How Cloud Computing And Growing Franchisee Influence Are Hitting Retail IT

Written by Evan Schuman
October 14th, 2008

Consider this: Is there a connection between a growing support for various cloud computing approaches and the increasingly active IT role that franchisees are taking?

Yes, it’s a wacky juxtaposition, but stay with me for a moment. There has been a steady noise coming from retail franchisees who are trying to drive more of their stores’ IT strategy. Just this week, we heard about a McDonald’s kiosk trial that franchisees practically demanded. Demanded in the "we’ll pay for it ourselves and do it ourselves if we have to. Do you want it done your way or our way?" manner.

But that’s just the latest example. Ran into an IT manager with another large national chain with heavy franchisee involvement who said the trend is now undeniable.

Why now? This IT manager said it’s another impact from the economic freefall. In some segments, franchisees were amateurs who saw being a franchisee as a good investment. For many, it was an absolutely wonderful investment.

When the dollars were flowing freely, having sophisticated reporting wasn’t seen as a priority. "Some didn’t care about their labor or inventory. A third of our franchisees couldn’t have told me what their product costs were," the exec said.

But as the economy has soured, the amateurs, if you will, bailed and were replaced by more professional franchisees, who know retail and spreadsheets and who insist on knowing precise product and labor costs. It’s the combination of a freefall economy coupled with more sophisticated franchise owners that is pushing demand for IT.

Even though these new owners want lots of data, they don’t have IT support on site and they want their workers to focus on the core retail elements. Hence, cloud computing leveraging virtualization and pulling POS data into the cloud is the right strategy for these people at this time.

"They want to pull as much technology out of the stores as possible, with IT people managing all of this instead of the stores," he said.

For years, the franchisee has been the footnote when discussing retail IT. Unless the economy flips around quickly, look for those franchisees to be much less of a footnote and much more inclined to put their foot down.


One Comment | Read How Cloud Computing And Growing Franchisee Influence Are Hitting Retail IT

  1. Justin Davies Says:

    Great article, and you have certainly hit on growing interest in Cloud Computing to take away the pain of managing networks, updating software etc.

    For major franchises, rolling these kinds of systems are major projects – but leveraged off the size of the enterprise.

    For smaller franchises that are yet to hit that scale and are on the way up, outsourcing this to a cloud computing solution makes a lot more sense simply due to the economics.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.