by Raghu B on November 20, 2017
In this post, I wish to present the idea that hyperlocality, franchising, and the concept of distributed ledgers can be connected to create unique and interesting solutions for entrepreneurs.
Let’s imagine you operate a digital service that connects consumers and home owners to handymen and local contractors (your plumber, electrician, etc.). These services are hyperlocal because most service providers operate within a radius of 25 miles.
Now, if you were to scale your operation beyond a hyperlocal geographic area, then you will need to market to other locales. This is much harder than it seems because for hyperlocal services, marketing has to be done literally one town at a time. At last count, 3007 counties and 19354 cities & towns in the United States.
The concept of franchises has been there in the brick-and-mortar world for a long time. Many restaurant chains operate franchises by selling locations to independent entrepreneurs who pay for the right to operate that brand e.g McDonald’s. But the closest concept in the digital world is affiliate marketing but not quite franchising per se.
So, when you have a hyperlocal concept e.g. restaurants, or handyman service then franchising is definitely one of the concepts to spread in the multiple geographic localities quickly.
It has several advantages:
- Franchisees are independent business owners and their focus is targeted
- Franchisees bring their own capital
- Franchisees hasten the pace of growth
Obviously, there are downsides to this story in terms of trying to maintain quality and consistency in service and so on. This is especially true with brick and mortar businesses.
With the advent of distributed ledgers, could the concept of “franchising” can now be implemented in the digital world through decentralized networks? Intriguing thought! Imagine each locale being a node on the decentralized network, and each node is hyperlocal, almost like a franchisee. The operator of this node is a small business owner or entrepreneur who canvasses for local customers through ads in local medium. The data this node cares about for the most part is hyperlocal and serves the local community.
So how would this work? Imagine you had a hyperlocal concept then the recipe would be:
- Setup your 1-2 local nodes to serve the communities you are most familiar with
- Provide a means for other entrepreneurs to join your network (aka franchisees)
- Franchisees download the code for the node and operate their own node
- Each node will have its own local set of customers, service providers, usage and billing records
- Franchisees market the product/service to their local communities
- Customer buys goods/service from franchisee
- Smart Contract governs the revenue split and apportions a piece to the franchisor and the balance to the franchisee
- Corporate wide data is broadcast to all nodes
There are several advantages of franchising for the founders:
- Franchisees will enable them to hit instant scale
- Lower marketing costs
- Local know-how
- Each franchisee in essence becomes a brand ambassador to evangelize the message
- Depending on how the systems are setup, the franchisor may also derive benefits of watching over franchisees operations leveraging transparency, tamper-proof, immutable properties of distributed ledgers
- Uniformity in the software across the network
If there are network wide campaigns e.g. 20% discount during Holiday Season, all nodes would be notified.
The consensus algorithms in decentralized networks could also be useful where nodes can decide on issues such as:
- Supporting or Voting against a franchisee entering a hyperlocal geography
- Agreeing or Disagreeing with corporate policies e.g. Discounts, Products changes, Branding changes, etc
In the long run, the infrastructure in this setup lends itself nicely for cryptocurrency payments for goods and services.
So, in short, it is my conjecture that hyperlocal digital business concepts lend themselves well to franchising and decentralized networks may be an interesting way to implement them. It may also be a method whereby entrepreneurs can scale digital concepts without needing large capital investments.