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Managing the Chaos of Technology
Although the mere mention of the word “process” can send the average entrepreneur into a catatonic state, it's a fact that franchisors who define, implement and manage their processes across many franchise locations have a higher likelihood of success. Franchisors aren't selling the best idea or the best-tasting food. It's the best business model that sells. A proven business model increases the potential revenue while decreasing the risk for the franchisee and that is what makes buying a franchise more attractive than starting up a new business. A proven, scalable, and replicable business model is what differentiates the best franchise systems from failed concepts. What is a business model? It is the big "how to" manual for success or the process for executing the strategy. No matter what franchised businesses think of process, they do need it. learly-defined, well-communicated, and effectively-managed processes result in a dramatic increase in profitability at any stage of the franchise lifecycle and for any size of franchise. At the concept phase, the business model defines a roadmap for replication. During rapid growth, process enables scalability. For mature franchisors, a process for implementing changes consistently helps increase same-store sales growth. Franchisors spend a great deal of money on process: sometimes effectively and sometimes not. Common processes in the franchise world include:
Technology: Aggravation or Advantage? On the other hand, technology, done right, can reduce costs, increase productivity and increase franchisee satisfaction: Technology brings the following benefits:
Dimension. While processes can be laid out as a series of checklist items, each step involves multiple elements for execution. Technology allows the incorporation of procedural guidelines, links to the systems or documents that are needed to complete procedures, training or videos for help and resources or contacts.
Auditability. Nothing is going to go wrong, right? If it does, no one wants to have to chase down documentation. Technology records operational events, tasks completed, documents read and then provides reports with history and backup documentation.
Dashboarding. Getting an accurate, real-time snapshot across all store openings around the world and being able to see who's on track and who may have missed a critical step can make the difference between opening a store on time or losing that revenue.
Communication support. Personal communication is critical to successful operations. Technology can employ auto-e-mails to prompt communication at the right time to avoid missed critical incidents. Portals provide a way to deliver operational announcements, new vendor offers and marketing campaigns.
Analysis. Identifying where a process is failing or timelines slipping is extremely important in gaining efficiencies. Sales trends can be compared with operational practices to identify best practices that truly work.
Demonstrate the Strategy. Showing a prospective franchisee a clear and actionable roadmap to implement the business strategy can mean the difference in landing an new franchisee and not landing one. Remember, the goal is to sell the business model. Technology can help sell it effectively.
Collaborate. Let the people who understand and manage different parts of the process manage the updates and communications. Technology supports multiple points of input and decision-making.
Look at the options. There are plenty of lessons from the corporate world.
How to get there: Do you...
Build it internally?
Buy off the shelf programs?
Software as a Service? More SAS options are being offered in the franchise space. The scope and purpose of these offerings vary greatly. Some simply handle a portion of the process, such as lead generation, communication or reporting. Others are intended to be more comprehensive. Point of sales systems can be SAS, internally developed, or off the shelf.
Throw More Bodies at It? For all the promises, people cannot be automated out of people-based businesses. However, technology can increase effectiveness and reduce the cost of managing more chaos–ultimately enabling rapid profitable growth–if the right technology solution is chosen. Assessing a solution provides guidelines to help in the process of selecting the right approach. The list was prepared primarily to help with assessing SAS or other third-party solutions since this is the least understood approach.
Assessing a Solution
Sustainability The software solution needs to be sufficiently robust and scalable to support a growing environment and have security that is granular enough to allow the franchisor to determine exactly which different groups (franchisees, managers, vendors) are able to see and do. Look for a company with a customer base that will allow them to continually enhance the application without requiring additional payments. That customer base should include companies that are used to having the power and ease of use for a large user population.
Questions to ask on sustainability
Total Cost of Ownership • Administration and maintenance: If a dedicated staff is required to administer the application, any cost savings may be completely eliminated. Trends today put the management into the hands of the business owners so that administration is driven by business needs and does not require IT intervention or dependence upon the vendor. For example, when a new maintenance procedure for equipment is introduced, the operations person who is in charge of that equipment should have an easy way to make the appropriate changes to procedures and to inform everyone of the update. • Training: Some software is difficult to learn and requires significant training. As new franchise owners come on board, this training requirement can add up. Technology improvements make it possible to design software that eliminates or minimizes the need for training and the software itself is used for training. • Operational Efficiencies: Many times, technical solutions require organizations to change operational practices to accommodate the shortcomings of the technology. For example, having to use different systems to complete a transaction or communicate with all team members. Look for solutions that support the most efficient operational practices. Technology should support the needs of the organization, not the other way around. • Leveraging Existing Systems: A solution that does not work well with your existing systems and leverage current intellectual property and processes can require time and effort to integrate or redevelop or just work around. Sometimes replacing an existing system or process makes sense if the benefits of replacement are great. Too often, both systems are still needed but they don't work well together and precious time and energy are spent making everything work.
Questions to ask on TCO
Customization
Questions to ask on Customization
Scalability
Questions to ask on scalability
Implementation
Questions to ask on Implementation
Reporting
Questions to ask on reporting
Integration Processes are essential to successful franchising and there are multiple ways to implement, manage, and improve them. Technology supports successful and rapid growth if done well. A careful assessment of the technology and how well it supports your particular goals should be made before selection. Kathy Larson is with Franchise Roadmap powered by Xegy. She can be reached at 303-302-1186 or kalarson@xegy.com. To discuss this topic further,visit the International Franchise Association’s Technology Forum at www.franchise.org/techforum.
By Kathy Larson
• Turning an idea into a viable franchise concept,
• Qualifying prospects and generating leads,
• Finding good sites,
• Getting stores up and running,
• Ongoing legal and financial requirements,
• Implementing new business models,
• Improving profitability or expanding service offerings,
• Royalty reporting, and
• Compliance or certification requirements.
Enter technology with all its promises. Technology-enabled processes will allow the franchisor to sit on a beach and open 5,000 franchises in a year with nothing more than a laptop, an Internet connection and a Mai Tai. Sounds pretty good until it’s implemented, right?
Building an information technology infrastructure makes sense for certain aspects of the business. However, many organizations have made the mistake of underestimating the cost and commitment required to maintain an IT department to build and manage applications and have lost focus on the core competency. While “home-grown” software promises a "build to your exact needs," risks include quirky code that quickly becomes obsolete as the business changes. Ongoing maintenance or improvements frequently depend on continued access to the people or team who created it. If a company is large enough and can ignore the sucking sound as the budgets keep getting slurped up, this may be the way to go.
There are off-the-shelf programs that help manage just about any aspect of a business. Some are small and single purpose such as MS Project or Quicken. Others are more comprehensive, such as financial software with project management and job costing. Still others such as Vignette or Microsoft’s Share Point can be used as portals. Small applications must be knit together to support a cohesive strategy. Large enterprise-wide applications are expensive and not nimble enough to tweak as needed. The portal applications provide strong functionality, but require as much development and support as home grown software. Some make good business sense if they match the need. Others will just cost money in licenses and technical support. If a franchise system leaves software purchases up to the franchisee, it gets multiple systems.
The Web has brought new options in functionality and new ways to purchase. The fastest-growing segment of software providers is “software-as-service,” sometimes called an application service provider. SAS is outsourced from the vendor and a monthly fee is paid to access it through the Internet. SAS is ideal for the franchising sector because the cost of entry is low and monthly pricing is based on the number of users so the cost increases as revenues increases. Implementation time (and cost) varies by provider and application, but they are generally much faster to implement than traditional software. Maintenance is a big advantage of SAS as the provider keeps the software up to date and bug-free and this cost built into the monthly fees–fewer hidden costs.
This is the lower-tech solution and it is surprising how many franchisors go this route. Initially, it might seem like the most reasonable choice. However, the solution is not very scalable and it is costly as growth requires additional head counts. The chaos factor is high as a greater project management burden is placed on a growing number of people who may be new to the organization. The results are often attrition of prospective franchisees or missed opportunities.
All technology is not created equal. When choosing technology, make sure to assess the decision thoroughly. Take the time to relate it to your business and not simply rely on lists of features.
The only constant is change. Strategies and needs change as markets shift. Technology becomes obsolete very quickly unless it is being updated and upgraded continuously. Technological advances can translate to real competitive advantages. While implementing the newest technical gadget is often imprudent, having that technology readily available when it does create an advantage can be extremely beneficial.
Often a solution looks very inexpensive on the surface and turns out to be extremely costly to the organization. Some of the hidden cost factors include:
Remember, you are selling your business model. You don't want your infrastructure to look like everyone else's system. Make sure that you are able to brand it and differentiate your concept through layout without a large investment of time and money. Where technology doesn’t fit the way you do business, anticipate the cost of making it fit or changing your business model.
Most franchise systems want to grow. It is therefore critical to choose a solution that can grow with you (or ahead of you). Purchasing a solution because it is inexpensive or easy is short-sighted. Scalability is one of the reasons that the SAS model is so appealing. The time to set up systems is in the beginning, before rapid growth and chaos make it difficult to institutionalize methodologies. Low upfront cost makes the SAS option appealing. Additionally incremental user fees are based on true growth and can be passed to the franchisee without having a significant impact on them. The ongoing cost of SAS is usually lower than supporting an internal system that needs to be maintained and updated even after the organization becomes very large. Large corporations have been adopting SAS to minimize cost and time and increase nimbleness in responding to market demands.
Implementation should be fast and painless because franchisors need to move fast to get the concept out and begin growth. Implementation involves both set up and training. Technology that leverages existing systems and allows for an evolutionary implementation provide immediate benefit, have higher adoptions rates because of explicit benefit and ease, and become more powerful over time without impacting users.
One of the primary reasons to implement technology is to capture everything in a database where it can be used to report on, analyze, and improve business practices. Often getting reports involves contacting the vendor and incurring additional costs to produce the report. Assess the standard reports offered and the flexibility of pulling reports that filter based on date ranges or other criteria.
The corporate world has spent millions of dollars trying to have everything fully-integrated with everything else. The trend has come back around to integrate thoughtfully and only in areas where the ROI is real and apparent. Franchisors should learn from this and look at exactly where integration will provide real and lasting benefit. The POS system is the prime candidate for exploring integration. However much can be accomplished without incurring the very high cost of true, seamless integration. Taking an incremental approach can often bring enlightenment.
