Technology Offers Franchisees Advantages

Technology can help restaurant franchises reduce operating costs, streamline their operation, build customer loyalty, enhance quality, and create more personalized experiences for customers. But restaurants must carefully weigh the benefits of technology against the potential challenges it can create. An inability to strike the delicate balance of technology and service can impact already thin restaurant profit margins.

Through regular meetings with our restaurant franchise clients, we have an understanding of their technology decision-making process and have learned first-hand what has and has not worked. Following are some of the key ideas and best practices we have gleaned from conversations with our restaurant clients.

Putting Control in Customers' Hands

One emerging trend our clients are taking into consideration is the ability to put more control in their customers' hands, literally. Both quick service and fast casual franchises are experimenting with mobile ordering programs that enable customers to place orders from either their own mobile device or a device at their dining table.

These programs can boost ordering accuracy, create a more personalized dining experience, reduce costs, and enable on-the-fly menu changes. Restaurants can also use the data gathered through mobile ordering to learn more about customer preferences and enhance customer loyalty programs, which means more return visits and a better customer experience.

The Big Benefits of Big Data

According to our clients, restaurants aren't limiting technology initiatives to customer-facing applications. With advances in computing and storage technologies and analytics software, restaurants can glean more insight into customer behavior and in-store operations than ever before.

Big Data can help restaurants analyze in-store traffic, more efficiently schedule staff, fine tune their marketing promotions, streamline purchasing and create menu options based on known customer preferences. Armed with this insight, restaurants can identify food trends and even create more successful marketing promotions based on sound customer insight.

Restaurants Carefully Weigh Tech Benefits and Challenges

Our clients know that incorporating new technology into their restaurants isn't without risk. They cite the high costs of implementation - which can increase exponentially depending on the number of franchises they operate - as well as the potential risk to their reputations should customers have a negative experience with the technology. For example, some of our clients have decided against implementing mobile ordering because it may alienate customers who prefer a more personable dining atmosphere.

They also cite data security concerns as a significant factor in their decision-making process. While technology has made it easier for restaurants to collect data on customers and their purchasing behaviors, it has also created challenges around how to protect that sensitive information.

Assessing Goals and Prioritizing Are Key

Mobile ordering and Big Data are only two of the emerging trends that are changing the restaurant industry. A number of our clients are also investigating the viability of mobile payments, digital-enabled customer loyalty programs, IoT (Internet of Things) capabilities, smart kitchen equipment, and even location-based beacons.

With so many technology applications available, our clients know that they need to separate what they want from what they need. It's easy to become overwhelmed by the potential these applications offer, but one best practice is to begin by understanding the specific business challenges you're trying to overcome.

Whether you want to reduce costs, improve staff scheduling, or enhance the customer experience, knowing where you want to go is the first step in mapping out how to get there.

In the past, restaurant franchises viewed technology as a support function, but now they are looking to technology as a strategy, a way to learn more about their customers, streamline their operation, grow their business, and create a competitive advantage.

Rick Thompson is managing director, franchise finance at BMO Harris. He is responsible for the oversight of a team dedicated to identifying the finance needs of a diverse group of national franchise clients - and helping them make informed decisions through their insights, tailored solutions, and advice-driven approach. He can be reached via email at rick.thompson@bmo.com. Banking products and services are subject to bank and credit approval. BMO Harris Bank N.A. Member FDIC.