Business Franchise Australia


Cost effective innovation

This article appears in the Jan/Feb 2015 issue of Business Franchise Australia & New Zealand


While it may be tempting to have the ‘latest and greatest’ technology for our franchise business there are some important considerations that need to be addressed before making the investment.

Maybe it’s a slight over-exaggeration, but it seems that every day there is a new piece of technology or service innovation available in the market. New apps for the smartphone, improved medical technology, faster and lighter computers, wrist bands  that monitor your sleep patterns, and even significantly better mousetraps are paraded before us on a regular basis.

And of course, we want it all. We want it for our own business, and even if we don’t, we probably need to implement some technology enhancements because our customers want the benefit that the new technology and innovation brings to them.

Ultimately, the benefit of most new technology is that it enables us to do things better, faster or cheaper. In an increasingly competitive environment and to stay relevant to consumers franchise brands understand the importance of branding and  imagery in their business. If we implement correctly, we should capture significant value in the form of increased profit.

But, innovation costs money, and with consumer tastes changing as fast as new innovation hits the market, how can we implement technology in a cost effective way, that gives us an advantage in the market and improves our profitability?

As tempting as it is to jump on board with the latest innovations, we need to assess any changes and make sure they fit our business. As a franchisee you also need to understand your obligations under your franchise agreement as store refurbishments will be required to provide a consistent brand image across the network. The cost and timing associated with these requirements will need to be factored into your business plan and cash flow projections.

Let’s walk through some of the key considerations:

How does it help the customer?

Without customers, we don’t have a business. After all, it is our customers who keep the franchise afloat through the purchase of our products and services.

Start by assessing how this new technology adds value for the customer. For example, does it speed up a process for them? Does it give the customer something that they didn’t have before? Does it make their life easier in any way?

If we can answer yes to any one of these questions, then there is a stronger chance that customers will stay loyal to our business. This is because we are improving the overall experience that our customers have with us. Sometimes, due to growth or operational issues, we need to improve technology that doesn’t immediately add value to the customer. In these instances, we should aim for the change to be neutral. Or, to put it another way, the customer should be no worse off after the change than they were before.

For example, say that we introduce a new record keeping system to keep our customer orders organised. This might mean that we need to obtain additional information from the customer as part of the sale process. However, if obtaining that  information inconveniences the customer, or detracts from their experience, we run the risk of losing that customer for future transactions. So, when we implement the change, we need to be sure that there is no negative experience for the customer.

As an additional consideration, if the technology significantly changes the customer experience, we need to clearly articulate what the change is and how our customers will ultimately benefit. This way, we can step them through the change, and take them on the journey with us.

How does it fit in with the business strategy?

When assessing new technology and innovation, we really need to consider how it fits in with our overall strategy. The key question here is: does this new technology or innovation support the direction that the business is taking?

While it might sound strange, there are occasions when new technology does not align with how we are trying to position our business in the market. For example, if our business focusses on face to face service, it may not make sense to invest in electronic direct mail technology.

How will it add to the bottom line?

Regardless of the technology that we are implementing, there is always a cost to install it in our business. So, after we have agreed that it makes sense to implement, we need to do a full cost analysis. The best approach is to consider is the return on investment, or ROI.

ROI measures how efficient we are at converting the total cost of our investment into profit. Keep in mind that this is the total cost, so we need to include:

• The purchase price
• The cost of installation
• The cost to train our staff and educate our customers in the change

In addition to calculating the overall benefit to the business, we should also consider how soon the investment will start making a profit for us. The longer it takes for the new technology to turn a profit, the harder we need to scrutinise whether it is worth implementing.

How will customers react?

As a final consideration, we need to ensure that our customers are on board with any changes that we have made. This starts with training our staff. These are the people who, ultimately, will sell the change to the customers. The better our people understand the new technology, and why we have made the change, the easier it will be for our customers to come on board as well.

Next steps

The pace of innovation and technological change is phenomenal. A lot of that change can benefit both us, and our customers. The key to successfully implementing new technology lies in understanding how it helps our franchise business and our  customers, and how soon we can get a return on our investment.

Westpac has supported the franchise sector in Australia for over 20 years. The growth of a specific franchise system is supported by providing streamlined processes for lending, as well as access to other leading transactional solutions. The bank also has a national network of franchise specialist business bankers who are able to deal with the specific day to day needs of the franchise customer.

Sharen Verrenkamp is the Westpac Senior Business Development Manager for Queensland specialising in the franchising sector.

Contact Sharen at:

P: 0438426319