What FRANdata Thinks

Here Comes Technology! Ready for the 4th Industrial Revolution?

August 29th, 2018 by Darrell Johnson

For the last couple decades franchise development has consisted of casting marketing nets (ads, expos, websites, direct mail and so forth) and trying to attract franchisee prospects.  Further, for years franchisors have struggled to get franchisees to share business information as well as create a platform that is confidently secure, thereby taking advantage of one of the biggest attributes of franchising – namely, every unit is designed around consistency and conformity, leading to the same expected outcomes.  How are these things changing in a mature information technology age and the beginning of what is being described by some as a transition to a 4th industrial revolution?

This 4th Industrial Revolution builds on the information revolution that began in the 1970s and the digital revolution that began in the 1980s.  We are now seeing a leveraging of these technologies with 21st century advances in fields such as artificial intelligence, quantum computing, nano-tech, biotech, robotics, the Internet-of-Things and more. It’s not exactly about Blockchain, prescriptive analytics, Big Data, 5G wireless, mobile apps, and cloud computing. It’s about the confluence and integration of all these and more in ways we are just beginning to imagine – embedding technology within societies and even the human body in ways we can barely fathom.

Just when you thought you were getting your arms around technology, a new wave is about to crash ashore.  Technology transitions of this magnitude are messy.  There is plenty of room for trouble with the risk of spending a lot of money that doesn’t produce any commensurate benefits. Most IoT devices are still too insecure to inspire trust and most AI-based tools are still too subject to misuse and manipulation. There are privacy issues galore. However, many of the technologies that have been promised for decades are now reaching a point of maturity.

We are entering a phase of rapidly evolving technologies that will impact the future of how we conduct business.  Thanks to distributed ledger technology (blockchain), we will see a new approach to data ownership, giving control to the original creator of content instead of the platform where it was created.  Think of it this way:  Google allows you to find products and services.  Of course, Google uses your search information to help companies find you.  Amazon came along and offered a more directed model built around distribution (that many in Google recognize is a serious competitive threat) that has made its founder the richest person in the world.  They not only find product or service options for you, but they also deliver it to your door.

In franchise development, casting a marketing net is beginning to evolve into targeted searching.  We have worked with some of our clients on assessing profiles of their franchisees on an individual household level.  We then overlay that information to households in geographic markets where they want to expand – finding prospects before they know they’re prospects.  That is moving franchise development from a Google model to an Amazon model.

What about franchise intranets and franchise support?  In 2018 we are seeing the launch and further development of platforms that enable secure and private data sharing. It can best be described as each piece of data having its own vault with its own rules linked to it, governed by smart contracts. Any transfer if that piece of data can be tracked and monitored and the data owner can benefit in real-time.  With that capability, franchisees should feel more comfortable with sharing proprietary data with franchisors and other franchisees because they have control of who sees what.  Further, better technology security will allow franchisees to share performance information even with competitors without having to be concerned with exposing confidential information. For the foreseeable future that is only done with a trusted third party.  Our client experience with current applications of big data, for instance, allows a better understanding of how revenue in a unit location is impacted by, say, a specific ad campaign. We can separate that impact from other influences by looking at how other establishments sales have changed in that localized area in the same time-period, whether or not they are in the same system.  Finding and analyzing that data puts us in an era of predictive analytics in franchising, something we have been doing for a few years now with franchise credit risk products for lenders.

Today the challenge is finding and making sense of big data.  There are lots of pockets of data to be pulled together and the speed with which it grows is daunting.  Over six billion messages flow through Google every day. A self-driving car generates a full gig of data, every second. However, we’re finding ways of applying predictive analytics to franchising that informs better decisions. That will improve outcomes for many areas associated with the franchise business model, such as recruitment, training effectiveness, unit performance, and ad spending, to name a few. Exciting times for sure.


This article originally appeared in Franchise Update magazine’s Q3 issue of 2018. See it in print on page 45!

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