How do you arrange the distribution of webshop revenues (and costs) in a franchise model?

Good agreements between franchisors and franchisees regarding income and costs in online sales should start with a thorough analysis after conducting a successful pilot.

Always start with a pilot

During the pilot phase, the system truly learns the impact of the webshop, both for the store and the central organization. Often, it is only during the pilot phase that there is a real understanding that the effects of online sales extend far beyond initial expectations. Tip: choose an e-commerce solution that is flexible and can grow with you.

Which components are important?

The advice for franchise systems is to analyze the customer process during the pilot phase on the most crucial components:

1. Promotion (of the webshop and the webshop for the store)
2. Assortment (of the webshop versus assortment in the store)
3. Pickup versus delivery
4. Payment in the webshop environment and/or in-store
5. Return procedure (centralized or also local)
6. Investments and costs

What should you look at?

In the analysis, it's important to look at the customer process, the average revenue per transaction, and the costs needed not only to launch the webshop but also to manage it profitably. The assortment is very important. If you have a different assortment online compared to your store, this can have significant consequences if customers are allowed to return or exchange their online-ordered items in the stores. Pricing is also crucial. An internet-only offer may sound appealing, but it can lead to unusual situations. Do not forget to consider the effects the webshop has on the shop floor and the central organization, and whether this fits with the collaboration agreements and arrangements with suppliers.

A central webshop or separate ones per franchisee?

Organizations that conduct the analysis almost always conclude that considering the consequences and costs, a central webshop is preferred over multiple individual webshops. By allowing customers to pick up products from the entrepreneur of their choice or to receive advice from the entrepreneur for more complex products, the connection between webshop and local entrepreneur is optimally made.

What is a fair distribution of income and costs?

A fair distribution of income and costs depends on the analysis. This varies per system, and there is no standard rule. Increasingly, we see the distribution ‘what is picked up in the store belongs to the entrepreneur, what is delivered to the home belongs to the franchisor’. This keeps it simple. It's important to monitor whether this remains a fair distribution in the long run. In most cases, it makes sense for franchisees to share in the income, especially if you want the webshop to enhance your store operations and vice versa. Conversely, it’s also logical for franchisees to contribute to the costs. Both the benefits and the burdens should be fairly shared, in the spirit of franchise collaboration.

From a franchise perspective, it's important to realize that a webshop almost always means the central promotion budget needs to increase. You're centralizing a part of the sales process and thus also the sales costs it entails. Additionally, we see that it is not the development but the promotion of the webshop (visibility) that is currently the largest expense. This doesn't necessarily mean the (promotion) fee needs to increase. As a franchisor, you might also use part of the webshop's operational income for its promotion. For the entrepreneur, it's relevant that a webshop, besides bringing additional income, may also bring extra costs (for example, in case of exchanges).

It's essential to realize that a webshop should generate customers rather than detract from them. A webshop is a part of the franchise system that the entrepreneur operates. Especially for franchise systems, this should be the starting point. If you handle this consistently, the webshop will strengthen the physical stores.