Digital transformation and quick-service restaurants: Getting to ‘yes’ with franchisees

Now more than ever, digital transformation is essential for QSRs. But success depends on buy-in from franchisees. A playbook for winning their support can help leaders drive change.

Why digital matters for QSRs, now more than ever

It’s common knowledge that restaurants have been hit especially hard by COVID-19. The industry could see a revenue shortfall of $240 billion by the end of 2020. An estimated 16,000 restaurants have permanently closed. And eight million restaurant employees are out of work — three times the job losses of any other industry.

Yet while these numbers are staggering, they don’t tell the full story. The impact of the pandemic hasn’t been uniform across the entire industry. In fact, a number of QSR brands are thriving right now. From Wingstop to Del Taco, recent earnings reports show that growth for restaurants is possible even amid great disruption and uncertainty.

What’s powering the business health of some QSR brands in this climate? While multiple factors are at play, digital is clearly one of them. A study by Nation’s Restaurant News explored the commonalities of pandemic success stories like Wingstop and Domino’s. Not surprisingly, It found that a robust digital infrastructure has helped these QSRs seamlessly pivot to off-premise service formats, enabling delivery, order-ahead, and curbside pick-up to meet the changing needs of customers.

These advantages are likely to persist well after the pandemic ends and the economy recovers. The accelerated growth in e-commerce adoption caused by COVID-19 means more customers are interacting with QSR brands through digital channels than ever before. And many of them won’t want to give up the convenience afforded by best-in-class apps and websites. Despite the fact that orders through in-store registers have recently started to pick back up at Chipotle, for example, sales through its digital channels still remain at a whopping 50%.

Franchisee concerns with digital transformation

The ability of certain QSR brands to emerge stronger from the pandemic shows digital transformation is more important than ever. But that doesn’t make it an easy process. In fact, there’s a not-so-hidden secret out there: across all industries, most digital transformation efforts fail — to the tune of 70%, according to a report from McKinsey.

The biggest barriers to success typically center on organizational culture and behavior, including stakeholder risk aversion and a lack of shared understanding about customer needs. Ultimately, it’s one thing to get stakeholders to nod their heads when a digital transformation initiative is unveiled; it’s another to get them to consistently take action amid uncertainty and misalignment.

The challenge is no different for QSRs. Franchisees have a set of legitimate concerns when it comes to digital transformation efforts — and those concerns aren’t restricted to how costs are distributed under the terms of a franchise agreement. If left unaddressed, these sticking points can torpedo even the most thoughtfully planned digital transformation initiative. Indeed, because not all change can be mandated from above in a franchise model, getting franchisee buy-in is even more important.

While the specific concerns to solve for will differ from franchisee to franchisee, and brand to brand, the following themes are typically top of mind:

Too much complexity.

Franchisees often see digital transformation as something that’s not as simple as promised. Poor coordination and communication can intensify fears of a ‘second shift’, as franchisees worry that managing a new set of digital tools, systems, and processes will be onerous.

Lack of freedom. 

Franchisees pride themselves on knowing the needs of their local customers better than corporate leaders, who are often far away. Digital transformation efforts can be seen as taking away the freedom to engage those customers, locking franchisees into digital tools and marketing programs that might not fit regional preferences.

Loss of customers.

Far from driving business, digital transformation can be seen as harmful. The fear is that regular customers will be driven to other locations, either because competing franchisees are more adept at luring traffic through digital marketing, or because new apps will suggest the most convenient location, whatever that might be.

Minimal input.

Franchisees play an essential role in innovating the customer experience at the front lines, but they often feel left out of the strategic process of defining priorities and evaluating potential solutions when it comes to new technology, with limited opportunities to communicate their ideas and feedback.

These types of franchisee concerns have surfaced again and again in Fuzz’s digital transformation efforts with leading QSR brands. In our experience, anticipating and effectively solving for them during all project phases is critical for ensuring success.

The playbook for driving change

To get true buy-in from franchisees — so that they’re not only passive stakeholders throughout the process of digital transformation, but advocates who will consistently take needed action — it’s critical for corporate leaders to establish a strategy to build trust and transparency. The specifics will look different for every brand. But here’s where an effective playbook should start:

1. Communicate how digital transformation will help franchisees deepen customer relationships.

Best-in-class digital should enable franchisees to meet growing customer demand for frictionless delivery and order ahead services, personalized menus and promotions, and a host of newer, digitally-enabled experiences that will shape the future of QSRs. Make it clear how innovative digital products and service formats will help franchisees more successfully compete with today’s digital leaders, allowing them to attract, engage, and retain customers who might otherwise give their business to other brands.

2. Demonstrate the ROI that franchisees can reasonably expect to see.

Deeper customer relationships have a direct impact on revenue. Best-in-class app and web experiences have the potential to drive higher average order value, more frequent purchases, and increased customer satisfaction for QSRs, all of which contribute to the bottom line. Help franchisees understand the business impact of digital transformation by projecting the growth in revenue that will result from best-in-class customer experience. When the argument for digital transformation is made in dollars and cents, it becomes much more compelling to all stakeholders.

3. Create a governance model that involves franchisees without overburdening them.

When executed thoughtfully, digital transformation efforts should allay franchisee concerns about a ‘second shift’. Create a governance model that shows the extent to which corporate leaders will be responsible for delivering and managing digital programs, while showcasing where franchisees will slot in to collaborate and offer input. Provide details on the type of corporate support franchisees can expect in the short- and long-term. Finally, set clear expectations for how new digital technology will impact franchisee operations, and be transparent about substantial changes to those expectations throughout the process.

4. Put franchisee pain-points at the heart of user research and product roadmaps.

At its best, digital transformation is not only about creating amazing customer-facing experiences, but also designing systems and processes that enable franchisees, managers, and employees to do their jobs with more ease and efficiency. Establish a research plan to identify franchisee pain-points with current-state workflows and technology through interviews, surveys, and on-site research. Collaborate with franchisee steering committees to prioritize the problems that are most critical to solve, and use the output to inform the roadmapping process.

5. Make flexibility for franchisees a core part of the product vision. 

Digital transformation should yield tools that balance any global brand’s competing need for consistency and flexibility when it comes to customer experience. For QSRs, this makes regionalization features and store-level controls essential. Demonstrate how these tools will allow franchisees in different regions to flexibly structure their menus on apps and websites. Share early prototypes to get feedback and further understand franchisee needs for variability on store-level content. Indicate how marketing programs might run throughout a given year, and where franchisees will have control over messaging and promotions.

6. Create a rollout plan that minimizes disruption for franchisees. 

Launching new digital products always requires a willingness to work through changes, but care should be taken to minimize disruption where possible. Create a rollout plan that entails pressure testing new products and services in a lab environment, followed by pilots at a subset of restaurant locations, so that tech and workflow kinks can be worked out before broader scaling. Establish feedback loops during the pilot and scaling processes, so that franchisees can flag issues and get needed support as new products are launched.

Conclusion

Digital is more important than ever for QSRs. To emerge stronger from the pandemic, brands must strengthen their ability to pivot to new service formats while offering a best-in-class customer experience across a range of channels. Digital transformation is the path to get there, but driving change requires buy-in from franchisees. To win their continued support, QSR leaders need a playbook for demonstrating the business value of innovation, effectively solving for franchisee pain-points, and minimizing disruption while rolling out new technology.

Learn more about how Fuzz helps restaurant brands evolve their customer experience.