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Consumer-facing technologies can improve your online customers’ experience. As a franchisor, upgrading to new technologies can positively affect your franchise network. However, making significant changes such as this comes with a host of legal considerations. This article will explain several legal considerations involved with implementing consumer-facing technology in a franchise network.
Franchise Networks and Consumer-Facing Technology
Over the past few years, UK businesses have experienced a significant increase in online sales. As a franchisor, you lead the innovation of your franchised brand, ensuring it maintains its competitive position. You might enhance your brand’s online customer experience by implementing new consumer-facing technologies. However, a franchisor’s implementation of new technologies raises several legal considerations.
This handbook covers all the essential topics you need to know about franchising your business.
1. Franchisees Are Independent Business Owners
Implementing a new technology brand-wide will affect all franchisees within your network. Your franchisees may lack the resources to purchase the latest technology items through their own means. Such financial constraints and concerns over brand uniformity mean franchisors may have to buy and implement this technology centrally.
Centrally innovating a franchised brand by introducing new technology can make franchisees feel you have impacted their independence. Due to this potential conflict, franchisors need to strike a careful balance. You should consult franchisees and communicate clearly and respectfully when making significant decisions and changes to your brand. Otherwise, you risk frustrating the relationships you share with them.
Clear and effective communication is vital. Ensure you allow franchisees to share their thoughts and take their concerns on board. Also, consider your timing. For example, if you decide to implement a new technology, it is ideal that each franchise implements it at a similar time. Otherwise, you risk a lack of uniformity across your brand.
2. Contractual and Financial Considerations
Refamiliarise yourself with the terms of the franchise agreements before making any big decisions. Check whether you have the authority to bring in a new consumer-facing technology. For example, consider whether your franchise agreement allows you to make such technological updates. You may need to seek your franchisees’ consent or consult them about contributing to ongoing payments for the new technology.
As consumer-facing technologies can be expensive to buy and develop, implementing them will likely require significant investment. The expense might impact the financial relationship with your franchisees. It is essential to clarify whether the existing franchisee royalty payments can cover the cost or if new payments are necessary. If you require new payment, be transparent with franchisees about why you need this and ensure you establish an additional contractual basis for it.
3. Pilot the Technology
It is best practice to test a new technology in a small number of franchise units before introducing it across the whole network. An unsuccessful network-wide launch may be costly and unnecessarily strain your franchise relationships. As a franchisor, you should have a valid legal basis for conducting such tests with those franchisees.
4. Seek Professional Legal Advice
Seek advice from experienced legal professionals if you need it at any stage while implementing a new consumer-facing product across your franchise network.
Making significant changes as a franchisor can be tricky as there is a balance between doing what you think is best for your brand and respecting the franchisee’s level of control over their businesses. Also, ensuring you have a legal basis to implement such technology can be complex. It might involve reviewing your franchise agreements and perhaps drafting separate, freestanding agreements with franchisees. An experienced lawyer can help you navigate through this process.
Key Takeaways
This article has discussed a number of vital legal considerations involved in implementing consumer-facing technology in a franchise network. These include the following:
- respecting the franchisee’s control over their businesses;
- familiarising yourself with the franchise agreement before making significant changes across the network;
- having a contractual basis for any financial changes;
- piloting the technology; and
- seeking professional advice.
Communication is key throughout the process. Franchisors must remember that franchisees are independent business owners. Although they operate under the franchised brand, they retain a level of control over their business operations. This control complicates franchisors’ central implementation of new technologies. Franchisors must carefully navigate the process of such significant changes and observe open and respectful communication. Consult franchisees throughout the process and take their concerns on board.
Also, remember that you should update your franchise operations manual when making changes within your brand. This includes when you implement new tech. Updating the franchise operations manual will not give you a legal basis for implementing it, but it is a mechanism for supporting the franchisees. The updated manual should clarify how the technology works and how franchisees can use it, including troubleshooting information.
If you need legal advice relating to your franchise, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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