How e-shopping revenues are distributed in franchising?

Almost all franchise agreements state that franchisees have an exclusive ‘territory’ in terms of the location of physical stores. But what’s happening with the online sales? Unfortunately for franchisees, any revenues from sales through the chain’s website (or its mobile app) go to the franchisor, even if the customer is within the same suburb as an existing store.
Therefore, if a customer visits their local store on Sunday, looks at an item, and then goes home before ordering it online a couple of days later, the value of that sale goes entirely to the franchisor.  

Obviously, this creates all kinds of perverse incentives. For example, the franchisee views the website as a “competitor” with the same merchandise rather than an asset for their business. Why encourage your loyal customers to purchase their goods from a competitor? As a result, since the company’s accounts in the social networks are geared to get people to buy online rather than in store, what incentive is there for the sales staff to promote them? 

The franchisee’s big regret with all of this is to fail to ask the question of how online sales revenues (or profits) are distributed. After all, who wants a franchisor who feels like a rival rather than a partner?  

If you’re looking to become a franchisee, make sure you ask about how online revenues are distributed. It’s always better to ask ahead of time than to find yourself in a business dispute. 

If you are a franchisor, be aware that the way you treat your online sales and web presence can create perverse incentives for your franchisees. If a sale can be traced to near a physical franchisee’s store, consider some sort of profit sharing agreement with your franchisees.

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