From the March 1997 issue of Entrepreneur

Certainly such recent events as the landmark case Vylene vs. Naugles, which sided with franchisees on encroachment issues, and the new streamlined Uniform Franchise Offering Circular requirements have had obvious effects on the state of franchising. But there's another force subtly reshaping the industry--from the way entrepreneurs investigate franchises to how existing franchisees operate and grow their businesses. That force? The Internet.

Some may be surprised to discover leak detection and housecleaning franchisors setting up shop on the World Wide Web alongside the likes of Microsoft and Coca-Cola, but franchisors of all kinds are flocking to the Web today. For some, establishing a Web site has created an easy, affordable way to disseminate information and market products and services. Many franchisors are using e-mail to communicate with their franchisees. Still others are reaching potential franchise buyers around the world through the Internet.

With such obvious potential, it's no wonder there are some 350 franchise Web sites and counting. "From the franchisor's perspective, you simply have to have a presence on the Web," asserts Calvin Haskell, president of Franchise Solutions Information Services, a franchise consulting firm in Portsmouth, New Hampshire.

Information, Please

On a basic level, franchise Web sites exist to inform consumers about industry trends and educate them about a franchisor's products and services. The Tinderbox site (http://www.tinderbox.com), for example, was established primarily to provide information about premium cigars. At Molly Maid's site (http://www.mollymaid.com), you'll find a map to guide you to the nearest Molly Maid location, and Ms. Molly answers all your cleaning questions via e-mail. Many franchise sites are also quite entertaining. To wit: You can tour various McDonald's locations around the world at the McDonald's site (http://www.mcdonalds.com), or visit the "Flavor Graveyard" at the Ben and Jerry's site (http://www.benjerry.com).

From an entrepreneurial perspective, however, the real value in browsing these Web sites is the ability to research business opportunities--and get answers fast. Most franchise sites contain descriptions of franchise programs, company fact sheets, news releases, franchisee testimonials and details on franchise opportunities. Others, such as the Franchise Solutions Information Services site (http://www.bluefin.net/~fransale), aid entrepreneurs in the purchase and sale of franchise and business opportunities.

What it comes down to is literally hundreds of Web pages that can make for more informed choices by entrepreneurs. "There's an absolute wealth of more extensive, quality information on the Internet than people have traditionally been able to find about franchises," Haskell says.

Since launching its Web site in October 1995, Molly Maid has sold 12 franchises to prospects fielded over the Internet. Likewise, last July, King of Prussia, Pennsylvania-based Maaco Enterprises Inc. sold its first franchise to someone who checked out the Maaco site (http://www.maaco.com) and then inquired about purchasing a franchise. Linda Kemp, Maaco's franchise development manager, says, "The franchisee was able to read through the [information on the] site and determine right away that he could qualify."

Support Network

In many respects, the Internet has also helped franchisors build stronger relationships with their franchisees and provide a higher level of support. Molly Maid franchisees have the option to e-mail Molly Maid their operating information; the franchisor will then analyze it and e-mail it back with recommendations on how to improve daily operations.

"We've had a phenomenal response from this program," says David McKinnon, president and CEO of Molly Maid in Ann Arbor, Michigan. "It saves on paperwork and time. Many franchisees say they simply can't live without it."

Similarly, industry insiders see e-mail as an extremely effective way to heighten the frequency and quality of communication between franchisees and franchisors. "It's always going to be a benefit when you can have open lines of communication," says Haskell. "Because the Internet opens channels and allows franchisors to speak with franchisees and vice versa more often, the Internet is turning out to be a benefit to everyone."

McKinnon, who says he receives an average of 10 e-mail messages daily from franchise owners, sees the Internet as a speedy way to communicate with franchisees.

No Boundaries

Perhaps the greatest advantage of the Internet is it connects people from virtually all corners of the world. Experts agree the most significant impact of the Internet on franchising to date could be the tremendous power it's given franchisors to expand globally. By establishing Web sites, franchise companies can easily market and sell their products and services abroad and tap into an international pool of potential franchisees.

When The Tinderbox launched its Web site last August, it received dozens of inquiries from interested entrepreneurs in Western Europe and surrounding countries.

"On the Internet, we've become global overnight," says Fred Haas, director of franchise development at The Tinderbox in Bala Cynwyd, Pennsylvania.

Likewise, franchisees can reach national and even international customers by establishing their own Web sites. Industry watchers, however, see this as a potential for conflict.

"In addition to the territory in which they operate their stores, franchisees can now become global," explains Haskell. "While that means more revenues, more royalties and more products distributed, a lot of franchisors limit your territory. Right now, there's no language in the franchise agreement that says you can't market globally through the Internet. [The technology is] too new. So if a lot of orders come out of [another franchisee's] backyard, well, that could present a lot of problems."

Even so, many franchisors still allow franchisees to establish their own Web sites. For a small fee, for example, Molly Maid will create home pages for its franchisees. And more than 60 Tinderbox franchisees have Web sites (although all content must first be cleared through the franchisor). Neither franchisor says they have experienced any territory disputes between franchisees.

"So far, there really haven't been any problems," says Haas. "Each franchisee understands that territory boundaries are lifted [through the Internet], and they're marketing abroad to various foreign countries."

Down The Line

Just how much will the Internet change franchising? Only the future will tell, but some experts predict the number and quality of franchisor Web sites will surely increase. On the other hand, there are some franchisors who are dissatisfied with their Web sites. And some franchise companies have even resorted to posting the warning "serious inquiries only" to decrease the amount of "looky-loo" e-mail messages sent to their sites.

Still, many franchisors on the Web see great promise in the Internet. McKinnon, for one, wants to use the Internet to provide remote training. New franchisees could learn to use the franchisor's software by attending an online training course. In the next five years, McKinnon envisions using desktop videoconferencing over the Internet to keep in touch with international franchisees, discuss franchise contracts and conduct meetings.

In addition, other franchisors say they plan to enhance their Internet offerings by e-mailing franchisees periodically with company news and sending prospective franchisees electronic versions of company materials.

"If you polled all the franchise companies on the Internet, overall they'd probably say that the jury is still out," concedes Haskell. "We really haven't seen how much the Internet is going to change [franchising] at this point."

Stay tuned.

What's New

LEARNING EXPRESS INC.

76 Farmers Row

Groton, MA 01450

(508) 448-2333

DESCRIPTION: Educational toy stores

BUSINESS STARTED: 1987

NATIONAL FRANCHISE EXPANSION STARTED: 1995

NUMBER OF FRANCHISES: 59

TOTAL START-UP: $200K-255K (includes $30K franchise fee)

ROYALTY: 5%

SEEKING: Nationwide

You won't find Power Rangers poised for action or Disney dalmatians on the shelves at Learning Express. Instead, you'll see educational toys such as arts-and-crafts sets, role-playing games, construction kits and puzzles.

Sharon DiMinico, 51, started the company 10 years ago when she couldn't find interesting toys for her children. She began franchising in the Northeast in 1989; in 1995 the company took the stores national.

Learning Express is already making its mark in the toy industry. DiMinico credits the company's 1996 sales of $30 million to exciting merchandise, a strong franchisee support system and the active participation of each store owner. Says DiMinico, "The business will be only as good as the owner wants it to be."

--Lourdes Aguila

Contact Sources

Franchise Solutions Information Services, (800) 898-4455, (http://www.bluefin.net/~franfol);

Maaco Enterprises Inc., (800) 296-2226, franchise@maaco.com;

Molly Maid, 1340 Eisenhower Pl., Ann Arbor, MI 48108, (800) MOLLY-MAID;

The Tinderbox, 3 Bala Plaza E., #102, Bala Cynwyd, PA 19004, (800) 846-3372.