Franchising and E-Commerce: the e-lephant in the room
For many premises-based, consumer facing brands (particularly those in the retail sector) which have used franchising as a tool to expand their business, the traditional approach has been to recruit experienced and well-capitalised local operators and grant them "pure-play" rights to open and operate branded physical premises to sell products and services in an allocated territory. The franchisor has then reserved its rights in respect of other channels, such as wholesale distribution, e-commerce and/or other forms of distance selling.
From a legal point of view, the reservation of channels such as e-commerce will only work in jurisdictions where the local competition authorities do not view these restrictions and prohibitions as having a problematic effect on competition.
From a commercial point of view, this model is becoming increasingly outdated on two fronts; today's tech-savvy global consumer demands a consistent multichannel service and a franchisor's reservation of e-commerce rights can create friction in the franchisor-fanchisee relationship.
In this article, we will consider the various options for bringing e-commerce into the franchise system, the legal and commercial challenges and how brands can develop and implement a strategy for e-commerce and franchising which creates a genuine "win/win" for them, their franchisees and their customers.
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