Both Uber and AirBnB have disrupted their respective traditional industries by providing modern, easy and cost effective solutions without owning a single asset on offer, i.e motor vehicles and hotels.
A critical component of disruption is the social ease of accessing traditionally inaccessible products and experiences. Similarly, the financial sector is faced with fintech or crowd-funding (online lending or investing without traditional financial systems) and Bitcoin (cryptocurrencies).
How does disruptive innovation impact the traditional franchise model?
The traditional franchise model has been lauded as one of the biggest innovations for many years, making business ownership accessible to many through pooled and replicable systems. However, the disruption of the franchise model is imminent as it may lose appeal to young entrepreneurs.
Technological change and innovation
The biggest consideration for the traditional franchise model is the lethal combination of rapid rate of technical advancement, strong social movement and the ease of accessing traditional products and services such as global experiences (travel or food).
What this means is that the consumer is increasingly seeing value in using technology to research, purchase and consume both online and offline, and demands easy access to products and experiences they are able to share as a community.
Some other factors that may challenge the existing franchise models
- Many entrepreneurs are chasing the unicorn or creation of something exponential with rapid growth potential. Young entrepreneurs have an interest in creating and innovating new business concepts rather than replicating existing models.
- Standardised systems and protocols offered by franchise models are considered too restrictive to support disruptive innovation or create growth. Access to capital through fintech and similar platforms may be more supportive of innovative business concepts.
Smart contracts and the franchise model
According to the techies, smart contracts (or cryptocontracts) are an unending and continuously growing record system or software programme.
This programme not only allows legal contracts referred to as smart contracts to be prepared digitally but also to be executed, implemented and actively managed online and digitally. And this enables a digital legal system that will police, enforce and manage compliance in all aspects of lives through the Internet of everything.
What are smart contracts and how will they impact franchise arrangements?
Picture this scenario. You (Fred Franchisor) input all the terms of the franchise agreement with Felicia Franchisee into a computer software programme. The computer software, considering all history of parties and possible scenarios, generates the perfect franchise agreement quickly and cheaply.
The software then executes the franchise agreement through access to Felicia Franchisee’s bank account ensuring payment is made to Fred Franchisor on time and without breach until termination, applying securities and penalties where necessary.
This smart contract will also execute and manage the franchise supply chain, ensuring transfer of value only occurs once certain conditions have been met.
Smart contracts are essentially automated contracts written as computer programmes. These contacts are able to enforce themselves when certain conditions are met, eliminating the need to check compliance or require enforcement by lawyers or franchisors and franchisees.
Most futurists will bet on technological advancement, disruptive innovation and exponential growth as key trends over the next decade. Is the franchise business model the next big disruption? Or is it ready to embrace the shift in its archetype?