follow us on twitter @EliteFranchise find us on facebook connect with us on linkedin google+ page

Will robotics and AI spell out the judgement day for franchising?

on Tuesday, 04 September 2018. Posted in Analysis

New technology has always been feared. However, if done right, implementing new innovations in your franchise could provide many advantages.

Will robotics and AI spell out the judgement day for franchising?

Businesses have always looked to drive efficiency and cost savings. And as labour costs have continued to rise the need for automated solutions has in many cases become a necessity to protect and improve margins. Many larger organisations have partnered with robotics and artificial intelligence (AI) companies to find workable and more profitable ways of conducting their operations.

From Dominoes drone deliveries, McDonalds’ touch screen ordering, Hilton’s digital concierges to the Big Data AI solutions for sales forecasting, ordering and marketing technology is integrating into everyday working life at a rapid rate. In 2016 KFC partnered with the Chinese search engine Baidu to create the world’s first human-free fast food restaurant in Shanghai.

Robotics and AI have advanced at almost an alarming rate. While it’s not quite the mechanical science fiction takeover portrayed by Hollywood, this technology has become a reliable and more cost effective solution to many of the everyday operational tasks. It’s often faster, smaller and more affordable than humans. Moreover, they don’t have holidays, sick days and aren’t late to work. All of which is leading to more franchisors using these new technologies in their day-to-day operations.

Of course it has not all been plain sailing. In March of 2018 the US franchising brand Cali Burgers robotic burger flipper Flippy had to be taken offline after just one day as it was considerably slower than its human counterpart and customers were left waiting for their food to be cooked. Since its launch improvements and upgrades have been made and variations of this robot are being used in other brands across the US.
In 2016 Chinese restaurant chain Heweilai replaced its waiting staff with robots in three of its locations. Sadly, they weren’t up to the task and struggled to pour or carry liquids, take orders or even stay functional for a full shift. It also became apparent that it was more expensive to continuously fix these robots than it was to pay the human counterparts' salaries and as result Heweilai ended up throwing away the robot staff and having to close two restaurants.

So how does all of this affect franchising? For franchisors and to both new and current franchisees, there are three main issues which will need to be addressed should this robotic revolution continue at this pace.

The first and most obvious is cost. While the long term cost benefits may be significant there is the issue of the initial cost of development, it's not cheap developing robots and as such most organisations tend to purchase rather than develop. The aforementioned Flippy robot costs $60,000 - $100,000 depending on the feature set, maintenance, life expectancy and repair costs, remain undisclosed. This may not be a large amount for some but represents just one robot performing one function at one site. If a business operates a large number of sites, then this can quickly add up to a considerable sum to invest back into the business.

For both new and current franchisees this could be a considerable additional sum to find and assuming a world where other tasks are to be completed by touch screens, camera or drone solutions etcera, where is all of this extra investment coming from?

Then there’s the question of implementation. Calculating and recalculating the return on investment will be critical to the practicality of implementation, for example, if a franchisee only has three years left of their franchise agreement and the return on investment via cost savings is five years. This of course is not an issue if there is no immediate need to roll out the technology across the network, but where there is a franchisor should expect problems and should prepare accordingly.

For those brands with no physical premises of their own they will need to get the buy-in of a franchisee or two to have the new systems or robots installed in order to determine cost savings, efficiencies and resolve all those initial kinks before being able to ethically roll out to the network. This may be easy or it may not but a franchisor should be prepared to compensate if things go wrong and the robot staff decide to take up arms against their human overlords.

Then there are the servicing and maintenance aspects to consider both in terms of the costs and the practicality of running an operation. What if your robot concierge decides to blow a fuse, how quickly can this be repaired? What is the interim solution?

Last but by no means least you need to consider the people. Automation by definition will reduce the need for employees, the primary function of a franchisee in most brands is to manage, coach and develop people. By reducing/minimising the workforce it will reduce the ability of a franchisee to affect change and make improvements, taking this aspect away from franchisees will likely lead to them feeling powerless in the relationship which for some will present challenges to all parties.

Of course we are not quite at the point where robots are doing everything for us, I had to type this article myself after all, but we must be prepared to implement new technologies into our businesses and our lives intelligently, respectfully and with empathy for those that it impacts or face our technological judgement day.

This article comes courtesy of Brian Gregory of CeX, the gadget lovers dream franchise.

Affiliate Member

Strategic Media Partners

<