The Impact of A.I. on the Franchise World

Technology

Smart systems are revolutionizing how franchisors empower their franchisees.

By Keenan Baldwin

Artificial intelligence or “A.I.” is coming, but it isn’t quite what you think. While the Hollywood-driven narrative about machine overlords or scheming supercomputers is entertaining, and might convince you that it’s time to start stocking the basement with bottled water and weapons, the reality will be much more incremental and less dramatic. 

For example, A.I. is already all around us. Sometimes it’s visible, such as services like Apple’s Siri, Microsoft’s Cortana, or Amazon’s Alexa, and other times it’s subtly embedded in turn-by-turn navigation maps, online ads, or your music playlist. All of these are forms of machine intelligence and designed to eliminate drudgery and make our lives easier. 

In the franchise world, A.I. offers incredible advantages. Franchising success often comes down to the relationship between franchisors and franchisees, and how the former can empower the latter. Those franchisors who provide the most innovative site selection, training, advertising, and support put their franchisees at an extreme advantage, and we’re already seeing them use A.I. to do so in three main areas.

Site selection

Location is among the most important and least understood factors in franchise success. Part of that is because commercial real estate site selection is a fairly opaque process, bedeviled by lack of insight and structure. Franchisors have long provided site selection guidance based on macro-trends, but have always found difficulty in balancing this perspective with the individual franchisee's local knowledge.
 
In a deadlock, which opinion carries more weight? And for those franchisors that are advanced enough to rely on data and perhaps algorithmic decision making, the data they or their consultants have access to is often incomplete or drawn from census data that’s hopelessly out of date. Today, A.I. is adding some rigor.
 
A.I. location intelligence services such as SiteZeus and some geospatial intelligence systems can gather vast tracts of big data in real time and compute quick answers. They draw on inputs ranging from the weather to foot traffic, sales data, competitor locations, points of interest, and more to display everything visually on a computerized map. In some cases, they can even provide a heat-map of high-success trade areas. What used to take months of back-and-forth and result in inconclusive decisions now takes minutes and can be calculated with a high level of accuracy. With A.I. location intelligence, franchisors help their franchisees land upon better site decisions.

Advertising and sales

On the marketing front, A.I. is helping franchises polish their most valuable asset: brand awareness. Franchisors can operate digital advertising services centrally for all their franchisees, either completely or partially, and provide recommendations.
 
Those franchisors who actually manage the advertising itself can partner with location advertising companies like xAd which use A.I. to tie-in location data to deliver incredibly targeted ads. They can, for example, help a car dealership target mobile ads to nearby consumers who have recently searched for cars online, or serve coupons to loyal customers in a quick service restaurant’s trade area. Other services such as Facebook’s advertising platform use A.I. to optimize ad segmentations based on who interacts, responds, and purchases, and offer franchise-specific toolsets.
 
And A.I. won’t stop there. According to Franchise Times, it is likely that machine intelligence will soon connect consumers’ assistant services such as Apple’s Siri to retail POS systems. This would allow the A.I. which knows each consumer best to predict when they would like coffee and automatically order it so that the drink is ready by the time they arrive at their favorite coffee shop. The more consumer A.I. services learn more about us, the more power franchisors will have to drive consumers directly to their franchises. 

Merchandising and logistics

A.I. is also hard at work reducing waste and fraud while increasing revenue. Companies such as Daisy Intelligence allow those franchisors who collect POS, sales, and CRM data from their franchisees to squeeze insights from it. By parsing past operational data, their A.I. can provide recommendations on just about every factor of the business, including how to detect credit card fraud or how to merchandise specific products better. Franchisors can package these insights and even offer them as a service to franchisees.
 
Logistics chains are also soon to benefit. Delivery companies including DHL and Amazon have invested heavily in A.I.-powered logistics chains that auto-replenish inventories when they run low. Franchise operators would benefit from a similar service, allowing them to stock shelves more efficiently, reducing waste and the need for storage space. 

Only a matter of time

If taking advantage of A.I. seems like a daunting prospect, many franchisors need only look to their younger employees, who will likely embrace it. Forbes estimates that Millennials are predicted to make up 75 percent of the U.S. workforce by 2025 and their trust and understanding of these technologies are implicit. Most have never known a time before the internet and have come to expect the ease of use that machine intelligence offers. As they advance in their careers, they’ll agitate for these services in the workplace. To stay current, and to be an attractive employer, it’s a good idea to prepare for this future.

“Must-Have” data sets

If you’re convinced of the utility of A.I., the next thing to understand is what makes it so intelligent. A.I. has developed in tandem with the big data trend whereby companies make use of the vast troves of information they collect through everyday operations. 
In the franchise world, this can mean gathering your own data, but it can also mean renting it. The ecosystem is full of vendors with specialized data sets. Here are just a few examples of what is available: 
 
INRIX collects data from over 300,000 mobile devices and vehicles to offer a comprehensive view of where your franchise’s consumers travel and when.
 
Black Box Intelligence provides data on over 27,000 restaurant units and allows you to benchmark your performance and analyze your sites.
 
Google Maps’ API provides a global map of millions of points of interest so that you can see what surrounds your franchisees’ locations.
 
Applied Geographic Solutions allows you to map hundreds of geographic factors including crime risk, commuting statistics, and household expenses to see precisely what happens nearby. 

Putting A.I. into practice

A.I. is coming, like it or not. The advantages for franchises are immense, and it’s never too late to begin incorporating elements into your business. Often, the easiest way to do this is to seek out purpose-built A.I. platforms that solve for a specific challenge, such as site selection, advertising, or merchandising. It’s here that the barriers to entry are the lowest and the outputs are greatest. This will free your team to leverage A.I. with focusing on its core mission: empowering your franchisees with technology that they need to be successful in a future that’s advancing quickly.

Keenan Baldwin is SiteZeus Co-CEO and Co-Founder. He and his brother Hannibal had a unique opportunity to have a front row seat in the expansion struggles and successes of several notable restaurant and retail brands, which led to the conception of SiteZeus, a web-based location intelligence platform for brands with a multi-unit footprint. The company was founded in 2013. Visit www.franchise.org/sitezeus-supplier for more information.