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Bytes for bites: How disparate data can boost QSR franchise profits

QSR giants are not exempt from the rule that businesses should base product offerings on customer preferences. They arguably have the most access to data, yet many fail to translate that information into action.

April 25, 2016

By Tyler Walton, marketing manager, Clutch

After two straight years of declining same-store sales, McDonald's Q4 earnings report came sunny-side up. The company attributed its 5-percent increase in global sales to a new buttermilk chicken sandwich and all-day breakfast menu, a turn toward product strategy rather than advertising push tactics.

QSR giants are not exempt from the rule that businesses should base product offerings on customer preferences. They arguably have the most access to data, yet many fail to translate that information into action, falling back on an old "if we make it, they will come" approach that fails to entice modern consumers. Instead, products (and services) must be shaped by abundantly available digital data; point of sale terminals, e-commerce transactions, social media, and mobile apps all offer insight into your customers' voices.

But for brands like McDonald's — whose target market includes nearly the entire world and whose business is built on franchising – how do you accomplish that? It starts with collecting data at the franchise level, synthesizing the information, and using analytics to drive overarching corporate strategy. Doing that will keep both franchisees and customers lovin' it.

Franchises need data to drive regional strategy

Big data, even data in general, is the hot topic in big business, but many brands aren't capitalizing on its full potential. They capture and analyze data, then align incentives and motivators to drive purchases. But they're missing the opportunity to use data-collection platforms to connect with customers, understand their likes and opinions, and then develop and deliver products accordingly.

This process becomes particularly vital in a franchise business. Do your customers in the South want the same thing as your customers in the North or on the West Coast? I'd be surprised if the answer was yes. Before betting on a new product or promotion, franchise brands must segment customer geographies, then assess age, gender, and other relevant demographics to determine what motivates its customers.

But how do you begin to collect fragmented data in a franchise business?

Collecting data from hundreds of franchises is challenging but not impossible

You can't sugar-coat it: It's difficult to collect and synthesize data in a franchise business. While corporate brands want to give franchisees autonomy to select store technology, it can create difficulty when trying to roll out across-the-board initiatives like data collection. But there are multiple work-arounds to solve problems from disjointed systems.

When Paul Brown became CEO of Arby's, he conducted large-scale nation-wide focus groups to define the brand's identity, adjust its menu offerings, and overhaul its marketing. With franchisees on board throughout the process, Arby's increased its same-store sales for 19 consecutive quarters and reported a 2014 sales increase five times higher than the industry average.

The data collection challenge can also be solved by integrating third-party consumer management software to aggregate data from disjointed sources and across channels. Elevation Burger, for example, implemented a consumer management platform to collect and synthesize data from its more than 60 global franchise locations. Not only is the data used to drive targeted marketing campaigns, it is shared with franchisees to help them improve communication with their local customers.

Finally, there is an option to mandate POS systems in stores or develop a proprietary system. Roll-out may be a costly and difficult, but doing so led Marco's Pizza — a 650-store QSR chain — to a 2014 average ticket increase of nearly 5 percent compared with the previous year.

Regardless of how you collect it, data from franchises and channels enables you to segment customers, find trends, and identify opportunities to improve brand loyalty.

Profit formula: Data + customer listening = product offerings and promotions

With historical data to create customer profiles and show trends of past and present, connecting with and listening to your customers will help plan for the future.

Start with a single demographic identified in your segmentation exercises. Let's say it's a group of 10,000 college students who visit McDonald's for coffee. What else do they want? Ask through social media, an app and/or market research. If you learn they want breakfast all day, you have an actionable idea of how to customize your menu to boost sales.

While most industries are (finally) recognizing that data-driven marketing yields fruitful results, the food industry must embrace that the same is true for product offerings. For the all-day McDonald's breakfast offering, McMuffin customers were actually segmented from biscuit customers, and products were offered accordingly. That's definitive proof that in a franchise business, segmenting customers based on sales trends is essential to delivering the right products and promotions to the right people. In today's competitive marketplace, the brands who win aren't the ones who spend big money on advertising — it's the ones who spend time with data.