E-commerce challenges the franchise model
E-commerce has, in a short time, become a natural part of Swedish retail. Chains that once based their entire business on physical presence now see how digital channels both drive growth and shape customer expectations. But for franchise systems, where stores are owned and operated by local entrepreneurs, this rapid shift creates friction that is rarely discussed openly.
The traditional model under pressure
In the traditional model, the franchisee is responsible for staff, premises, and the daily work of managing customer relationships. The local store is often well-known in its area, with customers who return specifically because of the people behind the counter. At the same time, much of the chain’s growth today comes from investments in e-commerce—campaigns, advertisements, and promotions that ultimately direct customers to a digital checkout rather than to the shop on the corner.
When revenue disappears from the store
When sales move online, many franchisees lose their opportunity for revenue. It doesn’t matter if the customer lives in the area, if it was a local shop window that sparked their interest, or if it is the store’s staff who have nurtured the relationship over time. The revenue from e-commerce often goes entirely to the franchisor. Handling returns and running in-store campaigns for e-commerce frequently builds frustration.
A growing imbalance
This risks creating a growing imbalance in many systems. Because while franchisees see their turnover decrease, they are still expected to deliver the same service, the same brand presence, and in some cases also act as pickup points.
Solutions that work
In the long run, this is an unsustainable situation—but there are alternatives. In several chains, solutions have been negotiated where e-commerce revenues are shared, for example based on the customer’s geographic residence or store affiliation. It is technically possible to track where a purchase originated and thereafter allocate a reasonable share to the local store.
In cases where this has been implemented, it has contributed to increased loyalty within the chain by ensuring everyone works toward the same goal—to contribute to the sales of the shared pie. It also demonstrates that physical retail and e-commerce do not have to be seen as competitors, but as complements to each other.
Act before it becomes a conflict
For those who have not yet begun this process, the advice is simple: Sit down together with your franchisees or their representatives and review how e-commerce revenues are managed—before the differences turn into conflicts.
There are solutions that work, and there are good examples to learn from.
Love von Gertten
Deputy Director
Sveriges Franchisetagare (The Swedish Franchisees Association)