This is Part 6 of an ongoing series of lessons learned during the first years of our software startup. Feel free to take a look at our first year (Part 1, Part 2, Part 3) and our second year (Part 4, Part 5). Today we'll talk about one of our failures.

When you run your own company, you never run out of things to learn. We feel we've made great progress learning from our successes but mainly our mistakes. As Bill Gates once said, “It's fine to celebrate success but it is more important to heed the lessons of failure”.

In this line of thought, it is much easier (and faster!) to learn from the failures of other people than your own. It is for this reason that In Search of Stupidity and Founders At Work are on our recommended reading list for anyone launching a software business. We've talked about the books before on this blog, but must mention them again, as they are such a great reads.

Learning from failures is an important part of self-enlightenment but failure, as you can expect, is not something people like to share with others. Therefore, it is hard to find good stories that describe the steps that lead to failure and what could have been done to turn the failure into a success story. In this spirit, I feel it is important to describe one of LavaBlast's failures. I hope that this will encourage those of you who also run startups to post about your own failures, so that we can collectively learn from our experiences.

Even though we build software for the franchise industry, we cultivate a love-hate relationship with it. We decided to launch a business that focuses on franchises for many reasons; one of them being we fill a need in the market. Simply put, we build operational software: our clients need our software to run their business. Amongst the other software companies that build software for the franchise industry, many of them focus on converting web visitors into franchisees, in exchange for a hefty commission. This populates (read pollutes) the Internet with thousands of sites focusing on franchise opportunities. This is something we strongly disliked as it makes it hard to find anything related to franchising on the Internet without landing on one of these websites. (Don't get me wrong... these sites do provide a good service, but make it hard to find anything else.)

Being users of DotNetKicks, a site that aggregates news/articles/blog posts about Microsoft technologies, we thought it would be a good idea to launch a similar site based on the franchise industry. The end result would be a community-driven franchise news site that keeps people informed of what was going on in the franchise world: franchisors going bankrupt, unhappy franchisees, new franchises, franchise trends, franchise humor, etc.

Normally we would have said that this was a crazy project as there was nothing in it for us in exchange for hundreds of hours of programming time. However, DotNetKicks being an open source engine built using the same technologies that we use on a daily basis, we figured it would be easy enough to launch our own engine based on this code. Thus, Franchise NewsBlast was born. In less than a day's work, we had the site up and running and ready to receive content.

We knew we had to create some base content to generate interest and get the ball rolling. We therefore carefully read hundreds of articles and picked the cream of the crop to post on Franchise NewsBlast. We wanted to fill every section EXCEPT for franchise opportunities. Once that was complete, we contacted hundreds of franchise-related websites to inform them about our new engine. We promoted our site to the few bloggers in this space. We wrote a press release and sent it on a few channels. We wrote blog posts on Blue Mau Mau, the largest community-driven franchise website (which we also published here).

To make a long story short, after investing over a hundred hours (most of which in promotion, as the coding had already been done), we had one subscriber. Yes... only one person registered to post and rate articles on Franchise NewsBlast. ONE person joined our free site. This person also runs twelve-or-so franchise related blogs. Obviously, he registered to self-promote and we were happy about this as this is exactly what the site was intended to do... but when there's no community to rate the posts, the site has no value. We never reached the tipping point for it to go viral.

Practice makes perfect. Over the course of the following months, we signed up to various franchise news sources and cross-posted relevant articles. As time passed, we did gain readers but very few posters. We also gained spammers that were obliged to block. We reduced our quality standards in order to keep cross-posting on a regular basis. After three months, the site still stagnated and we discussed the inevitable: shutting the service down.

Three months later, the site was still online as it costs next to nothing to host. However, we're shutting it down today as it hasn't attracted any interest since. We're officially calling this project a failure. Why did it fail? Was it the software? No, the software is great – take a look at the DotNetKicks website. Was it lack of marketing? I don't think so. We did invest tons of time initially to make this work as we wanted this to be our gift to the franchise community.

Before starting this project, we did not know if the community would be interested in this online service. We thought it was a risky project, but were willing to lose a few hours to promoting our altruistic gesture. In the end, we believe there are simply not enough people that are interested in this type of service. If this is not the case, then these people are simply not computer savvy enough to see the value in such a service and/or find us. The last possibility is that we didn't promote it to enough people, even if we gave it our all. (Of course, we never paid a dime for advertising which might have helped us reach the tipping point.)

We've decided that the root cause of this failure was misreading the community and distorting our perspective on the market. We looked at the franchise market from a software engineering perspective: a classic mistake made by developers. This is exactly the reason why most software is unusable: developers don't spend enough time thinking like people or getting feedback from users.

Since we launched Franchise NewsBlast, an online franchise communities called FranMarket was launched using the Ning social network generator. Franchise Market Magazine is the originator of this community and we are happy to see they've started building the online franchise community. They've got more users, but our blog has more traffic than they do, according to Alexa. Franchise Brief is probably the simplest yet most active franchise new aggregator we've found but it doesn't appear to have lots of visitors.  Blue Mau Mau is still the biggest player in the online franchise community, and it is the online community for Franchise mavens.

Why are online communities failing in the franchise world? There are many reasons, but we can't claim to know them all. The franchise world is composed of franchisors, franchisees, franchise prospects, and franchise service providers.

• Franchisors: There aren't that many around. They're not the bulk of the community.
• Franchisees: There are more franchisees and we can see them being very vocal about the issues they have with their franchisor on sites like Blue Mau Mau. However, most of them are probably too busy running their business to be spending time learning about events in other franchise systems. (And they have better sources than public websites for news about their own franchise.)
• Franchise prospects: Prospects are the largest part of the community. They are interested in hearing everyone gossip about a franchise they're thinking of buying when doing their due diligence. However, once they do buy, they're probably don't care about what's going on in the franchise world anymore (as they are now franchisees).
• Franchise service providers: There are lots of such consultants/firms, but as you can imagine the goal is to sell services to others. It's the equivalent to putting a hundred lawyers in the same room as six startup founders. The service providers are not generating the news and hence are not usually that interesting (there are some exceptions – Michael Webster). Service providers like LavaBlast are part of a healthy community, but we're not what defines it.

What's left? Not that many people: and the cream of the crop is already using other services such as Blue Mau Mau. We ignored the classic “know your market” recommendation. We feel that's why we failed. We are disappointed but we don't regret trying out Franchise NewsBlast. After all, we did learn more about the franchise world and we did make a few contacts. Best of all, it gave us a story to write!

Now that we've told you about our failure, we would truly appreciate it if you did the same! Think about your recent failures and blog about them! Everyone fails once in a while! There's no shame in failure as if you never try anything, you'll never go anywhere!

This article is the last of a three-part series related to technology in the franchise world. It focuses on what franchisors should be doing to react to the trends presented in Part 2.

Franchisors should be doing a number of things to keep up with the Net Generation. Most of these are straightforward once franchisors realize that people expect lots of information, expect it immediately, and expect their opinion to be taken seriously.

Streamline your processes

The more people use software, the more people expect of it and become irritated if a feature requires extra effort when it could be automated. Users don't pay attention when performing a task repeatedly and introduce errors into systems. Therefore, your business processes, including the software portion of it, should be as integrated as possible. Of course, you cannot integrate all at once and have to work on the pain points for which an integrated solution would save the most time or prevent the most errors. Streamlining your business processes is an iterative process which requires constant effort and attention but is very rewarding.

The processes that are easy to streamline vary for each franchise. However, using product-based retail stores as an example, the integration which provides the most value is between the point of sale and the franchise intranet. The goal is to offer automated sales reporting and centralized product line management. Once that is done, you can greatly simplify in-store product ordering by automating recurring orders via the in-stock quantities, for example.

Franchisors should keep in mind that integration that is already built-in built into a software product line is a very valuable asset. BjEmerson covered this, and other valuable questions, in his post on Blue Mau Mau. As a franchisor, it is your responsibility to periodically bring up the subject of integration with various suppliers to ensure you have an efficient process in place. Keep in mind that integration should not intend to cover all special cases and that you should put manual processes in place to double check that all the information in your system is accurate. 

A fine-tuned franchise is much more appealing to a franchise prospect because of the simplicity of its day-to-day management. Furthermore, if you have developed your own software or processes to make everything easier, the value proposition is even clearer.

Franchise Collaboration

The most important thing a small franchisor can do is to stop any unidirectional (waterfall) decision making. Transparency and collaboration help foster trust whereas keeping everyone in the dark before enforcing a big change is simply not a good business practice. Obviously, you won't be able to make everyone happy all the time but when franchisees feel their opinion is appreciated, everyone benefits. Obviously, this involves much more than technology but franchise collaboration software such as forums and polls can help. Thanks to open source software and online tools, you can even set this up for free. The real added-value comes when collaboration becomes a part of every day tasks, such as polling features directly integrated into the point of sale. This promotes collaboration within the franchise since the franchisees are not required to login to a separate tool when they get back home after a long day's work.

If you don't collaborate with your franchisees, you will lose them, period. If a franchisee leaves you because you never listened to their opinion, you can be sure that people reviewing your UFOC will end up hearing it. On the other end of the spectrum, a franchise which pushes strong franchisee collaboration via online tools can be a strong selling point for new prospect. A simple demo of the current issues being discussed will clear up any fears about ongoing support.

Openly discussing issues and possible solutions with your franchisees forces you to write things down in a logical fashion and think about the issues in a rational way. This simple activity often guides the decision making process and leads to the best decision.  

Give out more information

Franchisors should utilize their website and should not feel shy about posting lots of information to attract new franchise prospects. Obviously, organizing this information is very important as to avoid overwhelming the user but franchisors should post lots of information and treat their prospects intelligently. The website should include a high-level executive summary which allows interested prospects to drill down to find relevant information on separate pages.

The classic sales technique of not giving out too much information, having prospects request additional information, and having a salesman call them back to conclude a deal is no longer the best approach in today's online context: these practices must be adapted. Franchisors who don't display basic information such as franchise fees and setup costs are shooting themselves in the foot for numerous reasons.

First, today's visitors expect more information and they expect it now. Your prospects are probably thinking about starting their own business in this same field and it is your job to show them the wide breadth of problems you've already solved and how it is a better business decision to purchase a proven franchise system. You also need to show how your franchise is better than other franchise systems and your website is an ideal place to showcase your distinguishing factors. 

Second, the volume of franchise prospects on the Internet has increased, although we've mentioned franchisors are feeling  the quality has dropped. There is a growing number of people looking for low-cost franchises and if yours is not one of them, stating your requirements explicitly will help reduce low quality prospects.   If you are looking at catering to this growing niche, you might as well clearly define the lower cost options you are offering (kiosk format instead of store format, for example). Once you've formalized your offering and covered the frequently asked questions in detail on your website, you've developed a resource base that can be utilized by your salesforce.

Keep in mind that it is possible to get information about leads via your website, even if you're posting most of your information online. All you need to do is post a bit of exclusive content on your website which is only accessible after filling out a short form (email address, name and phone number). This gives you a way to contact prospects after the fact while still giving your prospects information when they want it (now!). This exclusive content can be as simple as a two-page PDF brochure or as extensive as a virtual tour of your store with pictures and videos.

Spread the word

The first thing you should do as a small/new franchisor is to actively participate in online communities. You should remember that online participation is a give&take relationship and you need to do more than self-promotion or demolish everyone's opinions. You can start by participating online in franchise communities such as Blue Mau Mau and FranMarket and simply writing comments on other people's posts. Everyone has a different background and you can often refer to your past experiences to help clarify posts by other people. You should also look for online communities which specialize in your niche, to raise awareness about your brand but also simply to exchange ideas. If your franchise is a dog kennel, you should look for pet-related online communities.  Finally, don't overlook any local business online communities which may be appealing to you. Hooking up with a local software startup or local artist might put your franchise in a better position to take on the world.

In addition to participating in online communities, you should start your own blog either at Blue Mau Mau or at another free service. There are numerous things you can (and should) blog about:

• A post for each new franchisee with an interview, franchisee profile, store pictures, etc.
• What makes your franchise unique (you should be able to find dozens of cool things that distinguish your franchise from the competition)
• New products or services
• What the franchise is proactively working on
• Your lessons learned as a franchisor
• Partner announcements
• How you or your franchisees gave back to the community
• Trends
• Internal reflections
• Congratulate one of your franchisees for outstanding achievements
• How your franchise is saving people money or saving the planet
• You've got a particular problem and are looking feedback on solutions

Many new bloggers are afraid to reveal the secret sauce if they talk about their lessons learned or what makes them different. They fear the day where their competition will copy their brilliant ideas. In reality, ideas are free and execution is key. Furthermore, if all that distinguishes your franchise is the auto-flushing toilets you installed last year, you've got a problem. You shouldn't reveal every last detail about how you operate, but don't let paranoia overcome you with every little detail. Blogging is a rewarding experience because it puts you in touch with lots of new people which may help you down the road.

More franchisors should blog about the problems they have experienced and how they overcame them as it is an essential subject which will help others. The franchise world is full of people who are looking to make a quick buck and being open about your franchise is a good way to help build a relationship of trust with your service providers, prospects, and franchisees.

Last week, LavaBlast launched Franchise NewsBlast to help franchisors spread the word about their franchise. Our system doesn't focus on franchise opportunities but rather on franchise-related articles that have true value for web visitors. 

Conclusion

Some people find it easier than others to get their head around the new business context in which franchises operate. We've listed a few high level tasks which help clarify the possible ideological differences between franchisors and the Net Generation. Once these base concepts are better understood, franchisors will be in a better position to understand things such as viral marketing and social networks in order to take advantage of these business opportunities for their franchise systems. Take a look at Franchise NewsBlast, Blue Mau Mau, and FranMarket today!

We've just added a new item on our press release page. The content of this press release is replicated here for your convenience.

Montreal, Quebec, June 23rd 2008 - LavaBlast Software launches Franchise NewsBlast (http://news.lavablast.com), a free online system which provides franchise news to franchisors, franchisees, franchise service providers, and franchise wannabes. The system allows visitors to keep up with what's new in franchising by collaboratively selecting the best franchise news. Visitors are invited to submit articles related to franchising which they feel would interest the other members of this online community.

Franchise NewsBlast covers a wide range of subjects related to franchising such as legal issues, franchise technology, new franchise opportunities, franchise trends, and even franchise humor. Anyone can become an editor because Franchise NewsBlast allows its members to blast interesting franchise news items, allowing the best articles to rise to the top. Because of a collaborative community effort, people interested in franchising can quickly keep up to speed with franchise news without having to visit the hundreds of franchise blogs available on the Internet.

Motivating Factors

There are a few motivating factors behind the launch of this new franchise community, which benefits a wide range of people.

For readers: Save time!

In the franchise industry, readers typically do not have the time to visit, on a daily basis, the hundreds of franchise-related websites which are available on the Internet. Readers are interested in receiving quality franchise news but simply don't have the time to filter through the large volume of articles published every day. Franchise NewsBlast solves this problem by aggregating news from various sources and publishing the cream of the crop. Readers can also share opinions on external articles directly on Franchise NewsBlast, allowing them to connect with others in the franchise community.

For bloggers: A niche-specific aggregator, maintained by the community.

An important part of blogging is informing the community about your blog and getting your articles to interested readers who might not have found your blog. Franchise NewsBlast is similar to the very popular Digg except that it focuses exclusively on the franchise niche. On Digg, it is impossible to get an article reviewed by enough people with interest in the franchising industry given the general nature of the community. Quality franchise-related articles typically fall through the cracks of such mass-population sites whereas they can become very popular on niche-specific sites. Additionally, bloggers can leverage their existing visitor base by adding a "Blast It" icon on each of their franchise-related posts, increasing each article's popularity on Franchise NewsBlast.

For franchisors: An incentive to start blogging!

It is not easy (or cheap) for a small franchisor to get their name out in the franchise community. Hundreds of new franchise systems are born every year and Franchise NewsBlast is one of the ways these new franchisors can join the online franchise community. As approximately 25% of all franchise systems have less than 10 locations, small franchisors are a big part of the franchise community and they deserve to be heard. After starting their own blog to share lessons learned, current market trends, or elements which different their franchise, franchisors can use Franchise NewsBlast to drive traffic to their blog and get feedback on their system from various franchise professionals or simply attract new franchise prospects.

A collaborative effort

A large number of franchise websites are created with the intention to promote the highest-bidding set of franchise brands whereas Franchise NewsBlast is intended to inform people, not to showcase franchise opportunities. Thanks to collaboration between peers, Franchise NewsBlast intends to complement existing franchise communities such as Blue Mau Mau. LavaBlast adapted the open source software which powers DotNetKicks, a news site dedicated to .NET software, to focus on the franchise niche and allow anyone to become an editor.  Readers are encouraged to start posting news on Franchise NewsBlast immediately and inform other people in the franchise industry of its existence. 

For more information, please visit Franchise NewsBlast at http://news.lavablast.com.

About LavaBlast Software Inc.

LavaBlast Software Inc. has developed FranchiseBlast, a web-based software solution for the franchise industry that simplifies day-to-day franchise operations by integrating the franchisee's point of sale and the franchise's e-commerce site with the franchise intranet. The integration of existing software is a proven way to leverage the franchise's original software investment during an economic downturn.

• Email: info (@) lavablast.com
• Web: http://www.lavablast.com
• Phone: 1-201-467-LAVA (5282)

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This article is the second of a three-part series related to technology in the franchise world. It discusses current trends in both the software and franchise worlds which are relevant, given the similarities illustrated in Part 1. Part 3 discusses what franchisors should be doing to react to this change in business context.

Fact: The world is changing. Technology is the catalyst.

The impact of technology on the way we do business is undeniable, and franchising is no exception. More often than not, franchise success stories list technology as one of the key elements to the franchise's growth. Five to ten years ago, most franchise systems recognized the value of a franchise intranet/extranet as a centralized franchise collaboration tool. More recently, the rise in franchise systems which allow absentee/semi-absentee franchisees has increased the need for software tooling that facilitates remote franchise management. 

Start thinking about who will be buying franchises in the next decade or two. These people have grown up with the Internet and do not know life without it. A very insightful read on this subject is Diana G. Oblinger's recent publication Growing up with Google: What it means to education as many of the concepts can be projected from current day challenges in education to tomorrow's franchise sales situation. The Net Generation (born after 1982) is now entering the workforce with university degrees. It won't take long for them to look at purchasing a franchise. Thanks to the Internet, the Net Generation has access to vast amounts of information which doesn't always work in the franchisor's favor. A single individual can report scams which rapidly make their way through the Internet. There are even blogs dedicated to reporting fraudulent business opportunities. This generation has learned to question authority and to go the Internet to prove their claims.

The widespread availability of high-speed Internet has not only impacted franchise operations: it has deeply changed our society. The latest trends in software have been user-empowerment (blogs), online collaboration (wikis), and social networking (for business or for fun). In case you didn't know, over a quarter of all Canadians have a Facebook account. If you're thinking that this is a fad for kids and teens, think again as over half of these users are over 30. Reacting today to these social and technological changes does not only help prepare yourself for the future, it also helps you understand your current operating environment because the facts of life for the Net Generation are also true for many older individuals which are no longer marginal.

A few trends in the software world...

Starting a software company on a shoestring has never been easier for a number of reasons. First, high quality open source tools, powerful software frameworks, and the availability of free web services allows competent software engineers to solve problems faster than ever. Second, infrastructure costs are negligible. Everyone already has a computer and an Internet connection... and working from home is an option for MicroISVs. Once you outgrow your basement or garage, co-working environments provide an affordable way to grow your company to the next level.  Even if you operate from home, you can still reach a very wide potential client-base thanks to the Internet and the same logic applies to any kind of business, not only software.

Another trend in the software world is that many cities (examples: Ottawa, Montreal) offer a vibrant software startup community which most people aren't even aware of. Founders are connecting and publicly sharing lessons learned. Funders are even connecting with founders at informal social events focused on growing the community. Twenty years ago, it would have been hard not only to meet startup founders but also to sit them down to hear about their experiences. Today, you can read about it on blogs and join up at local events... and if you're feeling old school, you can still buy books to learn the stories of other founders. As we all know, the Internet makes it easy to contact other people and collaborate online but it does also make it easier for people to meet offline for both business and social events. 

Finding and retaining good people is the single hardest task in a software company, even if you've got money to burn. Money is an incentive, but is far from being the most significant one for software engineers. Indeed, just take a look at Maslow's hierarchy of needs to discover esteem and self-actualization are higher in the pyramid yet cannot be purchased with money. What developers are looking for are interesting challenges in a great work environment and most large organizations are unable to take advantage of this fact, which push the best software engineers to work at smaller startups or even start their own company. The best talent have plenty of opportunities to pursue and consequently don't often look for jobs on sites such as Monster whereas bad employees always end up unemployed and pollute the system. The solution in the software world is to be active in the software community and utilize niche-specific job sites such as the Joel On Software job board.

... That are also present in the franchise world

In the franchise world where we are seeing lots of concepts, such as home-based franchises, growing rapidly because of their low start-up costs. Many people dream of being their own boss while doing something they love and it now easier than ever for them to start their own business. Striking gold is (and always will be) hard, but one can make a decent living with a MicroISV (thanks to niche markets on the Internet) or home-based franchises (thanks to franchisors who know what it takes to make the concept work). We're also seeing an increasing number of new franchise concepts, partially because the Internet has made it easier to contact experts in franchising (and vice-versa... which is not always a good thing).

I would love to say there is a vibrant startup franchise community on the Internet, but that is simply not the case. There are a few disparate local associations but the web is polluted with franchise opportunity websites, given the high commissions related to franchise sales. However, if you look hard enough, you can find a few good websites which unite franchisees and franchisors under one roof for discussion and collaboration. Furthermore, younger franchisors are turning to blogs and are openly discussion various lessons learned. It would be superficial and discriminatory to claim age is the only factor at play to explain the slower growth of a good online franchise communities, but it is a contributing factor given the fact that franchisors require a substantial amount of capital to launch a franchise. Few, if any, current franchisors are part of the Net Generation.  However, I am optimistic that a number of excellent franchise-related websites such as Blue Mau Mau, focusing on everything other than sales, will help grow the franchise startup community over the next decade thanks to collaboration between franchisors and various franchise service providers.

Finding and retaining good franchisees is an obvious challenge in the franchise industry. Many new franchise prospects are surprised that they are being screened for quality and are unaware that, for new/small franchisors, their individual success can have a strong impact on the success or failure of the whole system. Most franchisors complain about the decreasing quality of leads via franchise websites and this poor quality is surprising given the parallel which can be made with online recruiting systems such as Monster. As more people look for franchise opportunities on the Internet,  it becomes increasingly important for franchisors to be able to efficiently filter through a larger volume of requests but also for them to be proactive about sales and marketing. This can be achieved by participating in online communities dedicated to their niche. Of course, time & effort is a valuable commodity and lower quality leads are to be expected when a franchisor doesn't proactively work on solutions on a daily basis. 

Summary

After discussing changes in our society, this article covered three core trends:

• Younger people are starting businesses on a shoestring budget.
• It is easier than ever to connect with other people and learn from their mistakes.
• The big sites are saturated with people you don't want to hire or have as franchisees. 

Part 3 will talk about what you should be doing to make the best of this changing environment. Your homework for the next week is to participate in a few online communities of your choice (Franchise, Startup, or Local). Also, take a look at Franchise NewsBlast, which we are launching today.

The omnipresence of technology in our lives and the Internet has changed the way we do business. The software industry is not only one of the driving factors for this change, it is also one of the first industries to be influenced and react to changes in society. This contrasts with the franchise industry which is a bit old school... which has its pros & cons. Regardless, being abreast of current trends is helpful for any business and we feel franchisors can benefit from the insights of those with a software engineering background. Since LavaBlast builds software for the franchise industry, we’re at the junction point of two very different worlds ... which are more alike than you would initially expect. 

This article is the first of a three-part series related to technology in the franchise world. It focuses on similarities between franchises and software startups and serves as a premise to Part 2, which covers current trends in both industries. A comparable evolution in a changing context was to be expected, given the similarity between software startups and franchise systems. Finally, Part 3 discusses what franchisors should be doing to react to this change in business context.

For the sake of argument, let’s focus on small and/or new franchise systems. Why? There are numerous reasons:

1. Innovation often comes from smaller, nimbler organizations.
2. Over half of all franchise systems have less than 50 units. 25% have less than 10 franchise units. 
3. Hundreds of new franchise concepts are born every year. Over 1000 businesses turned to franchising for expansion between 2004 and 2006.

Small franchises are similar to software startups in nature.

There are numerous similarities between software startups and budding franchises: the strong need for domain expertise, the global potential, and they are both created to fill a gap in the market. However, their resemblance can be concisely be explained by looking at growth patterns and scalability.

In general, because of the very nature of software, software startups can achieve very high growth in a short period of time (examples abound!). Venture capitalists rate startups according to their scalability in order to obtain the highest possible return on their investment. This is done by building software which solves problems for a large group of people with little or no custom work required on the software firm's end to support a new user. Hosted software applications are installed once on the startup's web server and shared between customers, thanks to a scalable multi-tenant software architecture.  Additionally, the first hires in a software startup are crucial to building both v1.0 of the product and also the company’s culture. A solid team working together in the same direction is necessary to grow a successful company.

Franchises are similar because the concept must typically be tested and proven to be successful in its first location, akin to a software beta. Small business owners which turn to franchising as a growth strategy quickly discover than growing a franchise is a completely different ball game than making your first location successful. Scalability cannot be tacked on, it must be planned. The franchisor must find a scalable supply chain and must ensure the store look & feel is replicable. Unfortunately for some, purchasing store fixtures at your local flea market, police auction, or more recently eBay is not a replicable way to grow a franchise. The franchisor can't fly out to different cities to shop around for cool lamp shades for each new franchisee... Suppliers must be approved and utilized. The same is true for software where an integrated solution is the key to simplified franchise management. Furthermore, people with different backgrounds and skill sets are required to launch a successful franchise, and the first few franchisees are critical. As much thought (if not more) must be given when picking the first franchisees as the first hires in a software startup.

Additionally, the very nature of franchise systems implies that franchisees are geographically distributed. One might think this is not the case in software startups, but this is not totally true due to outsourcing and open source. Furthermore, even small software startups deal with international customers on a daily basis.  As such, the various stakeholders are not necessarily always in the same room ready to discuss business issues even though both are have to quickly react to preserve customer/franchisee satisfaction and grow the business.

Implications

We've just scratched the surface of why software startups are similar to small franchise systems. You may have other similarities in mind or you may disagree and have opposite feelings; in both cases, you are invited to share your opinion.

If you are a franchisor, why should you care about software startups? Simply put, software startups are more in tune with the impact of technology on our society which affects your franchise's operating environment. This subject will be covered in detail next week, in Part 2. In the meantime, you are invited to read Growing up with Google: What it means to education which explains the characteristics of the Net Generation you should be aware of, regardless of your background.

We have just released a new feature on the Teddy Mountain Stuff-Your-Own Teddy Bear Website which we believe is an industry first. Teddy Mountain sees itself as the most innovative teddy bear franchise and they use LavaBlast's technology for both their supporting infrastructure and client facing applications.
We've done a number of industry-specific solutions for this franchisor:

• Interactive Kiosk with webcam and touch screen to create your own teddy bear adoption certificate.
• Point of Sale: Integrated with the kiosk, our point of sale is easy to use and reduces training costs.
• Website: Online sales via an e-commerce engine with a few teddy bear industry-specific features.
• FranchiseBlast: Our centralized management and collaboration portal which ties everything together, providing a single environment to modify the product line, store pricing, collaborate with others, share documents, view reports, etc.

Today, we augmented the integration between the points of sales distributed across the world and the Teddy Mountain website.  We are now allowing members of the frequent buyer program to view adoption certificates they have created in brick and mortar stores…. online! Simply put, existing PaLS members from a select number of stores are able to see their frequent buyer card balance and birth certificate history on the Teddy Mountain website. We think that no other franchisor in the teddy bear industry has done anything similar and are proud to see Teddy Mountain lead the way. Of course, for privacy concerns, only those who sign-up for the program will have their pictures made available online to distribute to their friends and family.

We feel that, in the long term, this feature will improve gift card sales from out-of-town family members as the donor can receive visual feedback from the recipient, via the Internet.

If the feature attracts some interest, we are open to implementing new features such as integration with FaceBook or using Google's OpenSocial API. We shall also add features such as emailing certificates to friends/family with a greeting.

With the Teddy Mountain teddy bear stuffing franchise, we’re fortunate enough to work with a technically savvy franchisor. Our website describes various elements that we’ve produced for their great franchise system. LavaBlast is proud to help centralize the Teddy Mountain franchise operations and bring the franchise offering to the next level. We’ve been working with them on various solutions since their early beginnings and grown our tailor-made solution with their growing needs.

Today, we launched a simple feature that allows franchisees to remotely monitor their stores, using security webcams that were installed when the stores opened. This is something they could already do, but we’ve integrated it into our solution so that they only have one place to go on the web for their product pricing, reports, etc.

The integration into our solution was a quick job thanks to the infrastructure we already had in place. We do little side-projects like this just for fun, to clear our minds!

PS: The Teddy Mountain store decor is absolutely fabulous. The Imagination Retail Group has found a great balance between visual appeal and supporting infrastructure.

If you are in the retail industry, chances are that you probably already know that you have to have a unique selling proposition to offer your clients.  But hey, what’s a unique selling proposition?  In the book Reality in Advertising, author Rosser Reeves defines a unique selling proposition (USP) as:

1. Each advertisement must make a proposition to the customer: "buy this product, and you will get this specific benefit."
2. The proposition itself must be unique - something that competitors do not, or will not, offer.
3. The proposition must be strong enough to pull new customers to the product. 

A franchisor needs to have something that will make its stores shine apart from the competition. As an example, let us discuss Teddy Mountain, one of our first clients here at LavaBlast. Teddy Mountain is a stuff-your-own teddy bear type of store. Stuffed animals have been around for years and are available it countless locations.  Some stores offer dirt cheap stuffed animals while others brand the bear with a particular tourist attraction such as the Eiffel Tower. Retailers in the stuff-your-own teddy bear industry sell more than just a physical teddy bear, they sell an experience and their selling proposition revolves around this custom-creation experience.

Teddy Mountain wanted to offer something more personal to the client to complement the experience.  They decided to offer birth certificates for each teddy bear they sell.  Simple idea, but this creates a strong bond between a child and their new teddy bear.  A picture of the child with their new friend would be taken and would be printed at the counter when the teddy bear was paid for.  One could think that this simple concept is insufficient to pull new customers to the product, yet in-store behavior has proven otherwise. Children are drawn towards the camera feed presented on the kiosk and often want to purchase a bear simply to get their picture taken.

The picture here shows the in-store kiosk being used by some children.  This kiosk has two screens with two webcams and prints in the color laser printer at the cash register.  The kiosk must be simple to operate because it is used mainly by children.   This is fairly simple software and other stores also produce certificates, but the kiosk appearance (touch screen interface, webcam, three-dimensional fixtures done by Studio Y Creations) adds to the child’s in-store experience and puts Teddy Mountain in a unique position.  Because we’ve integrated the certificate with the point of sale, the employees don’t have much overhead to deal with.  Coming up in the near future are many new features on the website that link the in-store experience with the online one, refining the brand’s uniqueness.

Teddy Mountain operates in an industry which is dominated by a giant and software alone cannot be the only unique selling proposition. Teddy Mountain experience is enriched by large-scale three-dimensional fixtures that attract children from the mall inside the store. These fixtures put a little bit of magic in the shopping experience and illuminate child birthday parties. There are other refinements that define Teddy Mountain; having a clear unique selling proposition is key to increasing sales but also to attract new franchise prospects. However, since our goal is to illustrate how LavaBlast is a piece of the puzzle, as opposed to selling you a franchise, we won’t go into more detail.