Security

With an estimated 1.8 zettabytes of information created and stored in 2011 alone, there has never been a more opportune time for hackers to challenge franchise data security, according to a DC Digital Universe study. Numerous yearly reports announce the increasing strain of data breaches among large and small businesses alike. Since it may seem impossible to predict and protect against each possible scenario, have you considered breach coverage or breach insurance to act as a fail-safe solution?

The real cost of compromise
What many businesses don't realize is that the compromise fine assessed by most merchant processors ($5,000 to $50,000) is only the beginning of penalties associated with a data breach. Other costs may include the following:

Litigation is America's fastest growing business because plaintiffs have everything to gain and nothing but a few hours to lose, says Hillel Presser, author of Financial Self-Defense (Revised Edition), www.assetprotectionattorneys.com.
"Even if a case seems utterly ridiculous - like the man who struck and killed a teenager with his luxury car and then sued the boy's family for damage to his bumper - defendants are encouraged to settle. It's sometimes the only way to avoid potentially astronomical legal fees," he says.
If you haven't already taken steps to protect your assets, that's one New Year's resolution you'll be glad you made and followed up on, Presser says. And while it helps to have the assistance of a lawyer who specializes in asset protection, there are many things you can do yourself...

Who is really responsible for network security?

An overwhelming number of franchisees are perplexed about network security ownership and responsibility--especially when it comes time to pay for a data compromise. Many incorrectly assume the franchisor or franchisee-appointed third party IT company manages all aspects of their security, including adherence to Payment Card Industry (PCI) compliance. Generally speaking, this confusion stems from unclear delegation of security obligations between franchisors and franchisees. This leads franchisees to make assumptions concerning who is ultimately responsible to ensure their PCI compliance is fulfilled, and who is liable in the event of a breach.

The rapidly expanding mobile payments market is attractive to merchants because of the low entry barrier to obtain a smartphone or tablet device. Dozens of companies, acquirers, and payment entities offer mobile payment solutions, and hundreds of thousands of merchants use them. Despite its convenient and futuristic qualities, the mobile platform was not designed as a secure application environment and seriously lags behind in payment security.
If I were a hacker, I would invest my time in devising ways to attack mobile smartphones. Think of the sensitive data stored or entered in your smartphone, such as bank login information, credit card numbers, and your personal information. Because it is connected to the Internet at all times, a smartphone is at great risk for malware designed to grab sensitive information...

The cost of credit card data compromise has risen nearly 70 percent since 2010 (Cost of Cyber Crime Study, 2011). Often, payment card information found by criminals is electronically just "laying around," waiting to be discovered.
In a recent report released by SecurityMetrics, (Merchant Data Security Report, 2011), 71 percent of the 2,700 merchant systems scanned had stored unencrypted card numbers. In all, more than 378 million card numbers were found on the systems tested. That is more than 12 times the total amount of sensitive records publicly reported compromised during 2011.
The question you must consider is: Do you have unprotected card data on your franchise point-of-sale or back office systems waiting to be harvested and sold for fraudulent purposes?
As a Payment Card Industry (PCI) Qualified Security Assessor (QSA), I conduct many onsite security assessments and continually see problems that result in insecure data storage--even on very sophisticated merchant or service provider systems...

There was a time when a hacker needed exceptional computer skills to breach a system. Only the most talented and experienced computer users could successfully bypass even the most minimal security provisions. Sadly, those days are gone. Recent investigations have revealed a disturbing trend: the availability of readily accessible hacking-made-easy tools has swelled the ranks of effective hackers. Now, an amateur with a grade-school computer education can often hack a poorly defended business network in minutes after downloading a free hacking template.
This alarming news should serve as a wake-up call for franchisees to increase their IT security vigilance. Novice hackers everywhere are now standing on the shoulders of computer geniuses, giving them the expertise to hack into systems and steal sensitive information that was previously beyond their reach...

You may not know it yet, but you are at war. An unprecedented battle rages over what you are entrusted to protect: your customer's credit card data. Your IT infrastructure is the last line of defense between you and a powerful enemy composed of a myriad of attackers with finely honed hacking skills, backed by organized crime. At the center of the fight today are multiple-franchise merchants. Visa corroborates this in stating that up to 97 percent of data compromises are suffered by smaller merchants and "specifically franchisees." The possibility of gaining access to a multiple-franchise network is a tempting prize, and attackers are relentless in their efforts to obtain customer credit card data.
Recent experience confirms that hackers are increasingly exploiting a common potential vulnerability, giving them unrestricted access to your system through your own remote access application...

In 1991, the Americans with Disabilities Act (ADA) issued regulations which allowed the use of service animals in public, including restaurants, hotels, retail establishments, theaters, and concert halls. The ADA's mandate caused little stir early on because service animals at that time were primarily "seeing eye" dogs highly-trained to help persons with blindness, deafness and some other disabilities while ignoring such distractions as food, strangers, and the presence of other animals. But given the regulations' lack of definitions, service animals steadily expanded more and more to boisterous poodles and irritable purse dogs, to say nothing of rabbits, rats, ferrets, lizards, and snakes. Doctors seemed to obligingly write notes testifying that the animals were helpful for mood support or to fend off depression and "therapy dog" vests could easily be bought online with no questions asked...

When Anil Yadav hears people talk about the United States as the land of opportunity, he takes pride in the fact that his life since emigrating from India has been a testament to the promise implicit in that phrase.

From his first job as a teenage fry cook at the local Jack in the Box in Northern California, to his position today overseeing an empire of 181 restaurant locations, Yadav knows firsthand what that promise means.

Today, he takes pride in remembering his own humble beginnings and still likes to roll up his sleeves and jump in to cook burgers at one of his 155 Jack in the Box units. He not only knows how to cook--he could train most any of the thousands of employees who rely on him for a job.

"We've enjoyed a lot of growth," says Yadav...

In my 20-year journey of understanding leadership fundamentals, I have found change to be constant and adaptability to that change as the number one indicator of personal success.
We all understand that the world is changing. Technology alone reinvents itself in a compressed life cycle ultimately changing the way we conduct business, live our lives, and expand our leadership footprint. Ten years ago, nobody would have guessed that today's business leader would be able to receive e-mail, text, check-in for flights, manage a personal financial portfolio, and talk to others on one device.
This column is part one of a three-part series on projecting yourself forward into the new reality of change and the architecture of leadership...

Gift cards can be an important component of customer loyalty programs. They can help attract customers, driving sales and brand awareness. New federal rules governing the use of gift cards have recently gone into effect. You certainly should be aware of and comply with the new laws.

Last year when President Obama signed the Credit Card Act of 2009 ("the Act") into law, the nation's attention largely focused on those provisions of the law that aim to change the way credit card companies do business with consumers. However, since the Act imposes requirements on gift card issuers, it also changed the way many retailers and franchise companies will do business with consumers.

Federal regulations implementing the Act's gift card requirements were issued on March 23, 2010 and became effective on August 22, 2010...

Multi-unit franchisees have tremendous potential to increase their current revenue and future growth simply by reducing customer service breakdowns and improving service recovery. I call this "found money" because these dollars come from existing customers.

Our research with restaurant, retail, and consumer service businesses revealed that it's typical to find $50,000 lost for every $1 million in current revenue. These losses are self-inflicted because of a failure to appreciate the impact of customer defections from operations management failures.

Let's start with the basics. Customers who experience problems are not as likely to return as those who don't. Customers who feel highly satisfied with problem resolution are very likely to return...

Have you recently stayed at a branded hotel, or eaten at a franchised restaurant where the property was tired-looking and in need of an update? Was the overall experience less than expected because of the worn-out facility? On your next trip did you make a point to book a room or eat a meal at a competing brand, where the facilities and amenities were up to date? Worse yet, was the property yours?

This is happening ever more frequently today. Hotels and restaurants built 10 or 20 years ago now need substantial updating to compete with progressive brands.

Next to the initial costs of property construction, the largest expenditure will come when a facility is updated. We all know it's not if, but when the refresh or remodeling will take place...

Ken Greene has a secret. When he gets ready to open a new Honest-1 Auto Care franchise unit in New York (34 now and counting), he knows how to save up to 60 percent on the cost of his equipment.

That's significant when you're talking about the thousands of dollars (or tens of thousands, depending on your concept) of equipment required to open and sustain a new restaurant. How does Greene do it? He buys used equipment, everything from ovens to stainless steel tables to coffee machines, and more. It's a similar strategy to what automobile buyers discovered a few years back. A slightly used vehicle with low mileage is still a quality vehicle and comes at a fraction of the price of a new vehicle. Smart multi-unit franchisees are applying this same line of reasoning to buying equipment for their growing operations...

Economic realities have been harsh, lenders stingy with money, and many suburban territories unavailable or overbuilt. These are just some of the reasons a few multi-unit franchisees are turning to opportunities in nontraditional locations. Many franchises have potential in places that have not historically been franchise hotbeds, like airports, hotels, colleges, senior centers, highway rest stops, hospitals, and military bases.
If you've ever considered - or never considered - nontraditional franchise locations, it can be a whole different ballgame. When done properly, it can be full of potential. For those who may be considering entry into nontraditional locations, here are a few tips from franchisees experienced in operating in these venues...

When was the last time you challenged a landlord or property manager about the operating expenses or common area maintenance (CAM) charges? Probably not recently or never, right?

To clarify, operating costs are the day-to-day management and maintenance expenses charged to the tenant; examples include asphalt repairs, snow removal, property insurance, and so on. Franchise tenants pay a proportionate share of these costs based on the space they occupy. Therefore, if a franchise tenant occupies 12 percent of a building, he or she will pay for 12 percent of the operating costs. Paying by this said ratio is the industry standard but, of course, there are deviations for special circumstances like free-standing buildings and so on.

Nonetheless, every lease generally or specifically outlines what can or cannot be charged back to the tenants … but it's up to the tenants to be watchdogs...

You've worked hard to build your multi-unit franchise business, and now it's time to step back--not only from the day-to-day operations, but perhaps from the business itself. Is it time to let go? Can you? Will the business continue without you?

This is a business decision, right? So where are all those feelings and emotions coming from? Your hopes and fears about the prospects of change and the loss of your role of many years (not to mention the business income) are natural. Adding to this is the realization of how many other people your decision will affect: family members, business associates, managers and staff, and even the communities where you have your business.

Once you've made the decision (strategic), it's time to explore how to do it (operational)...

Just to let you know where I'm coming from when I talk about the five biggest mistakes I see franchisors making in today's tough economic times, I've been plying my trade for more than 20 years now, and well over 50 percent of my clients have been among the nation's foremost franchise organizations. I've been in the trenches with them during all kinds of economic scenarios--inflation, recession, expansion, steady-as-she-goes, and a couple of booms and busts. That said, here's my take on the missteps I see in today's marketplace:
1. Thinking you can cut costs and/or services out of your model to increase or maintain profits. Yes, there probably is fat that can be trimmed and we need to look at every line item expense, but what we cannot do is compromise the customer experience...

There may be some lag time, but experts note that every recession since the 1950s--with its rising unemployment and weakened economy--has been tied to an increase in crime, most notably property crimes and robbery.

Making matters worse, many law enforcement agencies are feeling pinched as cities and towns cut back on municipal services. Factor in reduced government revenues from slow retail sales and a decline in property tax revenues, and this may be "the perfect storm" for a rise in retail crime. So what are the types of crime-related problems a small business operator is likely to experience?

I have a suggestion that will raise your odds of winning--and it won't cost you any money. To clarify what I mean by improving your probability of winning, let me contrast that with an example of winning by chance.

The game Battleship was first popularized in the United States as a board game in 1931. It was also published by Milton Bradley as Broadsides, the Game of Naval Strategy. To win the game, you have to sink the other player's ships before he sinks yours. To start the game, each player secretly arranges a number of ships on his side of the game board. The players then take turns "shooting" at each other's ships. Today, we play Battleship on home video game consoles and mobile phones too.

But despite the updates in gaming technology, what hasn't changed is this: Battleship is a guessing game...