Adding AI to Your Franchise Business

AI in franchise business

Key Benefits of Artificial Intelligence for Franchise Sales and Operations

Franchising as a whole tends to embrace new technology more slowly than other business segments, perhaps because a franchisor not only has to get its own headquarters on board, but also its network of franchisees, who are technically independent business owners. Therefore, while AI, or artificial intelligence, has been upping the game for a number of industries, from the way college professors grade papers to robots delivering groceries and flipping burgers, many franchisors are still not sure how to tap into AI’s work-changing benefits.

Artificial intelligence, simply put, is technology that recognizes and categorizes statistical patterns in large amounts of data. Just like the human brain, AI can use this info for problem solving, communicating, and mastering new tasks. But because AI has an infinite wealth of data to draw from, far more than the human mind can read and process, it’s more efficient and the dive into information is deeper.

Tech-savvy students are taxing professors who now must decode whether their essays are their own work, or one created by a robot. (In the interest of full disclosure, I did not use AI to write this article, although I was tempted to try it out!) And while AI comes with its own set of challenges, the benefits are definitely worth exploring.

Benefits of AI in Franchising

Early uses of AI included chatbots on franchise recruiting websites and automated text messaging to prospects in the sales funnel. In a competitive market, a delayed response to franchisee candidates can mean a lost sale before it even gets into the pipeline. The good news is that AI can streamline the franchise sales process, allowing franchisors to respond quickly and efficiently to sales inquiries while the lead is still hot. In fact, recent industry studies, including the 2023 FranConnect Franchise Sales Index Report, have shown that franchisors’ deal closure rates are highest when lead response time is under four hours. Many organizations are striving to move that needle to an even shorter timeframe, by committing to respond to inquiries in under 30 minutes; but the only feasible way to accomplish this consistently is through automated communications tools, supported by AI.

Franchise Innovation

AI can aid in a franchisor’s constant need to innovate its own operations, as well. It can help standardize processes so that they’re easily implemented by franchisees, but not easily replicated by the competition. AI can help save time, eliminate the need for hiring extra people in a tight labor market, and create consistency in franchising best practices. Domino’s Pizza, for example, has introduced a chatbot to its mobile app to process orders, track deliveries, and provide customers with real-time updates on their order and uses other forms of AI to route deliveries more efficiently. Checkers & Rally’s and McDonald’s are just some of the fast-food restaurants that are testing AI-based voice-ordering in their drive-thrus.

Responding to Customer Feedback with AI

Responding to consumers’ online feedback, whether positive or negative, is another task that can be assigned to AI. Consumer Fusion, an AI vendor, quoted a Yelp survey that found 90 percent of consumers read business owners’ responses to a negative review, and if the business responds within 24 hours, the reviewers may take it upon themselves to change or delete the review. The average time to respond to a comment is estimated at three minutes, so for a franchisor or franchisee with multiple units, using employees to monitor online chatter in a timely manner can be both challenging and costly. Starbucks, for example, is using Natural Language Processing (NLP) to analyze customer feedback, identify common concerns, and improve customer service. And while NLP is now being used by larger human resource departments for screening resumes, one can readily see how it could be adapted in the future to help franchisors to better screen franchise applicants.

Predictive Analytics (PA) is another AI tool that is beginning to come into its own in franchising. Panera Bread, for example, is using PA to analyze factors such as location, weather, and time of day to predict product demand – allowing it to optimize supply chain and inventory management to reduce waste, which, in turn, helps drive franchisee profitability. Real estate franchisors are finding that there are numerous uses for Virtual Reality (VR) in driving sales. Virtual tours of properties and virtual home staging are just two forms of VR that are now indispensable tools for many real estate brands.

We are just now scratching the surface of how AI can be used to improve our businesses both at the franchisor and consumer level.

AI and Labor-Savings

Labor-saving uses for AI include writing corporate or franchise social media and website content, generating product descriptions, and even developing company presentations. In short, we are just now scratching the surface of how AI can be used to improve our businesses both at the franchisor and consumer level. Just like most things in business, one size or one system doesn’t fit all. And AI is far from perfect. So as franchisors move into the realm of AI, they need to be careful that they do not lose more than they gain in the process.

There are numerous tools available and growing numbers of vendors who offer AI-related services, so you may first want to check in with your trusted franchise advisors to prioritize what to tackle first. You’ll want to ensure that you have the right franchise materials and that your messaging is on target and compelling before automating your sales and marketing systems. You’ll want to know what internal operations are in the greatest need of innovation and could benefit the most and the quickest from automation. But keep in mind: the one thing you don’t want AI to do is turn your brand into a cold and mechanical machine.

A Human Touch

As we start to live in a futuristic world where cars drive themselves and Alexa or Siri act as our de facto personal assistants, we can’t lose sight of the fact that people still like to do business with people they like. There will always be the need for the human touch in franchise marketing messages and sealing a deal. Your franchise system and brand can always be made more efficient. But because of the long-term, people-focused nature of the franchisor-franchisee relationship, it also needs a face. And that face most assuredly should still be human.

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Mark Siebert is the author of Franchise Your Business, The Guide to Employing the Greatest Growth Strategy Ever and The Franchisee Handbook, and a franchise business consultant since 1985. Mr. Siebert founded the iFranchise Group in 1998 as an organization dedicated to developing long-term relationships with successful franchisor clientele. He can be reached at 708-957-2300. Learn more at iFranchise Group.
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