Can Brick-and-Mortar Brands Win Online?

By Joel Libava

Can brick-and-mortar franchises dominate e-commerce? Discover the 3 digital revenue strategies to scale your brand online without alienating your franchisees.

Can a franchise brand built on physical locations, on handshakes, storefronts, and local community presence actually thrive in the digital marketplace?

The short answer: yes. But not without some serious strategic thinking.

Let’s dig in.

In Franchising, the E-Commerce Opportunity is Real

E-commerce isn’t slowing down. Consumers expect to interact with their favorite brands online. That includes franchise brands.

Think about it. If someone loves a product or service they get at their local franchise location, why wouldn’t they want to order it online? The demand is there.

The challenge isn’t whether franchise brands can expand digitally. The challenge is figuring out how to do it without blowing up the relationship with the very people who build the brand every day. The franchisees.

Three Digital Revenue Channels Worth Examining

In my experience, franchisors exploring e-commerce typically focus on three areas. Each one carries opportunity. Each one also carries risk.

1. Online Ordering Systems

This is the most straightforward play. Customers order online. The local franchisee fulfills the order.

Done right, it’s a win-win. The franchisor drives digital traffic. The franchisee gets more revenue without acquiring new customers on their own.

Brands like Domino’s (especially during Covid-19) and Wingstop have turned online ordering into an art form.

But here’s where it gets complicated.

What happens when a customer in one franchisee’s territory places an order that gets routed or credited to a different location? Franchisee frustration normally sets in. Unless it’s dealt with fairly. Up front.

Territory disputes are nothing new in franchising, but digital ordering can make them worse if the franchisor doesn’t have airtight policies in place.

But digital ordering can make them worse if the franchisor doesn’t have airtight policies in place.

2. Subscription Models in Franchising

Subscription commerce is exploding. Consumers love predictable, recurring deliveries of products they already trust.

For franchise brands that sell consumable goods like coffee, pet supplies, hardware supplies and more, this is a massive opportunity. Launch a subscription box. Build recurring revenue. Strengthen brand loyalty.

The catch?

If the franchisor sells subscriptions directly through a corporate website and pockets all the revenue, franchisees get nothing. That’s a fast-track to low franchisee morale. And potential legal battles.

That’s why the smartest franchisors structure subscription revenue so local operators see a benefit. How?

It might look like a revenue-share model, territory-linked fulfillment, or credits applied toward marketing fees.

3. Digital Services and Virtual Offerings

Some franchise categories like tutoring, fitness, consulting, coaching — have successfully launched virtual service models alongside their physical locations.

Again, because of Covid, franchise brands that figured out how to deliver their core service remotely opened an entirely new customer segment. And many have kept those virtual offerings after restrictions lifted.

Undoubtedly, this is one of the cleaner e-commerce plays for franchisors. That’s because virtual services don’t generally compete directly with local territory sales. Plus, they can actually expand brand awareness and feed leads back to brick-and-mortar locations.

The Franchisee Conflict Problem in E-Commerce

Let’s not sugarcoat this (I never do).

The number one risk with franchise e-commerce expansion is franchisee conflict. And it’s not hypothetical. It’s already happening across multiple franchise sectors.

For instance, when a franchisor builds a robust online sales channel and fails to compensate or involve local operators, franchisees feel undermined. They signed on to own their territory. They invested six figures… sometimes much more, to build a local business under that brand.

If corporate is now competing with them online?

That’s a problem.

Here’s what thoughtful franchisors are doing instead:

• Defining digital territory rights clearly in the Franchise Disclosure Document (FDD) and franchise agreement before launching any e-commerce initiative

• Routing online orders to the franchisee geographically closest to the customer

• Creating revenue-sharing structures that tie digital sales back to local operators

• Communicating early and often with franchisees before rolling out new digital programs

Franchisees who feel like partners in the e-commerce strategy will support it. Franchisees who feel like bystanders or victims will push back. Hard. As they should.

What Prospective Franchise Business Buyers Should Ask About E-Commerce

If you’re evaluating a franchise that has e-commerce ambitions or already has an online sales channel, you need to ask pointed questions during your due diligence process.

Specifically:

• How are online sales credited to franchisees?

• Are digital territory rights defined in the franchise agreement?

• What percentage of e-commerce revenue flows back to local operators?

• Have there been any legal disputes with franchisees over digital sales channels?

Item 3 and Item 19 of the FDD may offer some clues. But don’t rely on the FDD alone. Talk to current franchisees. Ask them directly how they feel about the brand’s digital strategy.

Their answers will tell you everything.

The Bottom Line

Brick-and-mortar franchise brands absolutely can win online. The technology exists. The consumer appetite is there. The revenue potential is good.

But digital expansion done carelessly can damage the one thing that makes franchising work. Trust between the franchisors and franchisees.

The brands that get this right will treat e-commerce as a shared growth opportunity. Not a corporate cash grab.

That distinction matters. Especially if you’re the one writing the franchise check.