Improving traditional franchises

As G20 finance ministers and central bank heads agreed to bring forward information for global regulation of cryptocurrencies by July at a summit in Buenos Aires month ago, we are looking at how crypto can revolutionize traditional business models, such as franchise.

The franchise model of business expansion has been actively used for the last few decades, but the advent of blockchain can improve it by adding transparency and reducing costs.

Since the mid-20th century, the franchise model has given a boost to a number of industries, most notably, the restaurant sector.

However, when it comes to distribution of profits between franchisors and franchisees, the model’s drawbacks become noticeable, while high license fees are often discouraging for potential franchisees.

But blockchain-based franchises offer a major improvement of the traditional model.

“Blockchain offers several major advantages,” says Konstantin Negachev, CEO of VRT World, a company that develops a decentralized global platform for virtual reality and runs a number of virtual reality parks across the globe on a blockchain-based franchise basis.

“First of all, blockchain ensures transparent distribution of income between the franchisor and the franchisee,” he explains. “With blockchain-based franchises, the fee payment procedure is streamlined and extra commissions are eliminated, which allows franchisors to offer lower fees to franchisees.”

According to Negachev, other major advantages of blockchain-based franchises included guaranteed observance of copyrights and instant payment of license fees in digital tokens.

“Token payments are not subject to any regional restrictions or currency conversion fees,” he notes. “In addition, intermediaries are eliminated, which leads to cutting costs.”

Applications of blockchain-based franchise run a gamut — from VR and online gaming to the power sector.

Challenges ahead

However, running a blockchain-based franchise is not exactly a cakewalk, as companies offering this kind of franchise face technological challenges and overall lack of understanding of the technology.

“Blockchain is still a very new technology, and many people are not yet familiar with its applications,” says Negachev. “But as soon as the technology becomes more widely used, there will be major growth in blockchain-based franchises, as well.”

Looking into the future

Still, companies applying blockchain for their franchise model, are optimistic about the future and predict growth in blockchain-based franchises.

“Our first VR-park based on Z8 franchise was opened in Moscow in mid-December of 2017,” says Negachev. “Now partners of the project from Europe have bought rights to launch 30 more parks across the continent within the next 18 months.”

“Within two years, VRT World will enter markets of the USA, China, Japan, South Korea and the UAE, and in four years, the number of VR-parks will reach 170,” he adds. “Without blockchain, such rapid growth and interest from investors would hardly have been possible.”

According to Negachev, there are vast opportunities for blockchain franchises in various industries, from fintech to car repair services and taxi.

“What we have here is a combination of the franchise model, which allows people to start a business based on already proven successful processes, and technology that makes is transparent and eliminates many hurdles,” he explains.