You’re Telling Me How To Spend My Money?

Written by Todd L. Michaud
September 8th, 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. He is currently responsible for IT at Focus Brands (Cinnabon, Carvel, Schlotzsky’s and Moe’s Southwestern Grill).

“Vendors need to compete every day to win our business. If they fail to provide competitive prices or superior service, I want to have the ability to choose someone else.”

I can’t tell you how many times I have heard some version of this over the years. On the surface, this seems like a pretty straightforward argument . But with most things in life, it’s not quite that simple. I also have franchisees who pepper me with questions like: “Why is the system so expensive? Why can’t I have a single phone number to call for all of my problems? Why are these upgrades so expensive and why on earth do they take so long to complete? Why can’t I get access to better data faster? Who is holding this vendor accountable?” Not always, but sometimes, the answers to these questions are found by limiting the franchisees choices.

The total cost of ownership of a POS increases by 15 percent or more for every POS vendor in a chain. These costs come from reduced purchasing power with the vendors, increased support complexity and costs, and increased integration costs. Important costs that are often overlooked are related to adding new functionality in the future.

Regardless if it is for competitive reasons or to maintain compliance, upgrading diverse systems is expensive for everyone involved. Try switching a gift card provider to reduce costs and add features for a chain with 38 different electronic payment systems and you will understand why these often hidden costs are an important consideration.

Many franchisee managers are reading this and thinking: “Here we go with another IT person who is trying to make their life easier by spending my money. He just wants to go the easy route and manage just one vendor.”

That is not my point at all. Cost is only one component of several that is considered with each IT offering. Risk is obviously also important. Putting all of your eggs in one basket is also a risky move. If a single source vendor fails to deliver on any aspect of the relationship, then sales suffer and IT’s creditability is damaged. Franchise IT leaders take that risk extremely seriously.

The original quote I referenced is actually a lot more detailed. It really goes more like this: “A single-source IT vendor is a horrible idea! I want the IT vendors to have to sell to me versus me being forced to buy from them. Vendors need to compete every day to win our business. If they fail to provide competitive prices or superior service, I want to have the ability to choose someone else. My local vendor is extremely responsive to my needs. If we choose a single technology vendor for our chain, then you will take all of this away from me. Plus, if you choose a crappy vendor, it will be my problem, not yours.”

There are times when a single-source vendor makes sense, times where multiple vendors make sense, and even times when a hybrid of the two is the best option. IT vendors in a Franchise environment usually operate under one of the following models:

  • The chain sets the requirements for the rollout and franchisees can chose any package that meets the requirements
  • The chain approves a series of vendors and the franchisees can choose any of the approved vendors
  • The chain approves a single manufacturer with several reseller/support options.
  • The chain requires a specific vendor(s) and the franchisees have no choice

    So which option is the right one? Let’s take a look.

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