The Data Wars, Franchisee Style

Written by Todd L. Michaud
August 18th, 2009

Franchisee Columnist Todd Michaud has spent the last 16 years trying to fight IT issues, with the last six years focused on franchisee IT issues—first running the retail technology department for Dunkin’ Brands (Dunkin’ Donuts and Baskin Robbins) and now running IT for Focus Brands (Cinnabon, Carvel, Schlotzsky’s and Moe’s Southwestern Grill).

“I’m taking your data and it’s going to cost you.” That is what many franchisees hear when talking to their retail chain about accessing store data. That 10-word phrase is one of the major misunderstandings between franchisees and franchisors.

Retailers tend to get so caught up in their global rollout plans and product strategy that they often forget to look at things from the store owner’s perspective. Seduced by all of the glorious benefits sold by vendors providing data analytics, retail brands start espousing all of the great things that the brand wants to do with detailed data from the stores. “By analyzing the data that we collect from these various sources, we will be able drive sales far more effectively.”

But the retail brand managers are asking their franchisee partners to provide the most intimate details about their business and in turn pay more for the privilege. And without clear quantitative benefits that this data will provide, franchisees have every right to be wary. Franchisees are skeptical that that yellow brick road is so easy to follow.

I once sat in a marketing meeting where several franchisees were being given an overview of a marketing campaign that would be spending significant marketing dollars to support a new menu item. The business case, the test results and the planned marketing strategies were all part of the presentation. One of the franchisees in the room leaned over and whispered to me in the presentation, “This is just nuts. If you look at this business case, with my profit margin, I am supposed to make $2 a day on this item. $2 a day! They are going to spend millions of dollars advertising something that won’t even make a dent in my business. They claim that it is going to drag all this high-margin business with it, but they can’t prove it. All the franchisees that run their business every day know that it won’t. This is ridiculous. Someone needs to be shot.”

Most retail marketing and operations executives will tell you that having good data is critical to running a highly profitable and competitive retail organization. Data can tell you what products are selling, which marketing campaigns are effective, what price points are working, etc. Data can also assist in better managing labor costs, inventory costs and optimize the supply chain. But what does a franchisor do when retail franchisees don’t want to provide the data or pay the costs associated with providing it? You have two options: You could track them down, one-by-one and give them a Wet Willy until they scream “uncle” or you could compromise.

With all the benefits of having detailed data available for analysis, it seems obvious that a franchisor today would like to collect and analyze all the same data as their company-owned retail brethren. But the simple truth is that a large number of retail franchise organizations existed long before the technical capabilities to send data back to the home office from systems such as POS, distributors or video surveillance systems. As a result, many franchisee agreements stipulate nothing more than basic sales reporting and maybe a profit/loss statement be submitted on a periodic basis. So when a franchisor starts asking for this detailed store data about a franchisees business to be provided, it’s bound to receive some significant push-back.

I have spoken with a few of my peers about the sensitive nature of data ownership in a Franchise organization. In most of these conversations, the two biggest factors come down to trust and cost.


One Comment | Read The Data Wars, Franchisee Style

  1. michael webster Says:

    Todd, this a very interesting article. A couple years ago, at the AAFD, I gave a talk about how to gain competitive information using the data from the POS.

    A number of Independent Franchisee organizations were interested in the idea, but I am afraid the most of their members could only focus on the cost of the new POS.


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