own website and receives online orders direct from the consumer to that individual store. The customer can elect whether to pick up the order in-store, have it posted to them or utilise the pharmacy's own home-delivery service if available. In this case the franchisor has clearly shown a commitment to the ongoing support of its franchisees.

      Commenter
      Online
      Date and time
      August 07, 2012, 11:19AM
      • The Franchise business model can be fantastic, lacklustre or abhorrent. it is up to the potential franchisee to do proper due diligence. Unfortunately there are plenty of people willing to take on a franchise who have insufficient business skills, and money burning a hole in their pocket.

        Commenter
        OpenWindow
        Location
        VIC
        Date and time
        August 07, 2012, 6:10PM
        • It's fairly easy to manage. You buy something online it has to get delivered somewhere just send it from or picked up from your local franchisee ... I think Harvey Norman do it. Ozzy tyres do it for sure. Among others.

          Commenter
          Drwevil
          Date and time
          August 08, 2012, 8:40AM
          • Pack and Send sounded useful to me, as a sick person stuck at home who has great difficulty sending parcels. However, they only have offices in Adelaide (4 of them), none in the country. I wonder if Australia Post would pick up parcels occasionally, to avoid that kind of competition?

            Commenter
            Clytie Siddall
            Location
            Renmark SA
            Date and time
            August 08, 2012, 2:43PM
            • You see, this is probably one of the things you should consider before you buy into a franchise. Ask yourself if the product could be sold online. It is not on the franchisor that could sell your product online. What is stopping some guy with a wholesale account from setting up an online store and having a bigger, more targeted ad campaign than you? Absolutely nothing!

               

              Commenter
              MattOzolins
              Location
              Shoalhaven
              Date and time
              September 01, 2012, 11:20AM

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