Automation and Technology in Franchise Operations
Franchises (particularly restaurants) are slow in incorporating efficiencies and technology. We’re all aware of the new technology out there (gaming, wireless, Internet, flat-panel TVs, handheld devices), but now think of your typical Subway or Arby’s? High-tech and fresh? I haven’t noticed a change in 10 years!
A few recent examples of streamling that should have caught on much fast are in the high-tech Alternative Payments, Ordering & Entertainment space:
- fast-food accepting credit cards
- offering “fast pass” or other radio transmitter payment options to speed payment (like gas stations).
- Centralized call center for drive thrus,
- touchscreen self-ordering ordering systems for customers (in both fast food/casual and sit-down restaurants (like movie theaters),
- gaming, internet, television and other entertaining activities while you eat,
- wireless handheld ordering systems for waiters/waitresses.
- automated/robotic fountain drink dispensers
Small, but annual high-tech improvements that refreshes the customer experience with convenience and entertainment goes a long way in generating repeat customers and word-of-mouth buzz.
While the menu and customer service must be at least average, the main differentiator in attracting customers is atmosphere and theme. Having a high-tech reputation will create a premium perception and enable the charging of corresponding premium prices.
Herein lies a weakness in most franchise systems - Franchise Agreements do not require the speedy adoption of innovative improvements. Additional capital expenditures in most franchising systems beyond what is required to startup are typically only mandatory when the Agreement is up for renewal in 10+ years. Without uniformity in a product offering, customers will become frustrated and resentful when only 65% of the restaurants stay on the cutting edge.
Advice? Can the franchise you are thinking of buying survive a store with similar quality food but top-notch systems like the ones described above? Look for franchise offerings that quickly adopt, incorporate and promote their focus on high-tech conveniences and entertainment, and expect their franchisees to continue to invest wisely in new innovations. There are not many restaurant franchise offerings out there now that match this criteria, but customers will gravitate to a fresh and familiar high-tech atmosphere.
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Some in the kiosk industry think that the increased minimum wage will lead to a greater adoption of this technology.
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#1 - An artificial increase in labor costs would have to make technology a more attractive option. It’s also one more thing franchisors can sell to the franchisees, so the zors will get a double benefit of possibly higher fees and markups on selling the technology.
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Leaving aside the notion of an “artificial increase”, I know for example in Alberta right now they cannot get people to work even for $15.00 hour in the QSR industry.
They are recruiting in Mexico at a cost of $30k a head; I think that the kiosk solution would work well in that situation.
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3.1% jobless rate in Alberta, not bad! I wish I bought Fidelity’s Canadian mutual fund. It double in the past 3 years.
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