Check out the latest edition of our newsletter!
FEBRUARY 2025
We proudly serve growing franchisees.
westcoastfranchiselaw.com (206) 724-0846
Old-timers fondly remember the days when the fast-food franchisee was a business owner in your town and lived in the community. I grew up in a town where the Dairy Queen franchisee had two stores; his kids went to high school with me, and people I knew worked there. That franchisee was part of the community. Those days are gone. Amid a seismic shift toward industry concentration, large operators have taken over hundreds or thousands of locations. That has sparked concern among some franchisors about a lack of grassroots management expertise. Many of the current executives with franchisors have grown up under a “franchise lite” model. They have never operated or developed stores, and therefore don’t relate to it well in many (but not all) cases. That can cause problems if franchisees default because franchisors lack the know-how to step in. As a result, the tail is wagging the dog. Some franchisors are trying to solve the problem by taking a cue from the past and pushing for owner-operators to live in the community where their stores are located. If franchisees are local, they reason, quality will improve organically due to pride in ownership. I believe that’s a step too far and risks missing out on some great franchisees. I have many successful clients with far-flung empires who have figured out how to hire people with a spirit of ownership. By promoting from within, offering the correct incentives, and managing relationships correctly, these clients are successful owners of stores in markets where they do not reside. They owe that success to the people they have put in place as their managers. The Secret Sauce Fostering a Spirit of Ownership in Front-Lines Leaders
excited about was the seller’s senior manager. My client had taken a hard look at the best incentives to get that guy to stick around, and fortunately, they worked. When my wife and I went out to dinner with my client, his wife, and the manager, the conversation took a funny turn. The manager couldn’t stop talking about the details of running his stores. This guy, I realized, was out to impress his new boss, who already runs great stores. He could not wait to share his knowledge. He spoke with such earnestness that his monopolizing the conversation was completely forgivable. The dude was internally driven to do a good job, and he was one of the most detail-oriented people I have ever encountered. This is a guy who, if he had a job bagging your groceries, his attitude would be, “Okay, I’m bagging the groceries, so I’m going to do the best damn job possible.” If he was your fry cook or assistant manager or manager, he would go all-in. Frankly, it was clear he would be even better than my client at running his stores, and my client would be the first to admit that. I don’t do all the filing at my office, but I have done it. Because I have done it, I know how to assess it and how long it should take. I can show others where the pitfalls lie. In the areas I am really good at, I am good at those things because at some point I messed up, I paid the price, and I had to fix it. I also can explain to others how to do that task really well. The same principle holds true for grassroots restaurant managers. As a well-known author on leadership once wrote, “A leader must own everything in their world.” In today’s tough operating climate, there is simply no alternative.
The issue isn’t ownership per se. It’s about fostering the attitude and attention to detail that enables a manager to succeed.
– Nate Riordan
I once helped a longtime client who owned a large number of stores acquire 28 more locations. The asset he seemed most
1
A Young and Bright Future for Science and Agriculture 14-Year-Old Whiz Kid Creates Produce Pesticide Detector When grocery shopping, various fruits and vegetables are typically on your list because they’re good for you, right? Well, imagine getting home, washing your produce, and discovering it still contained pesticide residue. That is precisely what Georgia ninth- grader Sirish Subash is driven to prevent! At just 14 years old, Sirish has created an astounding invention that is making huge waves in the world of science and agriculture: PestiSCAND, an AI-powered handheld device that can detect pesticide residue on fruits and vegetables. Beating out hundreds of other student entries, his remarkable device recently earned him the title “America’s Top Young Scientist” and the first-place prize of $25,000 in the 3M and Discovery Education competition. When testing the device, Sirish used spinach and tomatoes to detect pesticides. This revealed an accuracy rate of over 85%, meeting the competition’s objectives for speed and effectiveness, according to 3M. Using Food and Drug Administration data, Sirish found that just over 70% of store produce contains pesticide residues. Pesticides are chemically designed to protect crops against pests, weeds, and fungi. But they can also be harmful to humans when consumed and are linked to certain cancers, reproductive issues, and disruptions in vital bodily functions. “The residues can stay on produce after washing, and that’s where they’ve been connected to a variety of health issues. If we could detect them, we could avoid consuming them. We could reduce the risk of those health issues,” Sirish told USA TODAY newspaper. Sirish’s drive and passion for technology extend well beyond the classroom and science competitions. He’s genuinely committed to making a difference and solving problems that impact lives daily. So, congratulations to you, Sirish Subash! Innovation of this magnitude is sure to be a game-changer for not only consumers but farmers as well!
Feeding Your Cravings
Imagine this: You’ve just wrapped up a productive morning at the office, and your stomach is starting to growl. You check your phone for the time and — surprise! — there’s a mouthwatering photo of your favorite spicy lamb and avocado bowl from CAVA, a nearby spot you love for lunch. Even better, it’s at a discounted price. Looks like lunch plans just got deliciously easy! That perfectly timed, surgically targeted promotion was created just for you by one of the growing number of AI tools fast food chains are using to build customer loyalty. The tools gather data on what each loyalty member likes to eat, when they usually arrive, and how much they spend, then customize the restaurant’s notifications, promotions, menu offerings, and upselling efforts to match. The tools, including Incentivio, ebbo, Como, Punchh, and TikMe, can group customers based on their habits and fine-tune their pitches over time based on how customers respond. They also use each loyalty member’s preferred social media platforms to sprinkle enticements throughout their day. Wendy’s is using an AI system at 6,500 locations to offer gamified interactions, exclusive offers, and targeted promotions to loyalty customers. The chain hopes to deepen relationships with its fans and stand out in their minds as different from other chains, a supplier says. Domino’s Pizza uses AI to track customer preferences and suggest what to order. Other technology can change suggestions based on the weather or what other customers are ordering. This technology is not without risk. If the tools don’t work right, and offer unappetizing suggestions, too many intrusive notifications, or too many hurdles to receiving loyalty benefits, they risk sending even loyal customers running for the exits. But when the technology works well, it can make customers feel special and appreciated. Chipotle found a way to surprise and delight customers by using AI to match them with another anonymous customer who ordered the exact same meal within the past two minutes at a different location. Customers received no information about their food twin — only the time and date of their order, the restaurant where it was placed, and a listing of the customized ingredients. The “Chipotle Doppelgänger” campaign was a home run, spurring $4.8 million in sales to loyalty members during the initial four weeks of the campaign. Fast-Food Chains Harness AI to Lure Customers
Visit our blog for helpful franchise law insights and industry trends: westcoastfranchiselaw.com/insights
2
“While one person hesitates because he feels inferior, the other is busy
making mistakes and becoming superior.” — Henry C. Link ‘You Should See the Other Guy.’ Another restaurant turned an unfortunate accident to its advantage when a wayward driver crashed head-on into a ground-level sign in front of the store. A new set of letters, mounted on the sign’s crushed and crooked face, delivered a playfully snarky retort beloved by many brave victims of misfortune: “You should see the other guy.” No-Brand Burger. Struggling to stand out among legions of competitors backed by national brands, operators of one indie burger joint decided to turn their deficit into an advantage. In a humble appeal to haters of all the branded hoopla, they posted this teaser in their front window: “No-Brand Burger. Why pay more? It’s good enough.” Height-Based Pricing. You’ve heard of surge pricing, value pricing, and bundle pricing. How about height-based pricing? In recognition that kids are getting bigger these days, one Korean venue prices its wall-mounted “Hot Pot and BBQ Lunch” menu based on diners’ size. Adults pay $21.99, kids under 5 feet tall pay $11.99, and kids under 3 feet pay $9.99. Worst Pizza Ever. Every restaurant operator has experienced brutal one-star reviews on social media. In true martial arts style, one pizza joint posted a sidewalk sign redirecting a particularly scorching customer takedown into a come-on for the curious: “Come and Try the Worst Pizza One Guy on Trip Advisor Ever Had in His Life.” No word on how many contrarian adventure-seekers took the bait!
As any fast-food restaurant operator can tell you, wooing customers from nearby neighborhoods and shopping districts is a challenge. Many struggle to make their marketing message heard over the din of big-bucks advertising and social media campaigns. In a creative counterattack, some quick-service eateries are turning apparent weaknesses into humorous come-ons by posting unique signs and menu messages at their stores. As reported by Buzzfeed’s Mike Spohr, here are a few examples. ‘Thai Food Near Me.’ Thai restaurants often have a hard time standing out in the face of heavy competition. One Thai food operator turned market saturation to their advantage by naming their eatery with the same words hungry diners enter into Google Maps or Apple Maps: “Thai Food Near Me.” The result: The apps listed the restaurant first among Thai eateries in the area. Craving a No-Brand Burger? Restaurants Tout ‘Worst Pizza Ever’ and Other Contrarian Come-Ons
3
PRST STD US POSTAGE PAID BOISE, ID PERMIT 411
600 Stewart Street #1300 Seattle, WA 98101 westcoastfranchiselaw.com (206) 724-0846
In This Issue 1
How Ownership-Minded Managers Drive Grassroots Success Fast-Food Chains Use AI to Build Customer Loyalty
2
The Top Young Scientist in America
3
Restaurants Woo Diners With Crazy Come-Ons
4
New Tech Tools Are Changing Manager-Employee Relations
Can Monitoring Employees Spur Fast-Food Profit Gains? Technology Meets Hospitality
As costs rise and customer traffic remains sluggish, many restaurant operators are trying to improve employee performance and productivity to fill the revenue gap. This brings to the forefront a pressing question: Can using AI tools to monitor employee performance lead to lasting improvements in productivity? Some franchisees at Dairy Queen, KFC, Taco Bell, and other chains are betting the answer is yes. These restaurant operators claim that monitoring employees via audio and video streaming helps them identify and reward high performers with bonuses and motivates others to do better. The tools track such inputs as order-taking accuracy and speed, upselling and “suggestive selling” success, friendliness, and politeness. Managers wearing headphones can monitor individuals firsthand and see analyses of each worker’s performance on a dashboard. Some franchisees at Dairy Queen, KFC, Taco Bell, and Ben & Jerry’s use Hoptix to improve employee morale by enabling managers to evaluate performance more accurately. The tool also enables managers to use competitive games to award prizes to top
performers. Based on the premise that what gets measured tends to improve, Hoptix promises profit gains as high as 10%.
Experts on the human impact of AI, however, say the tools can be used to hold employees to unfair standards. Managers sometimes use productivity improvement programs to mask the fact that they are severely understaffed. This strategy risks squeezing workers even harder when many are already working as fast as they can. Managers claim such tools enable them to spot underperformers and deliver targeted suggestions for improvement. One Dairy Queen franchisee says the program sheds light on whether employees in the drive-thru greet customers warmly, suggest additional items to order, repeat the order back to the customer, and thank them. Although these operators see the technology as a ray of hope, raising the output of restaurant workers is challenging. Fast- food jobs require employees to repeat the same actions and conversations numerous times a day, and annual turnover industrywide is still near 100%. Whether AI systems can foster greater employee loyalty remains to be seen.
4
Published by Newsletter Pro • www.NewsletterPro.com
Page 1 Page 2 Page 3 Page 4Made with FlippingBook Ebook Creator