Technology take on traditional model
Derek Sankey, Financial Post Published: Friday, October 10, 2008
Brett Gundlock/National Post
Matthew Ball, left, and Aynsley Deluce, right, co-founders and partners of Parkingspots.com, pose for a photograph in a parking lot at 10 Huntley Street in Toronto.
Ramona Bernardi was at the end of her rope. Finding a parking spot near the downtown Toronto apartment that she had sublet for the summer was quickly becoming an arduous daily chore.
"I was living a nightmare. It was so hard to park my car and obey the rules of the parking authority. I was getting up all the time [to move my car] and after two weeks, I was spent," she says.
In urban markets across North America, where the supply of parking is tight and demand is high, it's a common problem, and one that led Aynsley Deluce and her husband, Matthew Ball, to solve their parking woes while breaking new ground on an emerging online business concept.
"It's usually the simplest issues that are the biggest ones to fix with the biggest opportunity," Ms. Deluce says. "I mean it's parking, for God's sake."
The couple bought the Internet domain parkingspots.com, but didn't do anything with it for the next few years. Until, that is, it became clear the parking problem was only getting worse. This past February, the couple officially launched Parkingspots.com with the aim of connecting people who owned empty parking stalls - commercial operators or private owners - with desperate drivers looking for a place to park, all done via the Web.
Users log on to the site, browse the listings of parking spots available and indicate which ones they're interested in renting. Owners of the stalls contact interested parties and close the deal. Parkingspots.com makes money by charging sellers a fee for each spot.
An initial round of financing helped get the company off the ground in Toronto. Since then, Parkingspots.com has expanded to 20 cities across Canada and the United States. As they moved into a second round of financing last month, the couple realized they needed to focus on turning the concept into a franchise model to fuel further expansion.
"All of our business is done on the Web site, so it's difficult to do a traditional [franchise model]," Ms. Deluce says. "There are no assets in any given market owned by us."
After doing research, they realized "it's virtually impossible" to follow traditional franchising models, so they turned to their seasoned technology industry board members from eBay and Yahoo, Isabel Tremblay and Matt Thornton.
"We're creating the latest evolution in franchising, which is more of an affiliate program," Ms. Deluce says. "It's a technology take on a franchise," Mr. Ball further explains.
In the tweaked franchise model, affiliates who sign up get access to Parkingspots.com's "alert list," - names of customers waiting to find a spot in a particular area. The affiliates, typically professionals with good connections in the real estate world, will approach commercial operators to list on the site. Every time a customer rents out one of those spaces, the affiliate (or reseller) earns between 75% and 80% commission on the first month's rent - a substantial extra income considering prices range from $150 to $500 a month per spot in hot markets.
"We get our brand out there, which is really what it's all about for us now," Mr. Ball says. "I'm willing to give up some money on commission as long as the brand is being driven."
The affiliates, or franchisees, sign agreements and are supported by back-end tools on the Web site to assist them in signing up new operators.
The company plans to have its revenue stream augmented by online advertising and an events directory for special events with mass parking needs, which it plans to launch soon.
Yahoo's Mr. Thornton decided to join the fledgling company's board because he saw the potential for this unique franchise model in the virtual world.
The domain name itself gives them "tremendous collateral," he says, but they'll need to push their brand further into the public realm by offering their data through other sites. Yellow Pages, for example, just launched its maps.ca site and features sites of relevance to its users. If Parkingspots.com can feature itself on these types of sites, Mr. Thornton says, the couple can push into the lucrative U.S. market.
"If they can find distribution channels like that, then they'll be able to drive a lot of traffic back to their Web site, which is where they're really going to make some money," he says.
Ms. Deluce and Mr. Ball are also targeting expansion into the U.K. market, starting with London. In North America, the site had about 900 spots listed in an average week in September, but the number changes rapidly. "They come and go super fast, especially the ones in high-traffic areas," Ms. Deluce says. The company says there are 1,200 to 1,400 people on the alert list at any given time.
When it launches its first advertising campaign in the next month or so, Parkingspots.com hopes the supply will increase. "We've recognized the model works and now it's ramp-up time," Ms. Deluce says.
Feedback from clients has been very positive. Ms. Bernardi can attest to what a relief it was to find a parking spot. "I looked at it as buying peace of mind," she says.
A day after expressing interest in a few spots, she was contacted and was able to secure a spot for $150 a month.
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