Caught in the middle: franchise businesses and the social media wave

The purpose of this paper is to explore the impact of the Internet, and more specifically social media, on franchise business models.

A review of both franchising and Internet literatures enables the creation of a simple model that distinguishes between surface waves, highly visible innovations that influence a restricted set of franchise business models, and deep waves that have a broader and more long-lasting influence on all franchises.

The first Internet era had a surface wave, online selling, that impacted relatively few franchises, but the deep wave of the wide availability of information and training materials has had a broader and more sustained impact on franchise systems. Similarly, Web 2.0’s social element has created a surface wave, the shared economy for hotels and cars, that affects relatively few franchises, but the deep wave of user-rating Web sites and Apps promises to have a broader and more long-lasting influence.

This paper enables researchers identify potential research topics, highlighting the need to determine the impact of social media on how consumers perceive quality and the influence this has on their ongoing behavior.

This paper helps practitioners understand how the Internet influences the competitive balance between franchised and non-franchised businesses. Hence, it will be of interest to any large organization that offers high quality decentralized products or services, as they typically either franchise or compete with franchised businesses. As well, for entrepreneurs considering investing in a franchise, this paper will help identify which business models are more sustainable in the face of Internet innovation.

The surface wave/deep wave model is a new approach to analyzing the long-term impact of the Internet on all decentralized businesses.