LegalZoom Should Consider the Franfiliate Business Model
LegalZoom has built a $200+ million business catering to the needs of customers with a legal need who don’t want to hire a lawyer. The company started out selling forms and helping preparing them. If you needed to file an LLC with your state and did not know how to do it yourself, you could pay LegalZoom to help. The company carved out a niche doing law-related work, mostly forms-based, that did not require a lawyer to complete. This allowed the company to operate outside the state-by-state licensure of attorneys.
This model proved very disruptive and successful carving out a niche of underserved customers at the low end of the legal market. By turning non-consumers of legal services into buyers, LegalZoom creates a profitable and growing niche similar to what the Vistaprint business model did in the printing industry.
As the company expanded, so did the services offered. The most logical areas of expansion were ones like trademarks and copyrights which required a lawyer but were national in scope vs. local. This allowed LegalZoom to have a handful of attorneys plus an army of assistants doing lightweight legal work.
Now the company is at a bit of a crossroads. They are the leader in quasi-legal work at the low end of the market. Directly above LegalZoom in the food chain is the army of lawyers selling services by the hour. This market is over 1000 times bigger at $250 Billion a year. With over one million active attorneys in the U.S., all with friends, relatives, clients, and personal connections, an Internet-based impersonal model may work against LegalZoom attacking this market.
So how can LegalZoom penetrate local markets and expand their offerings? One option would be to open Legal Zoom branded retail locations with several attorneys co-located in the same office. There are several business model options:
LegalZoom buys or rents a retail location and co-locates ten local non-competitive attorneys in the same office. Any services that fall outside LegalZoom’s offerings could be immediately referred to the on-premises attorneys. Of course, the attorneys would pay LegalZoom above market rates for the space as LegalZoom could not legally charge for referrals given. LegalZoom could also co-op advertising with the attorneys as a profit center. This option leverages the powerful LegalZoom brand into the much larger local legal markets.
Legal Zoom buys or begins competing with LegalShield (formerly Prepaid Legal). LegalShield is a larger entity than LegalZoom. According to the company website,
Now with over 4 million users, LegalShield not only provides legal services in 49 states and 4 Canadian Provinces; but also it provides confidence and peace of mind for families everywhere. For one low monthly fee our members gain access to quality law firms without having to worry about high hourly costs. Because our attorneys are all paid in advance, they provide the same level of service for trivial or traumatic legal situations.
LegalShield has referral relationships with attorney groups in all fifty states, so it has already accessed some of the local attorney business that LegalZoom desires.
LegalZoom adopts a Franfiliate© Business Model. A Franfiliate model combines a traditional affiliate model with the local owner-operator aspect of a franchise. If LegalZoom were to adopt this model, they could sell a franchise to sell forms and other non-law products/services to lawyers. The lawyer franchisee would run the LegalZoom store selling some of the same product and services found on the web. That’s the affiliate portion. The benefit to the lawyer is the traffic generated by the LegalZoom name, the profits generated from the operation of the storefront (probably minimal), and the overflow business from LegalZoom customers who need more than the traditional LegalZoom offerings. LegalZoom wins because there is a large segment of the population that does not want to do anything legal over the Internet or phone. They just feel more comfortable dealing with a person face to face. The local storefronts solve this problem for LegalZoom and open up a new segment of the market, potentially doubling or tripling sales.
LegalZoom has built a successful business as a disruptive force in the legal industry. It’s time for them to move up-market into the massive state-licensed legal services arena.
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