The Robots Are Coming!

But will they take over your franchise?

How to think about automation’s impact on your business.

(Hint: Don't forget about the power of people.)

By Ben Davis

At a recent industry event, I overheard someone comment to a friend that they wouldn’t want to purchase a certain franchise concept because the franchisor is “planning to replace everyone with robots.” The comment seemed a bit absurd, but not necessarily surprising given how fast technology is advancing in the areas of machine learning, automation and artificial intelligence.

Somewhere right now there are robots performing tasks that might be part of your franchise: taking food orders, flipping burgers, tossing pizzas, chopping salads, delivering dry cleaning, greeting customers, making hotel beds and preparing tax returns. The rapidly increasing presence of automation in daily operations has some franchise owners asking the question, “Will robots take over my franchise?”

Automation is necessary, but so is human interaction – When it comes to automation in franchising, the fast-food industry offers some of the most visible examples. Walk into McDonald’s today and you could order on a kiosk without speaking to anyone. By the end of 2020 McDonald’s hopes that most of its 14,000 U.S. restaurants will include kiosk ordering. 

Just last year, McDonald’s joined the mobile order and pay craze, adding the capabilities to its app. Mobile order-ahead will account for about 11 percent of all quick-service-restaurant sales by 2020, according to a study by Business Insider Intelligence.

About 73 percent of the activities workers perform in foodservice “have the potential for automation,” according to a McKinsey & Company analysis. But does that mean eventually there will be no foodservice employees? Not likely. While automation has become necessary for the survival of many businesses, so are the real people they employ to make and deliver products to consumers. Without people, franchises can’t succeed.

Franchisors are in the business of creating successful small business owners – One of the first franchises I worked for was a company with a large product-manufacturing component that was integral to the business. Our franchisees sourced more than 500 different products directly from us. When the company was interviewing for a new CFO, one candidate asked the founder, “What do you think, of all of your products, is the most important?” The founder replied: “The successful small business owners we create.”

Franchisors are in the business of creating successful franchisees. Franchising offers a different perspective on automation. Although efficiency in operations is key, the end-goal and the most important, primary product is still successful franchisees. While automation might be necessary for the profitability of some of our businesses, it’s never going to replace franchisees – it’s going to drive them to be better. 

So when it comes to automation, the question franchisors should be asking is not “how do we automate the people out of this?” Instead, it should be: “How does automation empower, enable or increase efficiency for our franchisees?”

Robots don’t replace people, they make them better – Take, for example, the story of bulk grocery e-commerce startup Boxed. The company, which allows users to order groceries through a mobile app, decided to automate its biggest fulfillment center. 

Instead of letting go of employees displaced by the automation, Boxed CEO Chieh Huang instead decided to retrain them. Huang told Inc. that a company’s value is more than just a spreadsheet. "Increased morale and a better-trained workforce will do more for our company than chasing cost-savings and eliminating every borderline job,” he said. Some of the employees were trained to manage the robots while others were trained in various departments across the company.

Although a great franchisor should be focused on leveraging new automation and technology to improve the efficiency, profitability and success of the business, he or she will also see that franchisees are a major part of that equation. Collaboration is key, and franchisees and franchisors need to learn to adapt as technology evolves and becomes more advanced.

Automation and real human interaction should be synergistic – As a financial technology organization, automation is essential to Lendio. Because there’s an entire universe of small business loans out there, it would be impossible to manage our rapidly changing platform of 75 different lenders and their multiple loan products without some level of automation. 

Yet in financial services – and I would say every service sector – personal touch still matters. An article in MEDICI phrased it best: “Despite all of the technological innovation powering the sector, lending remains fundamentally a people business.”

Small business borrowers want the benefits of easier access to capital that only technology can produce, yet a good customer experience is still important to them. That’s why Lendio launched its franchising model a year ago. 

To remain competitive, you must invest in machine learning and automation. To provide a trusted and highly valued customer experience, you must invest in people. A great franchisor sees value in both sides of this equation; they are not mutually exclusive. Automation and real human interaction should be synergistic. We are at our best when we have both.

Ben Davis is chief franchising officer for Lendio.


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