International Law

Systemic Change in Franchise Systems: How to Handle Technology

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Tariq Farid writing over at the IFA, has an interesting although flawed article about introducing new technology in a franchise system in order to collect royalties more efficiently:

The article starts off with stating the obvious, but soon veers into pro franchisor territory.

"Integrating such technology can face roadblocks.

The franchisees, small-business owners who see themselves as key members of a franchise organization, will resent anything that they perceive as intrusive.

Justifiably, they will see no incentive in implementing any technology that enables the franchisor to take, but not give.

As the health of any franchise system depends on the royalty fee, the process that is put in place should provide a perceived value that is seen as a winning situation for both the franchisor and franchisee.  

Therefore, it is critical this process is not seen as one-sided.

Franchisees should be able to access a lot of the same data as the franchisor.

Giving store owners the ability to look into their stores' metrics to see everything, including the performance of their staff, will be perceived as a great benefit.

Multiple store owners can compare stores easily and see how they are doing on a daily basis.

They will find the process incredibly worthwhile, especially if they get new reports every day.

Franchisees receiving data that helps them run their business better will not mind being part of a larger technological infrastructure, even if their data enhances the franchisors ability to collect royalties."

Small business men and women get to determine who they pay and in what order.

It is not acceptable to trade this independence for better metrics.  

I want to clear that I favour technologies which allow a more efficient transfer of funds from the franchisee to the franchisor.  But, I want to distinguish to between pull and push transfers.

A pull transfer pulls the funds from the franchisee's bank account to the franchisor's.  

A push transfer allows the franchisee to push its funds to the franchisor.

Franchisees should be in favour of new technology which uses push transfers, collects all the data, and allows both parties to have a legal interest or property in the collected data.

Full post as published by Misleading Advertising Law on September 15, 2008 (boomark / email).