A Digital Revolution Is Coming to Franchising. These Franchises Are Best-Prepared for What's Next. Powered by venture capital and Silicon Valley ingenuity, tech companies are finding new ways to make franchise systems faster, more efficient and better equipped to flourish during uncertain times.
This story appears in the January 2021 issue of Entrepreneur. Subscribe »
Sam Caucci was once the bringer of boredom. Back in 2010, when he worked for an athletic-coaching franchise called the Parisi Speed School, his job was to fly around the country giving employee training seminars. It was dreadful work. He'd arrive in a new city, pull employees off the clock, gather them in a room, and watch their eyes glaze over as he launched into a corporate-approved lecture on procedures and protocols.
"Employees were never excited to see me," he says. Nor would he see them again. He eventually realized that most of them were in their 20s or 30s, and they left the company so fast that he had to return to a location every three months to replay the same rehearsed spiel for another group of bored shift workers. "I started to realize my job wasn't so much about the training itself; it was about trying to keep employees engaged."
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The revelation led Caucci to explore better ways to spread corporate knowledge, and in 2015, he went all in on an idea. He launched 1Huddle, an app-based tool that converts training manuals into mobile games. "The average millennial spends more than 10,000 hours on gaming platforms before they're 21 years old," says Caucci, citing a common industry estimate.
So 1Huddle taps into what people are already doing: Players — or rather, employees — earn points by competing against colleagues through timed rounds of multiple-choice questions. The games are fun (relatively speaking) and employees can do them piecemeal on their own schedules. Best yet, 1Huddle clients don't have to fly someone around the country to host training seminars.
Soon after launch, Caucci saw signs of 1Huddle's success: Employees played 83 percent of training games outside of work. "They were logging in not just to learn about the latest safety training but to beat their coworkers," he says.
When franchisors are asked how they're modernizing their brands and appealing to younger employees or customers, their response is often the same: "We're embracing new technology." For some, that means making the obvious tech upgrades—an online booking system for appointments, a digital kiosk for restaurant orders, etc. But 1Huddle represents a new kind of opportunity: It's part of a rising industry of tech-fueled solutions that make franchise systems more efficient and profitable. And more companies like it will keep coming.
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Already, the marketplace is robust. ShiftOne, for instance, is a service that claims to cut staff turnover in half by crunching sales data, guest reviews, and other inputs to motivate employees by setting award-based performance goals. (Like 1Huddle, it gamifies work — but also uses AI to identify early problems in employee morale or performance.) Similarly, Onaroll rewards shift workers with perks like Netflix and Spotify memberships when they show up on time and hit sales goals. Other companies bring software-based solutions to customer service and acquisition. Olo funnels multiple food-delivery services into one point-of-sale system, and Zenreach uses in-store wi-fi to collect customer data, track traffic, and create targeted marketing.
The ability to quantify results helps explain why these services are drawing in millions of dollars in venture capital. When Jarred Fajerski, one of 1Huddle's early customers and the senior VP at the spa franchise Hand & Stone, began testing mobile training in addition to his usual webinar teaching programs, he noticed a double-digit sales boost. And the relationship was linear: The more gaming time a spa logged, the more money it made. Now the company makes 1Huddle available to all its 15,000 employees across nearly 500 locations.
Cloud-based franchise software packed with artificial intelligence and game-like features has been gaining ground for the past few years, but recently, its ascent was accelerated by a virus that changed the way people eat, shop, and live. "COVID forced a level of creative thinking that we otherwise wouldn't have been able to tap into," says Susan Beth, COO of NRD Capital, a private equity firm that invests primarily in franchise technology.
Take CaliBurger. The international burger franchise used the pandemic as an opportunity to begin testing a voice-ordering platform from Valyant AI, which works like Siri for the drive-through and integrates with a restaurant's existing infrastructure. "The restaurant industry is looking at all kinds of new tech in order to survive," says John Miller, cofounder of CaliBurger. And Valyant AI could help. Miller hoped that customers would perceive it to be less risky than potentially germy touch-screen kiosks, and according to Valyant, its service reduces customer wait time by 7 to 15 percent.
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"Voice ordering is still in the early days, but I think it will be a major way people order food in the future," says Miller. If he seems bullish on tech, it's partly because in addition to running CaliBurger, Miller runs a tech-focused investment firm called Cali Group. But his optimism is supported by the numbers. Roughly two-thirds of franchise companies collect technology fees, which usually amount to 1 to 2 percent of gross sales, according to a 2019 report from FranConnect, a software-management company. And those tech fees generate results; companies that levy them grew 36 percent faster over a two-year study period.
For tech investors like Beth and Miller, the franchise industry makes compelling business sense. A single franchise contract can push your technology into hundreds or thousands of locations and generate millions in revenue, says Miller. "The volume is huge if you can get into the bigger chains," he says. To that end, Cali Group often licenses new technologies to smaller operators free of charge, just to prove out the concept for big franchisors.
Plus, since many franchise technologies target general operations, there's potential to sell a sophisticated product many times over. "Whether you're flipping hamburgers, switching out mufflers, or taking care of pets, franchising is relatively the same," says Paul Rocchio, vice president of development and membership services at the International Franchise Association.
Next Force is a good example. The work-sharing platform consolidates employee schedules across multiple franchise units, so when an employee calls in sick, it can quickly pull info on every available staffer within driving distance who possesses the proper qualifications. The service reduces an administrative task that involved multiple phone calls and a stack of employee files down to a few taps on a smartphone screen. "Managers are constantly scrambling to fill these shifts, and this platform can have a huge impact on how they run their businesses," says cofounder Ramneek Bhasin. McDonald's, Wingstop, Denny's, and Taco Bell have all signed on to use the service, but even if Next Force conquers the entire restaurant industry, there's no reason it couldn't expand to hotels, convenience stores, and car-rental shops.
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Similarly, PopID could make sense for any franchise that sees the same customers repeatedly. The company enables customers to place orders and make payments through facial recognition. Miller's Cali Group is a majority owner of PopID, and after he implemented the service in CaliBurger stores in 2017, he says he saw drops in both customer wait times and credit-card-processing fees. The average ticket size also increased by 4.5 percent. Customers who log in with their faces see past orders pop up, so if they added extra avocado or a cookie in the past, they'll be invited to do so again.
While services like these are receiving extra attention right now — PopID feels custom-built for a touch-free world — many in the industry believe they represent the future of franchising. Tech will continue to become faster, cheaper, and more efficient, and it will continue to give franchise systems an edge over smaller operations. "Technology goes hand in hand with franchising," says Rocchio. "It's going to streamline the business and make everyone more profitable."
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