Buying a franchise: check the mandatory IT systems

A point-of-sale system, booking platform or ordering app may seem like a minor detail when you buy a franchise. Yet your day-to-day operations may depend on it. Shared systems offer benefits across a franchise network, but you need to understand which obligations and risks fall to your own business. Before signing, investigate not just what the technology can do, but also who pays, who resolves problems and what happens if a system fails.

1. Map out the mandatory IT package

Ask the franchisor for a complete list of the systems you must use. These may include tills, payment terminals, stock management, staff scheduling, accounting integrations, security and online ordering. Ask them to distinguish between mandatory components, recommended tools and services provided only during the start-up phase.

For each component, establish who you will be contracting with. A system may be offered through the franchisor, while you sign an agreement directly with an external supplier. Different terms may therefore apply to contract duration, payment and support.

Do not settle for a product brochure. Also obtain:

• the licence or subscription agreement and general terms and conditions;
• current prices and rules governing price changes;
• technical requirements for equipment and internet connections;
• arrangements for installation, maintenance and replacement;
• terms governing integration with other systems.

Then ask for a demonstration covering a full working day, from taking an order to payment and processing the accounts. Ask what needs to be done manually if an integration fails. This lets you assess not only ease of use, but also how much extra work the system could create.

2. Calculate costs over the contract term

A monthly fee rarely tells the whole story. There may be separate charges for configuration, training, additional users, transactions, updates and technical support. In some cases, you buy the equipment but can only access the software through a subscription.

Prepare a cost breakdown under three headings: one-off expenditure, recurring charges and variable costs. For each item, note how the charge is calculated. Is it per outlet, workstation, user or order, for example? Also check whether prices include or exclude VAT, and compare quotations on a like-for-like basis.

Next, investigate replacement requirements. Who decides when a till or computer is outdated? Must you buy new equipment whenever the franchise network switches systems? And will you still have to pay for an old subscription when a replacement system becomes mandatory?

Alongside normal usage, calculate the costs of a higher-transaction scenario and an early-replacement scenario. These are not forecasts, but a way to identify costs that could put pressure on your business. Ask for written clarification if a supplier or franchisor does not provide a clear basis for its pricing.

3. Pin down business continuity arrangements

A promise of ‘technical support’ tells you little about what happens during an outage at your busiest time. Ask about support availability, response times and service restoration commitments. A quick initial response is not the same as a working system.

Check who is responsible for reporting and resolving problems. Will you have to contact several suppliers yourself, or is there a single point of contact? Also get written agreement on who pays if an outage is caused by a mandatory update or a fault in supplied equipment.

Discuss at least these situations:

• The central platform is unavailable: can you continue working locally?
• The internet connection goes down: do you need a backup connection?
• Equipment fails: how quickly can a replacement be provided?
• A security incident shuts down the system: who coordinates recovery?

Ask who makes backups and whether restoring them is actually tested. Also check liability limits: suppliers’ terms may exclude or limit compensation for lost turnover. A service agreement does not automatically remove that risk. Assess with your adviser which risks you need to cover yourself and which could be allocated more appropriately through the contracts.

4. Use the statutory disclosure requirements before deciding

The Dutch Franchise Act has been in force since 1 January 2021 and is set out in Book 7, Title 16 of the Dutch Civil Code. For franchisees established in the Netherlands, its provisions cannot be departed from to their detriment.

The pre-contractual disclosure requirements include the draft agreement and its appendices, as well as information on fees, investments and other financial contributions payable. Mandatory IT expenditure should therefore not come to light only after you have signed. Also request any relevant supplier terms that determine your obligations.

The Act provides for a standstill period of at least four weeks before the franchise agreement is concluded. Use that period to have the IT package independently assessed. The statutory duty to provide commercial and technical assistance does not automatically mean that every repair is free or that every outage must be resolved within a set time. Specific contractual commitments remain important.

Practical conclusion: only sign once you can explain the mandatory IT package, its total costs and how the risks of system failures are allocated. Keep the cost breakdown and service agreements with your franchise contract, so that the basis for your decision to buy remains clear.