Cryptocurrencies have been around since their most archaic and experimental form in 1983; after American cryptographer, David Chaum, conceived the idea of anonymous, cryptographic electric money. Ever since then, pioneers and hobbyists continued to build on the idea until the concept became a tangible reality in 2009, when the first decentralized cryptocurrency came into existence.
Cryptocurrencies such as Bitcoin are worth a staggering $56,704 as of 15 November 2021, and was valued at $15,979 just a year ago. This kind of prodigal growth cannot be ignored or thought of as a passing fad. It’s not just bitcoin; a number of cryptocurrencies have emerged over the past few years, and while the likes of the Shiba Inu coin are somewhat hard to take seriously, it’s not difficult to take their rise in value seriously.
Franchising has always been a dependable and stable industry. It rarely makes risky leaps to support growth because of the number and variety of stakeholders. It’s hard to see larger, established franchises making moves to support cryptocurrencies in the near future, whether it’s with customers or the company itself.
Brands like Pizza Hut began venturing into the streetwear merchandise space as a form of marketing, and could find itself doing something similar with NFT’s. The sphere of digital consumerism is a growing one, and franchise brands could find value and increase their presence by interacting with this new world.
What is cryptocurrency?
Cryptocurrency should be seen as a digital currency that is secured by cryptography, the study of secure communication techniques. Modern cryptocurrency as we know it was born in 2008 and released by Satoshi Nakamoto in 2009 as an open-source software in the form of the most well-known, valuable and traded cryptocurrency, Bitcoin.
They can be considered to be virtual tokens or coins, whose value is determined by the market forces generated by its buyers and sellers. The record of a coin and its ownership is stored on an online, computerized database that uses strong cryptography to secure the records, verify coin ownership and manage the creation of new coins.
“Franchises can prepare themselves for the future by building knowledge in this area and experimenting with cryptocurrency”
Cryptocurrencies employ blockchain technology. Blockchain, put simply, is a public digital ledger of transactions maintained by a wide network of computers, making it difficult to hack, but not impossible as the numerous hacks over the years have shown. The records/transactions are called blocks and linked together with cryptography. Each block is verified by a network of peer-to-peer computer networks, which is time-stamped and added to the chain.
The aims of cryptocurrency are many, but there are three identifiable problems it can fix:
- Three billion people who are without banking services can access an online wallet and payment systems
- Middlemen, brokers and banks take fees for processing transactions
- Greatly reduce the time needed for to process transactions.
What are the links between cryptocurrency and franchising?
It should come as no surprise that cryptocurrencies have hardly made a dent in franchising. Franchising is an inherently stable and slow-moving industry because it opts for conservative growth and profits in lieu of bombastic expansion and unsustainable growth. However, as crypto continues to grow, it will become harder and harder for this hundreds year old system to ignore it.
While the biggest players have kept more than arm’s length from this potentially disruptive technology, some medium to smaller-sized franchises have begun to dabble, smelling the coffee.
Fantastic Services spoke to What Franchise earlier in the year. The U.K. based home services brand offered potential franchisees the opportunity to open a Fantastic Services franchise, paid for by cryptocurrency, tapping into some of the philanthropic aims of the creation of Bitcoin. College Hunks Hauling Junk has offered the same too, allowing franchisees to pay their fees with cryptocurrency, and even plans to hold onto whatever cryptocurrency it’s paid in, betting on its future.
The Global Franchise poll on LinkedIn showed that 60 per cent of respondents believe that franchising and cryptocurrency will collide in 2022, but it’s only 20 per cent a piece for those who are certain 2022 is the year, and for those who resoundingly think otherwise.
“Right now, there are a lot of crypto millionaires who have experienced a significant increase in net worth due to their crypto holdings. Franchising is an amazing way to diversify their investments and assets by purchasing a franchise business that can generate cash flow for them over a period of time,” said Nick Friedman, co-founder and visionary of College HUNKS Hauling Junk and Moving.
“This also opens franchise opportunities to a younger demographic as well as a new audience of possible franchise owners. As cryptocurrency is a volatile market, owning a franchise allows investors to keep investing while providing a stable source of financial independence in case of a market downturn.”
While companies can set up systems for crypto payment for things like royalty and franchise fees, that come from other businesses or partners, there has been a slight reticence in allowing customers to purchase products or services using cryptocurrency from most businesses, but not all. One franchise is even considering creating its own cryptocurrency coin after successfully buying back a franchisee’s business with Ethereum.
“We have even talked about creating our own internal cryptocurrency called hunk coin, that would give employees, customers and franchise owners an opportunity to transact as well as possibly earn and hold shares of the company,” said Nick Friedman, co-founder and visionary of College HUNKS Hauling Junk and Moving.
The Pavilions Hotels & Resorts allows customers to make bookings at their properties with the use of cryptocurrency. Users can book directly through e-mail, and are sent a payment link that is valid for 90 minutes. The brand currently accepts payment through over 40 different cryptocurrencies.
“We were made comfortable with cryptocurrencies by working and partnering with a secure and flexible platform, Coindirect,” said Tim Sargeant, group director of marketing at The Pavillions Hotels & Resorts.
“We pride ourselves on providing guests with personalized experiences. Guests can take advantage of paying in the cryptocurrency of their choice, based on the currency and location they are situated in at the time of booking, offering more freedom and a contemporary service.”
Are NFTs coming to franchising too?
NFTs came to the fore during the pandemic, where people were cooped up in their homes and creatives found an innovative way to monetize their work. While NFTs were known of before this period, it entered the mainstream with CryptoKitties in 2017, an online game in which players would trade virtual cats. The project managed to raise $12.5m and some of the ‘kitties’ sold for over $100,000.
NFTs have grown in cost and volume since, with artists and tech CEOs like Jack Dorsey capitalizing on old work and seminal moments. Electronic dance musician 3LAU sold a series of NFTs celebrating the three-year anniversary of one of his albums for $11.7m, meaning committed fans and customers are ready to spend on their favorite brand or artist to receive a unique, digital asset.
For the biggest and most recognizable brands, there is clear opportunity to be had here. Brands have recognized they are seen as more than businesses; they represent identities and values that people want to be a part of. Pizza Hut released a line of limited-release, wearable merchandise in July this year, and there is nothing stopping them from releasing a limited number of NFTs. Beyond the funds raised, it’s a great marketing opportunity. Brands can even add NFTs to the marketing schedule for a new product release, giving a limited number of customers the opportunity to buy an NFT version of the new product.
While this is an unexplored world, franchising will catch up eventually. The biggest brands are already in a position to take advantage of this growing space, and should look to involve themselves in this new technology and establish themselves before it becomes yesterday’s news.
Cryptocurrency could be the future; franchising can’t afford to miss out
Cryptocurrency is still a way away from being accepted into the mainstream world of franchising, though there are some very promising signs that adoption of the novel digital currency is impending.
Some franchises are allowing cryptocurrencies on a smaller scale, whether it’s paying for franchises or paying for services, there are a handful of franchises who have made that leap, and do not appear to have suffered in any way.
Franchises should cautiously enter this space. Nobody can predict the future; cryptocurrencies may become a prominent part of everyday life for decades to come, or it could wither into nothingness as uptake slows and institutions side with fiat currencies. Either way, franchises can prepare themselves for the future by building knowledge in this area and experimenting with cryptocurrency.