20 years bring huge changes in franchising technology

Looking back at how technology has evolved in franchising, by far the most significant changes have taken place in the area of lead management. Some industry experts trace the first concerns over franchise lead management back to right around the invention of fire, while others maintain the issues arose later on in evolution, shortly after Nixon resigned. No matter. Franchise lead management and the use of technology for other mission-critical functions in franchising have come a long way in the past 20 years.

Back in 1987, franchise sales representatives had "tickler files," essentially a recipe box with 3x5 index cards for every lead they were talking to. These cards were typically filled out at expo shows, which at that time were the predominant force in franchise lead generation. There was a snap-on lid, with dividers by rank according to how hot the lead was. The franchise sales person would pick out a card, make a phone call, and send a letter. If they received a call from the lead and it looked good, they would move to step two in the divider. Essentially, they handled leads like recipes.

Now, of course, thanks to technology and the development of the Internet, franchise lead management has moved light years beyond the antiquated recipe box system. In fact, the same can be said for most every function in franchising. We'll narrow the gargantuan topic down to three key areas: 1) lead management, 2) internal communications (intranets), 3) and payment processing (royalty payments, ad fund contributions, vendor payments, etc.).

Franchise lead management

Then: Having moved well beyond the recipe box method, the introduction of the Internet created a whirlwind of both positive and negative impacts on lead generation and lead management for franchise organizations.

The Internet opened up all kinds of lead possibilities, which was great, but then franchisors became deluged with leads that started coming in from all sorts of Web sites simultaneously, mostly emails that prospects could send directly to the franchisor. How to manage these leads became overwhelming. The question was what to do with all of them.

Back then, the franchise sales team would have to print out all the emails on paper, call the leads, and then cut and paste their notes from conversations into an ACT database or perhaps an Excel spreadsheet that lived on their hard drive at the home office. While that worked for some time, eventually the problem was that the information could not be accessed from the road or from anywhere outside of the office network. In addition, most franchisors initiated manually issued email campaigns from their home offices, with reduced, if any, reporting capability.

Now: Today, lead management is largely conducted electronically, with ranking and prioritization of leads and issuance of automatic opt-out email campaigns. Preset follow-up procedures are implemented based on the quality of the lead. "Quality of lead" is based on a formula. Typically that formula involves timing, multiplied by the individual's net worth, region of interest, and their interest in one or more units. For example, a prospect who indicates a desire for five units within two months in a key growth market and who meets the financial criteria will receive an entirely different follow-up campaign than one with reduced capital who wants a single unit in a less desirable market in a year. Today's lead management systems would make that differentiation and "act" accordingly.

Lead management involves a series of questions, such as who to call, when, who is interested in key markets, secondary markets, how many leads turn into deals, the cost per lead, the cost per close, and more. Everybody in franchising is thinking about contact management as a way of enhancing the franchise sales process with increased accuracy. That's where the initial trend has been over the past six years.

Lead management technology has moved toward ways to deduce patterns in the information gathered. The average franchisor today has leads that are generated through the major franchise sales Web sites as well as their own site, where a form asks prospects if they would like more information on the franchise program. Currently, those leads are being imported directly into the contact management system for automatic issuance of email campaigns promoting the franchise offerings, and automatic scheduling of follow-up procedures.

Future: Today's now is also heading toward the future, one that will include electronic tracking. By having a record of conversations tracked, franchisors can better manage the sales process. Now, it's moving toward being able to analyze trends as to how long it has taken for people to buy a franchise and why. Technology allows franchisors to go back and analyze the process. One emerging trend is recognizing the patterns of how a franchise sales team has handled prospective leads, as well as systems that help franchisees manage prospective customers the same way that franchisors manage leads. With "franchise-to-consumer" data reporting, customers can fill out an evaluation form on a Web site and relay their experience on a particular franchise unit. For example, did they enjoy the food? How was the service?

Just as a prospective franchisee goes to a site and fills out a form that goes into the lead management system, followed by an automated reply and email campaign, the same pattern occurs with customers. They go to a site and fill out a form, and the data goes automatically into the contact management system and associates it with all the other reviews for that location. Upon completion of the form, the customer gets an automated email thanking them along with coupons to be redeemed at that location.

Franchisor-franchisee communication

Then: Before Internet connections, most communication between franchisors and their systems occurred by telephone, in person, or by snail mail. Even the slightest adjustment to the operations manual had to be sent by mail or overnight delivery; revisions would come in the form of sticky notes indicating where in the manual the changes could be found. When the Internet went mainstream, these giant files would be e-mailed individually to each franchisee, again, with cover notes explaining where the changes took effect. Eventually, intranet systems alleviated this painful and expensive task. With intranets, franchisors could simply upload documents to a secured site and alert their franchisees by e-mail to visit the site for the latest and greatest version.

Next, intranets moved beyond just being areas where updated documents, ads, and promotions were posted to becoming mechanisms for real-time communication between franchisor and franchisee, as well as a place where franchisees could "talk" with each other in chat rooms and on message boards.

Now: Today, the creation of "mentor zones" has taken that process into a new political era. While intranets greatly improved ease of communications between franchisors and their franchisees, eventually the franchisees stopped listening to what the franchisor was communicating on the sites. Now, franchisors are turning to their most successful franchisees and asking them to convey the information to the system using the same technology. So while online discussion forums used to be moderated by the franchisor, now successful "franchisee mentors" are doing the moderating for them.

Information coming directly from a franchisee is typically perceived as having a much higher level of credibility. To protect the mentor from being bombarded with constant questions, franchisors have created mentor zones with mentors of the month, where franchisees can talk about what has worked for them. In this way, they never have to repeat themselves, and they are rewarded and recognized as mentors, which only furthers their desire to continue to succeed as they help and inspire others.

Basically, the idea of communicating using technology is great, but now the politics of who the communication is coming from is more of an issue than in the past. The bottom line is that on intranets, when information comes from the franchisee, the absorption rate is 10 times higher.

Another "now" issue in technology is blogging - particularly, how to cut off a negative blog. Recently a few franchise chains had problems with competitors trying to launch a sabotage campaign against them using bloggers. The solution is to spin the blog into an interview and to combat with positive commentary and your own blogging campaign.

But how do franchisors control internal blogs on their own intranet systems? The answer there is prevention. Franchisors should establish the ground rules within their own intranet systems. For example, no personal attacks, no swearing, and staying "constructive." Franchisors can clearly state that they reserve the right to prohibit use of abusers from chat rooms, blogs, or discussion forums on their intranet. After all, it is their property. They can delete negative comments or block the culprits' access altogether.

Future: The future is already moving toward more visual elements. As speeds and bandwidths get faster, and cell phones and PDAs become more capable, intranets are headed toward visualization for training, pitching prospective franchisees, and more. Visuals such as videos of the CEO speaking to existing or prospective franchisees are making the online process much more intimate and personal. Webinars featuring the CEO live over the phone and live over the Web to "meet" with the system in real time about emerging issues and challenges are becoming more mainstream every day.

This is becoming more of a trend with the creation of global communities, where people are remotely connected in franchising all over the world. For example, IFX Online supports franchisees in 23 countries, but for all they know or care, it's one online country. Everything is live, up-to-the-minute, and here-and-now. Access to information is as readily available in your neighboring town as it is in your neighboring country. This is monumental.

Royalty, ad fund, and other payment systems

Then: The antiquated systems of a few years ago are funniest when it comes to payment systems. It's scary to think that today many franchisors have not moved beyond those old methods. As a franchisee back in the day, I had to total out my cash register with a big long tape, and once a week I had to "X" out and do a summary, print out a copy of that tape, and handwrite the numbers on a royalty submission report. Franchisees would multiply their net sales, total it, sign the form, and write two checks, one for the royalty payment and one for marketing. They would attach the checks to the form, sign the checks, and send them in.

The franchisor would receive the checks, throw the register tape in a drawer, and run the checks to the bank for deposit. Usually they would never look at tape until they realized they needed to provide some analytical assistance. Amazingly, about 30 percent of all franchisors still use this process today.

Now: In the recent past, more franchisees graduated to filling out a secure, Web-based form that produces the totals for them, then prints it so they can send it in with a check. The report system fills out the form for them and calculates the numbers, but they still have to send a check. They typically send the sales data by email with an attachment to their franchisor, which serves as their sales data and royalty determination. The problem is that this is not secure and it includes detailed sales data for every franchisee.

Future: So what does the future hold for royalty payments? Basically, the franchisee will fill out an online form on a secured site that calculates their royalty, and an electronic funds transfer takes care of the royalty fee to the franchisor.

Centralization is also a future trend. More franchisees are now able to pay their royalty, buy supplies from the franchisor, and register for the franchisee convention using the same online payment center, which not only lets them transfer money from checking accounts, but also allows them use a credit card. Many franchise systems are using the payment center for other payments, such as advertising fund contributions.

More franchisees want to pay their royalties with a credit card, not because they are hurting financially and don't have the cash at hand, but because they earn points for airline mileage or other perks offered by the credit card company. The problem is that very few franchisors accommodate payments of royalties by credit card, mostly because of processing fees. Eventually, credit cards and automatic debits of royalties will become more commonplace, and will likely be voluntary. Franchisees will have the choice of how they would like to pay their royalties and purchase supplies. Paying electronically also offers the additional benefit of benchmarking. The franchisee can begin to see patterns of how their sales are doing and generate reports that track sales comparisons from previous months and years.

Nobody can accurately predict what specific technology will be the next to revolutionize the industry, yet my Great Crystal Ball tells me that advancements will focus on ways that franchisors and franchisees can better track, manage, and analyze most or all aspects of their business.

It's been a long road from recipe boxes for leads and sticky notes on operations manuals, but advancements are occurring at Internet speed, and will continue to make life easier, more efficient, and most important, more profitable for franchisees, franchisors, and suppliers alike.

Dan Martin is CEO and founder of IFX Online, an applications service provider specializing in the development of fully integrated Web-based management solutions for more than 200 franchises in 23 countries. He has 25 years of franchise structuring and management experience, including being an area developer. You can find him online.