May 20, 2022 - Blog, Franchise Articles by |

The Franchise Times recently reported Unleaded Brands’ acquisition of XP League, an e-sports franchise concept. According to the publication, XP League “blends traditional youth sports with video games,” and has expanded to more than 20 company-owned locations since its founding in 2020.

E-sports is a booming industry. It is also an industry that was not significantly slowed by the pandemic since most people can participate at home (although XP League seeks to connect players in real life). E-sports businesses generate in excess of $1 billion in revenue annually, and year-over-year growth has remained in the double digits multiple years running.

So, is e-sports the next frontier in franchising?

Considerations for Buying an E-Sports Franchise

XP League is not the only franchise offering in the e-sports segment. A quick Google search reveals several others, including Contender eSports Gaming Center and Valhallan. On a quick review, these concepts also appear to be very different—each targeting a unique niche within the segment itself.

A risk with any up-and-coming franchise sector is the possibility that it will be a short-term fad. While it appears that this may be less of a concern with e-sports, there are no guarantees. As a result, prospective franchisees will want to work with an experienced franchise attorney to carefully review their franchise agreements and determine if they have adequate protection should the industry’s growth wane or reverse course.

Here are some additional considerations for evaluating e-sports franchise opportunities:

  • Location, Exclusivity and Competition – For e-sports franchises that require a retail space, location will be important. Exclusivity is a key factor as well—as is the amount of existing (and potential) competition from other franchised and non-franchised e-sports concepts. It appears that some concepts offer the option to operate out of existing facilities that have complementary offerings.
  • Initial and Ongoing Costs (Including Upgrade Costs) – In addition to initial franchise fees, royalties and marketing fund contributions, technology costs (including the cost of mandatory upgrades) could add significantly to the investment required to open and operate a successful e-sports franchise.
  • Franchisor Commitment and Support – According to the Franchise Times, the founder of XP League chose to franchise because operating an e-sports concept requires a presence “in a lot of different areas.” The publication quotes the founder as stating, “Kids want to compete with kids from all over; they don’t want to play the same kids every week.” If this is the case, franchisees will need to rely heavily on their franchisor’s commitment to growing the system, and they will also be heavily reliant on the franchisor’s ongoing willingness (and financial ability) to support an integrated and interconnected system of successful franchisees.

Request a Free Initial Consultation with Franchise Attorney Jeffrey M. Goldstein

Are you thinking about buying an e-sports franchise? If so, we encourage you to contact us for more information about our fixed-fee franchise agreement and FDD review programs. To schedule a free initial consultation with franchise attorney Jeffrey M. Goldstein, call us at 202-293-3947 or tell us how we can reach you online today.

This article is provided for informational purposes. Goldstein Law Firm does not recommend or endorse any individual franchise opportunities.

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