Franchise software: protection against system outages

When assessing a franchise opportunity, it is easy to focus on the initial fee and premises, even though day-to-day operations may depend on a single central software system. If you cannot take orders, book appointments or access stock information, your revenue may be at risk. Before joining a franchise network, ask for more than a demonstration: establish what support, fallback arrangements and contractual protection you can expect during a system outage.

1. Identify what could bring your business to a halt

Start by listing the tasks for which you must use the central system. These might include operating tills, managing orders, taking bookings, purchasing supplies or preparing daily reports. Separate convenience features from functions without which you genuinely cannot serve a customer.

For each critical function, ask:

• Who provides the software: the franchisor or an external supplier?
• Who is your contract with, and who handles fault reports?
• Does anything work without an internet connection?
• Is there an approved fallback procedure, and who provides training on how to use it?
• What happens to orders recorded during the outage once the system is restored?

Ask for an operational trial as well as a demonstration. For example, test how an order already in progress can be handled if the connection drops. This is not a security test of the IT system, but a pre-agreed trial of a business process.

The Hungarian Franchise Association’s guidance on franchise system disclosure lists software among the rights with financial value that should be presented. Simply naming the software, however, does not explain what ongoing service comes with it. That requires separate operational terms.

2. Understand the legal basis for your protection

Hungary has no separate, comprehensive franchise act, but it would be incorrect to say that franchise agreements are not expressly recognised in law. Act V of 2013 on the Civil Code regulates franchise agreements from Section 6:376 onwards. The Civil Code’s general rules on contracts and breach of contract are also important.

Act LXXVI of 1999 on Copyright is also relevant to software usage rights. If the system processes personal data, the requirements of the General Data Protection Regulation (GDPR) must also be considered. None of these, however, replaces a precise contractual definition of service availability.

Hungary has no universally mandatory pre-contractual disclosure document template or registration requirement for franchise systems. The Hungarian Franchise Association’s recommendation to allow at least fourteen days to review the contract before signing is industry guidance, not a general statutory waiting period.

The practical implication is that you should not assume an automatic uptime guarantee or entitlement to a fee refund. Have the franchise agreement, software terms of use and service schedule reviewed together. If different companies undertake obligations in these documents, make sure it is clear who to approach about each type of problem.

3. Ask for measurable commitments on restoring service

“Continuous support” and “rapid troubleshooting” are not sufficiently precise commitments. Use a service-level schedule to define what constitutes a fault, when a response is required and what solution the responsible party must provide.

The following points are particularly worth addressing:

• Support availability: on which days and at what times is support available, and does this match your business’s opening hours?
• Severity levels: what counts as a complete outage, and what is merely a partial disruption?
• Timeframes: specify separate deadlines for acknowledging a fault report, starting work and the target time for restoring service.
• Maintenance: how much notice will you receive of planned downtime, and during which periods may maintenance take place?
• Updates: who provides status reports during a prolonged fault, and how often?

When checking how availability is calculated, examine the exclusions too. An impressive-sounding commitment may offer little protection if it excludes all external supplier failures or lengthy maintenance periods. Clearly define the boundaries of responsibility for the local internet connection, your business equipment and the central system.

The fallback procedure must be both lawful and workable. If a till or invoicing system goes down, for example, simply saying “write it down on paper” is not enough: the solution must also comply with the applicable tax and record-keeping requirements.

4. Agree in advance who bears the cost of downtime

Ask for clear rules on whether service fee credits are available and how to claim them. Also establish whether these are the sole form of compensation or whether you can pursue other claims alongside them. Compensation for lost revenue is not automatic: liability, causation, the evidence available and contractual limitations may all matter.

Check who pays for temporary solutions, on-site assistance and additional work after service is restored. For recurring faults, ask for a specific action plan and an escalation route, rather than just another support ticket.

Keep a simple outage log from the outset: start and end times, affected functions, support ticket number, instructions received and verifiable additional costs. This will help both parties resolve problems and support any potential claims.

Practical takeaway: before signing, make sure you have one clear document setting out who will help during an outage, within what timeframe, how you can continue trading and who will bear the costs. These arrangements, rather than verbal reassurance, provide a reliable basis for keeping your business running.