AI’s Impact on Franchising

Practical AI applications are delivering measurable ROI for franchises

Author

Chris Wright
February 28, 2025

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🤖 AI's Franchise Revolution

Las Vegas's IFA Convention showcased AI's practical uses in franchising. From fuel savings to sales boosts, franchisors are finding measurable ROI through strategic AI implementation.

Key Highlights:

  • UPS leveraged AI to save $400 million annually and 10 million gallons of fuel through more efficient routing systems

  • Wendy's is expanding its AI voice-activated drive-thru ordering from 100 to 500 locations after seeing increased sales and improved labor efficiency

  • AI now analyzes store layouts from photographs to boost sales by recommending display changes that encourage impulse purchases

  • Franchise marketers are using the "ABOSS" prompt method (Actor, Background, Objective, Stipulations, Style) to maximize AI-generated campaign effectiveness

  • Legal landscape remains complex with no federal AI regulations, but a growing patchwork of state laws addressing discrimination, deepfakes, and content watermarking

👉️ Why It Matters:

Franchise systems integrating AI thoughtfully are gaining significant competitive advantages in operational efficiency and sales. However, the technology is advancing faster than legal frameworks, creating a balancing act between innovation and compliance risk.

🍔 Big Chains Bet Big on Digital Displays (And You Should Too)

Digital transformation continues to revolutionize quick-service restaurants, with digital signage emerging as a critical technology for chains of all sizes. Major players like McDonald's, Domino's, and Pizza Hut are investing millions in these digital ecosystems – but the benefits extend far beyond just big brands.

Key Highlights:

  • Digital signage adoption led to increased orders for over 80% of restaurant owners, with 68% of customers more likely to purchase advertised products

  • Interactive digital displays reduce perceived customer wait times by up to 35% while creating a modern, inviting atmosphere

  • QSRs can dynamically adjust menus and promotions based on time of day, season, or real-time customer data – allowing instant pivots to boost higher-margin items

👉️ Why It Matters:

Digital signage offers a scalable solution for businesses of all sizes – from single locations to nationwide chains – providing the flexibility to quickly adapt to market trends and customer preferences while creating more engaging experiences.

🦉 Hooters Preparing To File for Chapter 11

Iconic restaurant chain Hooters is preparing to file for Chapter 11 bankruptcy amid mounting financial pressures, raising questions about the future of its approximately 300 locations worldwide.

Key Highlights:

  • Since 2020, restaurant food costs have risen by 29% while menu prices increased only 27.2%, compressing already tight profit margins

  • Declining foot traffic stems from shifting consumer preferences, greater competition, and more people opting for home-cooking as grocery costs stabilize

  • Despite closing 40 underperforming restaurants in 2024, the company continues to struggle with $300 million in debt.

  • Both company-owned and franchised locations face operational uncertainties during the restructuring process, including potential changes to franchise agreements

👉️ Why It Matters:

Despite four decades of brand recognition, even established concepts must evolve with changing consumer preferences. Paradoxically, the company is simultaneously planning expansion through new restaurant openings and grocery store products, illustrating the complex strategy of scaling through bankruptcy protection while restructuring debt.

🔎 Purpose-Driven Franchising

For many successful franchisees, the driving force isn't just ROI – it's the impact they make daily in their communities and the deep satisfaction that comes from purpose-driven work.

Key Highlights:

  • Franchising without personal connection risks becoming "just another job," especially during the demanding early growth stages

  • Prospective franchisees should reflect on personal values and experiences to find models that resonate with their passions

  • Even franchise models not inherently focused on helping others can incorporate charitable initiatives to create meaningful opportunities

👉️ Why It Matters:

When your business aligns with your core values, you'll build not just a thriving operation but also create lasting community impact. The sustainable energy that comes from purpose-driven franchising helps overcome challenges and maintains enthusiasm long after the initial excitement fades.

✂️ Snippets

Salt & Straw founder Kim Malek risked everything in 2011—cashing out her 401(k), selling her house, maxing credit cards, and even holding a garage sale—to launch what's now a 42-location artisanal ice cream empire with 1,000+ employees. The company's success stems from community focus and innovative flavors, with 70% of products sourced from first-generation BIPOC farmers. (Source: QSR Magazine)

Only 46% of franchises use customer loyalty programs according to the 2024 Annual Franchise Marketing Report, with 96% managing these programs electronically. Most franchises (57%) offer both discounts and free products/services, while 48% manage their programs in-house. When measuring profitability, franchises primarily track frequency of purchases (55%), with customer retention rate, average order value, and redemption rate tied at 32% each. (Source: Franchising.com)

Franchise FastLane's new president Tim Koch is doubling down on tech innovation, with significant updates planned for their Frick & FastLane portal in 2025. The franchise sales organization, now in its eighth year, maintains a "startup mentality" while focusing on three pillars: culture, innovation, and improving experiences for franchisors and franchisees alike. (Source: FranchiseWire)