Brand expansion

The metaverse offers a new and mostly unconstrained way for franchisors to expand their brands. In the physical world, franchisors are limited by things like territories, protected trade areas, lease terms, and approved construction plans. However, the same types of limits don't exist in the metaverse. Franchisors (and to the extent permitted, franchisees) can open virtual locations across different platforms, potentially reaching a much broader audience and without all of the temporal and geographical constraints of the real world.

Customer and franchisee engagement

Similar to how it offers novel brand expansion opportunities, the metaverse also offers potentially untapped ways for franchisors to engage with customers. In the metaverse, franchisors can create virtual storefronts for customers to visit and explore like they would in the real world or in ways that may not be possible or practical in a physical location. They can also host virtual events, games, or other creative and unique experiences related to their products or services, all to drive and deepen customer engagement. Particularly exciting opportunities will try to bridge the divide between the digital world and the real world. Making a purchase in the metaverse that triggers delivery in the real world is the most obvious example, but the possibilities for engagement with customers are seemingly limitless.   

In addition to customer engagement, the metaverse also allows franchisors to connect differently with franchisees. Because franchisees can be located anywhere in the world, maintaining frequent and regular communication may be costly or challenging or both. In the metaverse, franchisors and franchisees can interact in a virtual space, making it easier to collaborate on orientations, trainings, and other meetings.

New revenue streams

The metaverse provides franchisors a fresh chance to consider new revenue streams. These can range from selling virtual items or experiences, to offering exclusive or unique items in the metaverse for delivery in the real world, to selling the same items as in the real world to new metaverse customers. Regardless of any financial arrangement with franchisees, the new streams would represent incremental revenue to the franchisor.  

IP infringement and brand dilution

Inherent in the novelty and excitement of the metaverse is some uncertainty and risk. And chief among the risks for franchisors is the possibility of IP infringement and damage to the brand.  

Protecting and policing IP can be challenging enough in the real world even with well-established rules and procedures, but doing so in the metaverse adds a new and unique layer of complexity. It is incumbent on franchisors to ensure that their trademarks, logos, and other valuable IP are registered for use in the metaverse.  

They'll then need to actively monitor and potentially solicit franchisee assistance in monitoring the wide expanse of the metaverse for any unauthorized uses. A failure or delay in catching and stopping unauthorized uses of IP could mean that the brand is associated with low quality or inappropriate content, which could damage its reputation.

A related issue for franchisors to monitor as it develops is ownership of IP used in the metaverse. If a metaverse creator takes the position that IP used in the metaverse is owned by the creator (and not the franchisor), that could have problematic consequences for the franchisor.  

Data privacy and cyber attacks

Being a shared virtual space, the metaverse is vulnerable to all sorts of cyber mischief. Franchisors must ensure that they and their franchisees are protected from hacking and other cyber attacks that may leave them exposed or compromise their customers' personal data. This includes collecting and using data in accordance with all applicable regulations and the latest industry standards.

Regulatory uncertainty

It's still unclear if, when, and how the metaverse will be regulated. Franchisors that are early adopters may well experience some first-mover advantage, but should stay current on any new regulations that may affect how they operate. The emergence of ghost kitchens and virtual brands a few years ago caused some franchise regulators and legislatures to revisit their stances on registration and disclosure rules, so it seems possible that the same could happen with the metaverse. 

The metaverse is a digital land full of promise, but also some potential peril. Franchisors that are able to capitalize on brand expansion opportunities, drive engagement with customers and franchisees, and unlock new revenue streams could reap benefits. However, they'll need to successfully navigate risks around IP infringement, cyber mischief, and regulatory uncertainty to maximize those benefits.