Technology in franchising: new challenges for franchisors - part one

Technology in franchising: new challenges for franchisors - part one


Author: Magdalena Konig

Applies to: England and Wales

Technology now touches most, if not all, business areas, and franchising is no different. More than ever prospective and current franchisors need to be mindful of how technology can enhance, but also presents challenges for, their franchise offering.

Franchisee technology expectations and 'the Cloud'

Franchisors are under pressure to invest in and provide their franchisees with technology solutions to support their franchises, such as payroll software or customer/client management systems (ie CRM systems). Now it is also common for communication with franchisees to be facilitated via extranet (a website that only franchisees can access).

These solutions are beneficial for franchisors as they positively impact sales and save money by streamlining payment methods/processing, and can be used to implement further new technology into its franchise network. Given the development and increased confidence in 'the cloud', it is becoming easier for franchisors to deliver these types of software to their franchise networks.

Harnessing cloud-based services enables software to be more widely distributed and accessible as it's not required physically on a franchisee's hardware and allows multiple franchisees to access data, at the same time, from multiple locations. This negates the need for upfront capital investment in hardware and other equipment to support such software and provides a readily scalable solution to franchisees.

Franchisors can now also use cloud-based technologies to obtain greater transparency of the performance of its franchisees. For example, fast and accurate reporting and data analysis against metrics (ie by reference to a franchisor's operating manual). All this is available at a franchisor's fingertips, which could signify an era of automated compliance and franchisor 'big brother' activity, with more scrutiny of franchisee compliance and/or target achievement. This could encourage increased productivity. However, prior to undertaking any such data analytics, franchisors will need to evaluate the potential data protection implications of their activities. If such data consists of franchisee customer data, franchisees should be collecting the relevant data subjects' consents to the applicable use of such data (which may be difficult, depending on the goods/services being sold to end customers).

Franchisors may also want to consider possible efficiencies that could be created in providing training online (ie via webinars, virtual conferences and conference calls), or operating online knowledge platforms (for example, as a document and knowledge facility and forum).

If a cloud approach is adopted franchisors may also want to consider the devices on which such software is to be utilised. For instance, in order to save capital outlay, a franchisor may want to consider opting for a 'bring your own device' policy.

Deciding which technology to use

Given the above, it is imperative that a franchisor carefully considers which (if any) technology solutions to implement and how, with regard to how such technology will stimulate a return on investment. If a franchisor is undecided it may want to consider discussing the same with a franchising consultant, other franchisors (whether facilitated via the British Franchise Association or International Franchise Association networks) and in particular, the International Franchise Association's Information Technology Committee (being a body providing free of charge professional advice, contributed to by franchisors and ICT suppliers).

Trend towards e-commerce

E-commerce and online shopping is a staggering, global, trillion dollar industry and is expected to continue to grow. It's therefore more important now than ever for each franchisor to carefully plan internet strategy for its franchised business (including web presence, social media strategy and utilisation of search engine optimisation), and to consider the opportunities and threats presented by authorising or enabling its franchise network to harness e-commerce and, more specifically, the ever growing m-commerce industry.

Franchisees are increasingly targeting clients online, and as such seeking to operate websites to further develop their individual businesses, which can present the following questions:

  • Will the franchisor operate a central website/app for the benefit of the entire franchise network (the costs of which could, for example, be flowed down to the franchisees as part of any applicable marketing/advertising levy)?
  • Will the franchisees be authorised to procure and/or operate their own, separate, local websites/apps?

For further consideration of the challenges these questions pose to franchisors, please see our next article on Technology in franchising - new challenges for franchisors - part two.


This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.