People Innovation Excellence

Digital Franchising (part 1 of 2)

By Deva P. Setiawan S.T., M.M.

Chris Jeffrey noticed something strange about the restaurants in his collage town: few of them posted their menus online. When an eatery did have a website, ordering food through it was usually out of the question.
Sensing an opportunity, Jeffrey developed his own online restaurant ordering service after graduation. Using brand OrderUp, the site lets users scroll through various restaurants located in their area. Once they’ve decided what they’d like to eat, customers can place their order and either pick it up or have it delivered. OrderUp then sends the payment to the restaurant, minus a small commission.
Jeffrey’s early success with the concept made him eager to expand. But potential investors wanted too large a stake in the business, leaving Jeffrey afraid that he could be forced out of his own company. So instead, he offered to franchise OrderUp digitally, something that had never been done before in the business world. Although investors weren’t interested in such a risky venture, Jeffrey carried on and developed a tempting offer for potential franchisees. For a start-up fee of $42,000, franchisees receive software and training to launch an OrderUp operation in their area. The franchisee maintains exclusive rights to sell the service within their territory while the company itself handles order processing and customer service. This digital franchising model keeps costs low while giving franchisees the time to focus on convincing restaurants to join OrderUp. So far Jeffrey’s 20 digital franchisees have generated more than $30 million in food orders annually. (Nickels et al, 2016, Understand Business)
Chris Jeffrey in Venture Beat explains that the digital franchise model is a type of license or right sold to a franchisee that grants ownership of a local market and access to a digital technology that will enable them to build a local business, under the parent name.
For businesses that need local representation, digital franchising is an ideal method of distribution. Local representatives need to have a vested ownership in the success of connecting local businesses with local consumers — particularly in hyper-local markets. In this model, franchisees buy the rights to certain geographic areas and earn a profit from mobile and web eCommerce in their marked territory. As the owner of a digital franchise, franchisees own the rights to the market, and the rights to leverage the parent company’s brand name, back-end systems, training, and customer support.

Refences:
William G. Nickels, et al (2016). Understanding Business. Eleventh edition. McGraw-Hill. Singapore. ISBN 978-981-4670-37-1.
Chris Jeffrey (2013). The New Frontier of Digital Franchising. http://venturebeat.com/2013/09/25/digital-franchises/ citated on 24th Dec 2016


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