Mike Potts on Why Franchise Software Fails and How to Build Tech Worth Acquiring

Featuring Mike Potts, co-founder of Feature23.

Most franchise technology projects fail before a single line of code gets written, and the cause is rarely the code itself. It is almost always the gap between what leadership thinks is happening and what the field actually sees every day. Close that gap, build only what protects your secret sauce, and your tech stack stops being a cost and starts being the reason a buyer pays a premium for your business.

I sat down with Mike Potts because he thinks about technology the way I wish more people in our space did. Mike co-founded Feature23 back in 2008 and has bootstrapped it ever since, building custom software for middle-market companies without raising a dollar of outside capital. He and I share a client in Superior Fence & Rail, and over the years I have watched his team carry a client success rate north of 95 percent in an industry where roughly 70 percent of software projects fail outright. For the franchise executives I work with at Nail, that gap between failing and succeeding is the whole conversation, so here is how Mike closes it.

Close the understanding gap before you write a line of code

Mike's single biggest reason that projects fail has nothing to do with engineering at all. He calls it the understanding gap, and he traces the idea back to a researcher who spent decades proving it out.

"There's what the executive team thinks is happening, there's what middle management thinks is happening, and then there's what your experts in the trenches are seeing every day."

When you interview those three groups separately their answers almost never match, and leadership ends up making expensive strategic bets on a version of the problem that the field would not even recognize. Mike's first move on any new engagement is to drag that gap out into the open before anyone scopes a build.

"It's crazy how few organizations walk down the hall and simply eliminate or understand the gap before they start making very expensive investments."

He warned me that AI is making this worse rather than better, mostly because it is so easy to deploy now. An executive says "let's use AI," the field gets handed a tool that does not fit their reality, and twelve months later everyone is sitting around asking why the project failed. His answer to that is blunt: "you built on a problem that isn't real. And the experts won't use the tool 'cause it didn't solve their problem."

Spot the operational tax hiding in your "good enough" software

I brought Mike a term I have been using lately, the workaround tax, which is the hidden cost of bad software that never actually shows up anywhere on a balance sheet. It turns out he has a more seasoned version of the same idea.

"We call it operational tax... it doesn't necessarily show up as a line item on a balance sheet somewhere. But the way it presents itself is either through customer experience or employee experience or partner experience."

The clearest example I have lived through was the voice AI receptionist that Superior Fence's corporate stores were running before they brought on NaiL. Staff told me again and again that they were losing customers, because callers knew almost instantly they were talking to a machine that was terrible to speak to and could not realistically help them. The cost never once hit a report, but it absolutely hit revenue and CSAT.

Mike's standard for walking away from that kind of cost is the part that really stuck with me.

"We will literally call the client and say that, ethically, we can't be your partner because the operational tax is so much higher than any business value I can deliver."

He grounds all of this in an idea from a book called The Universal Method by Billy Cohen, where the engineering method exists to solve problems rather than to create knowledge. If the operational tax cannot even be discussed openly, his team either raises a hand or declines the work entirely.

Build only what protects your secret sauce, and buy everything else

The build-versus-buy question is where I see brand presidents freeze up the most. Mike's rule cuts right through it, and he once made a client shop the market for three full months to confirm that no off-the-shelf tool existed before he would commit her to a custom platform. The test he applies is always the same.

"Anything that doesn't make you special, use an off-the-shelf solution. You should only look to build if you're trying to compete or protect your competitive differentiators, at which point you own the IP that makes you special."

The trap with off-the-shelf is subtle, because you buy the tool and then you slowly reshape your whole operation to fit it without really noticing.

"You end up tailoring your operations to fit the off-the-shelf solution. Well, now I'm competing against other fencing franchises that use the same off-the-shelf."

And the moment you ask that vendor to customize something for you, you have just handed every competitor on the platform the exact same upgrade. Superior Fence & Rail avoided all of that by building Fence360, where a single franchise's good idea only enters the system if the advisory council agrees that it strengthens the model for everyone.

Invert the technology question with impact mapping

When a client opens with "we need AI" or "we need the cloud," Mike flips the question around on them instead of just answering it, and his favorite tool for doing that is a two-decade-old book called Impact Mapping.

"Custom software is just one way to make that impact, but it's not oftentimes the best way to make that impact."

He is genuinely willing to talk himself out of paid work to prove the point.

"I've gotten off a couple of calls where I told somebody to hire a team of summer interns. It'll be cheaper, it'll be bright, and it'll go away, and then you won't have all this complexity and burden within the business model."

His cloud story is the cautionary tale here. A finance client insisted that every project had to be "the project that gets us on the cloud," even though their whole team was made up of on-prem engineers, and it ended up shipping months late and hundreds of thousands of dollars over budget.

"You're trying to build a project around somebody you want to be but aren't in reality. And that project isn't gonna go well."

I had almost exactly the same call with a franchisor who was convinced they needed AI answering the phones before they had anywhere near the lead volume to justify it. They were solving the right problem a year too early. The lesson is to build research around who you want to become, but never ship production projects that way.

Let bootstrapping keep your vendors and you honest

Feature23 has never raised a dollar of outside capital, and Mike is convinced that the constraint made the whole company better.

"It keeps you honest, is the simple answer. There's no room for error, so you have to focus on the right things."

He contrasted that approach with a vendor that one of his clients had used recently.

"Silicon Valley company raised $160 million. Our experience was horrendous. The general philosophy is, well, we'll make it up on the next customer."

In services you simply do not get to burn through clients to find product-market fit, and money in the bank from investors can quietly let you stop listening to the customer sitting right in front of you. Bootstrapping took that option off the table for Mike, and it forced his team to build the business that their clients actually wanted instead of the one their investors wanted.

Make your operating model the thing buyers pay for

The reason all of this matters beyond day-to-day operations showed up clearly in Superior Fence & Rail's acquisition by Empower Brands, the company formerly known as Outdoor Living Brands. The deal documentation repeatedly cited Fence360 as a core driver of value, so I asked Mike what the technology actually made possible.

"The technology unlocked efficacy at scale. And in a franchise model, scaling is the point."

A franchisor lives or dies on its ability to profitably add units without losing consistency, and the platform delivered the visibility, the reportability, and a known-good onboarding path while still leaving room for an Oregon franchise to sell different fences than one down in Florida. Watching that evolve over the years was clearly the part Mike valued most.

"When you're 15, it's a belief. When you're 140 and growing, it's proof."

He made the math concrete for anyone weighing the investment, because if you can turn the dial just two percent per franchise across a hundred-plus locations, those add up to very real dollars very quickly. Buyers notice that, and as Mike put it, no acquirer wants to see human-intensive systems that should have been replaced by technology years ago.

What other franchise operators should take from Mike's playbook

If you run a home-service franchise and you are staring down your next technology decision, these are the three moves worth stealing.

• Interview your field before you scope anything. Walk the hall and ask your operators what the problem actually is, then compare what they tell you to what leadership assumed, because the cheapest fix in any project is closing the understanding gap before the money gets spent.
• Protect the secret sauce and rent the rest. Build custom only where your operating model is genuinely the competitive edge, and let everything that does not make you special live on an off-the-shelf subscription that you never have to maintain yourself.
• Price the operational tax alongside the license. A "cheap" tool that quietly erodes your customer or employee experience is the most expensive thing you own, so put that hidden cost on the table before you ever sign anything.

Watch the full conversation

Mike and I went a lot deeper on AI in the middle market, the impact-mapping framework, and his "good neighbor policy" of free whiteboard sessions for anyone who wants to talk it through. Watch the full Nail It. Podcast episode with Mike Potts, and if you want to see what outcome-focused technology looks like for your own franchise, book a Nail demo .

Article by George Paladichuk, founder of Nail AI. Featuring Mike Potts, co-founder of Feature23.