Is Franchising Under Attack?

Is Franchising Under Attack?

No, not by any terrorist gang, regulator or franchisee group ... but under attack by TECHNOLOGY!

No one can argue that technology is changing the world and the world of business. In some instances it is disrupting entire markets, industries and distribution methods. Think Amazon, Netflix and The Huffington Post. Is the franchise model immune to these changes? I think not.

Let's look at two companies - Tesla Motors and Uber - whose approaches are creating business and legal shock waves.

Elon Musk, founder of Tesla Motors, recently explained why they are not using the traditional "dealer" approach -- see the WSJ interview here. Is it a pre-franchise approach or a franchise avoidance approach? Tesla is lobbying state lawmakers to change laws to allow it to sell directly to consumers.

Uber is disrupting the taxi-world by making almost anyone a driver-service without selling franchises. (I thought this was only possible in Jamaica where every car seems to be a taxi) I have not reviewed an Uber-driver agreement so I cannot pass judgment on whether it is a "franchise" or not, but they market it as an "independent contractor" program - "As an independent contractor with Uber, you’ve got freedom and flexibility to drive whenever you have time. Set your own schedule, so you can be there for all of life’s most important moments."

The backbone behind these new non-franchised businesses is TECHNOLOGY. They are coming up with new ways to deliver their "products." I have to admit that when my daughter forced me (almost physically) to download the Uber app I was resistant. But once I saw the "technology" at work I was impressed, if not hooked.

Okay, don't get me started on how disruptive 3D printing will be to franchising - we'll save that for another post ... but a Big Mac "printed" to my office - Yum!

If you are in an existing franchise-based business, is your market being disrupted and what are you doing about it?

Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. Jim is a co-author of “Starting a Franchise System: Practical Considerations, Planning and Development” and author of How to Buy a Franchise. Visit www.fddlawyer.com or www.ohiofranchiselawyer.com for more information or contact Jim directly at 614.975.9876 or jmeaney@zandhlpa.com.