Evan Schuman's StorefrontBacktalk

Let’s start with trust. The number one franchisee concern is: “What is going to be done with the data?” If asked outright, typically the franchisor leadership will respond with statements like: “We will use the data to analyze our sales mix and promotion activities so that we can be more effective at marketing and, as a result, spend your advertising fund contributions more wisely.” Or they might say: “We want to understand if some analytics support different store operational processes or supply-chain disciplines that could help reduce your costs.” On the surface these seem perfectly reasonable. Who wouldn’t want that, right?

But things get dicier when more difficult follow-up questions are posed. Will you use the information for loss prevention and potentially use the data against me? Will I be judged or scored based up on the data that you collect? Will other franchisees be able to see my data? Will you spy on me? Typically, the answers tend to these questions are less comforting: “It depends” or “maybe” or “We would consider the circumstances.”

From my perspective, this is where some franchisors are trying to have their cake and eat it, too. Opposite to conventional thinking about compromise, in this case, I believe that the key to the compromise in this area is to be completely black and white. If a franchisee is going to open up and share with the brand significantly more information than they have in the past, an admittedly scary situation for some, then the least that the franchisor can do is to be clear about what the data will be used for.

I recommend that the franchisor and franchisees jointly craft a data usage policy similar to those available on many web sites. The policy should clearly call out what data is required to be provided and for what purposes it will and will not be used for. Decisions should also be made if the data is to be automatically sent, provided upon request, or provided with permission from the franchisee. This language should either be added to, or referenced in the franchisee agreements and franchisee disclosure documents. I would also suggest staying away from overwhelming documentation that looks more like a tax code reform than a simple agreement on how two companies work together.

Now let’s discuss the costs of providing the data. In many cases, the ability to send data from remote locations such as stores or distributors exists, but requires additional costs (licensing, infrastructure, etc.) from the vendors that provide these. For example, in some cases, the POS can send transaction data to a centralized database, but only if the “reporting package” is purchased. Keep in mind that a database infrastructure to collect and store potentially billions of records can be expensive as well. I do not think it would be an unreasonable assumption that a mid-sized retail organization would spend several million dollars a year to operate a quality business intelligence/decision support effort.

My recommendation is to share in the costs and share in the benefits. Work with the franchisees to determine an appropriate split of the costs of such a program (Example: Maybe a franchisee pays for the associated POS costs to send the data to the central system, but the franchisor pays for the costs of maintaining the centralized database and reporting system.) It is also important that the brand provide the franchisee with access to its own data with the new system. Although the data may be useful for the franchisor when it comes to marketing and operations initiatives, it is also valuable to the franchisee to help them better manage their individual business.

Creating a win/win situation for both the franchisees and the brand is possible if both sides are transparent with their thoughts and concerns and they work to compromise. Disagree? Please E-mail me at Todd.Michaud@FranchiseIT.org.