At the Summit: How to create a franchise-friendly supply chain
Bill Creekbaum, left, VP of Product, GoodData; Jeff Linville, president and CEO, Taco John's International; Chris McNutt, VP, Brand Programs, CSCS (Applebee's); Jason Valentine, VP, operations, Cousins Subs.
The supply chain is often the thorn in the side of franchisors, especially those that have brands spread nationwide or globally. It's just as frustrating for franchisees who are not adequately equipped with the information and resources to adhere to strict guidelines set by the corporate owner.
It doesn't have to be such a struggle, however, according to Jeff Linville, president and CEO of Taco John's International; Chris McNutt, vice president of Brand Programs for CSCS (Applebee's); Jason Valentine, vice president of operations for Cousins Subs; and Bill Creekbaum, vice president of Product for GoodData, who discussed these issues March 30 in a session at the inaugural Restaurant Franchising & Innovation Summit at the Highlands Dallas Hotel in Dallas.
"Transparency is always tough," Linville said, in answering a question about barriers to an affordable, transparent supply chain. "I've heard the term 'hyperconvergence,' meaning everything moves very fast. But there's not always time to explain ourselves and be transparent. So, we lean on data and analytics now more than ever."
It's important to have good communication among the pieces of the supply chain.
"There needs to be a marriage between the franchisee, the franchisor and the vendor," McNutt said. "That communication is crucial. You have to marry technology and transparency.
Fortunately, technology is adapting to drive the franchisee supply chain.
For Valentine and Cousins Subs, that means are uniform point-of-sale system.
"All of our 105 locations will soon have the same POS system," he said. "As a result, as soon as we get to certain levels of supplies, our vendors can be notified since our POS tracks it."
Technology also helped Linville and Taco John's with its distribution system.
"We redid all of our distribution practices by hiring a company to do it for us," he said. "All of our stores now have the same POS system. We know everything that's coming in and coming out. Taco John's has more than 400 locations, and we have four people in our distribution center. Technology does the rest."
According to McNutt, a supply chain that's not constantly changing is easy to manage.
"With technology, our restaurants and franchisees don't have to think very much, eliminating errors," he said. "It also helps our franchisees price their menus since they know what's coming when."
Food safety is always a concern for restaurant operators, whether they're franchisors or franchisees. An outbreak of E. coli, salmonella, listeria, or other food-bourne illnesses can do serious damage to a restaurant's reputation.
"A food-bourne illness that comes into the supply chain is a brand-killer," Linville said. "It's unbelievably important to keep your brand safe. With technology, within in a very short amount of time we can find out where it came from and shut it down. We can have a team activated in two to three minutes."
According to McNutt, Applebee's has a list of high-risk produce items it can watch closely.
"Have a plan and learn from others," Valentine added.
Supply-chain technology can also help restaurant operators launch new products by providing valuable data.
"We use past data to provide new experiences for our customers," Valentine said. "We use the data to ask ourselves, 'Can we market it? Is a particular unit set up to succeed?' "
Taco John's uses such supply-chain data for demographics information.
"We look at the demographics for a prospective area and what media is in that market," he said. "A good restaurant operator will figure out how to make the data work for them."
The metric system
All three panelists agreed that having metrics in place to monitor a restaurant's supply chain is crucial.
"Key metrics are sent to our franchisees monthly," Valentine said. "We want to be as open as possible with our franchisees about our supply chain and how it will affect menu items."
Keeping ingredients for menu items in-stock is also important to Linville.
"Do we have enough supply to keep a limited-time offer going, for example?" he asked. "If we don't, how will it affect our franchisees?"
One of the biggest challenges for a restaurant franchisee is menu selection.
"We measure what we're doing right and what we're doing wrong," McNutt said. "Our franchisees set their menus months out and we have to be prepared."
Restaurant profit margins can be razor-thin, so saving money is in the interest of the franchisor and franchisee. Determining where it's okay for a franchisee or franchisor to cut costs can be tricky, but it's doable.
"I look at paper and packaging first," Linville said. "I don't always look at food cost. Once you start screwing with food quality, it's the beginning of the end."
"Once you decrease your food quality, that's where you hurt yourself," he said.
For McNutt, it's important to view the entire picture.
"There's plate cost, of course," he said. "But if we're going to change something on the menu, how does it affect the back of the house and the overall customer experience?"
Travis Wagoner spent nearly 18 years in education as an alumni relations and communications director, coordinating numerous annual events and writing, editing and producing a quarterly, 72-plus-page magazine. Travis also was a ghostwriter for an insurance firm, writing about the Affordable Care Act. He holds a BA degree in communications/public relations from Xavier University.