Buying a franchise: assess IT dependency before signing

A shared till system, booking platform or ordering service can make day-to-day operations easier within a franchise network. But if the technology stops working, your sales may stop too. Before buying a franchise, you therefore need to understand which systems you must use, who is responsible for them and how the business will operate during an outage. Assess IT dependency as a separate part of your due diligence, rather than treating it as a purely technical detail.

1. Map out the systems your business depends on

Ask the franchisor for a list of the digital services required to run the outlet. Include tills, payments, bookings, orders, stock management and any links to accounting software. Identify which systems are compulsory and which you can choose yourself.

For each system, you need to know who supplies the service, who enters into the contract and whom to contact when something goes wrong. The franchisor may have chosen a platform without being contractually responsible for its availability. If you have to sign a separate supplier agreement, it needs to be reviewed alongside the franchise agreement.

In particular, ask these questions:

• Can the outlet take payments if the internet connection or central platform goes down?
• Can you view the day’s bookings and outstanding orders during an outage?
• Does a local workaround require the franchisor’s approval?
• Are there functions that only the franchisor or supplier can restore?

Also ask for a practical demonstration of the fallback mode. It is not enough to be told that a system works “offline”: check which functions actually remain available and how data is transferred back once normal service resumes.

2. Make operational responsibilities measurable

Phrases such as “support included” tell you little about the protection you have when customers are waiting. Ask for specific terms covering support hours, contact channels and how faults are prioritised. Support hours should match your business hours, including evenings or weekends if that is when you operate.

Distinguish between response time and time to restore service. A quick acknowledgement that a support request has been logged does not mean you can start selling again. Ask whether the terms specify a timeframe for a workaround or service restoration, and what happens if that timeframe is exceeded.

Also check how planned downtime is communicated. Will you need to close the till, complete orders or notify customers before an update? Who decides when the update takes place?

Next, review the limitations of liability. A supplier agreement might, for example, offer a limited fee reduction while excluding compensation for lost sales. Ask a lawyer to explain how the terms work together and whether there are situations in which neither contracting party accepts liability towards you. Do not assume that the franchisor will compensate you for losses simply because the system is compulsory.

3. Calculate both system costs and the cost of an outage

Request a full breakdown of the costs of the IT solution. Separate one-off installation and equipment costs from ongoing licence fees, support charges and transaction costs. Also check whether costs vary according to the number of users, terminals, bookings or orders.

Find out which elements are already covered by other fees. Otherwise, you risk comparing franchise options on different bases or leaving a compulsory service out of your financial projections. Ask who pays for troubleshooting if the supplier believes the fault lies with your equipment or internet connection.

Then work through a simple outage scenario using your own budget: what would happen if the most important platform stopped working on a busy trading day? Assess the revenue you might lose, the staffing costs you would still incur and any additional work the outage could create. Keep uncertain assumptions clearly separate from documented costs.

Next, test the fallback procedure step by step. Who contacts support? How are customers informed? How do you avoid duplicate bookings or orders when the system restarts? Check that the procedure is permitted under the relevant agreements and works for both payments and accounting. An improvised workaround is not automatically an acceptable fallback procedure.

4. Use disclosure requirements to clarify the terms

Sweden has an Act on Franchisors’ Duty to Disclose Information (2006:484). Well before the franchise agreement is signed, the franchisor must provide clear, comprehensible written information about the agreement’s implications and any other matters necessary in the circumstances. This information must include fees and other financial terms.

Compulsory IT services and their financial terms therefore need attention during your review. Ask for the supplier terms and pricing schedules you will be expected to accept, rather than just a description of the systems’ benefits.

However, the Act does not itself guarantee a particular level of availability or automatic compensation for downtime. Liability depends on the agreements and applicable general legal rules, including Sweden’s Contracts Act. Nor does Sweden impose a specific registration requirement solely because a business operates as a franchise; registration is therefore not a seal of approval for the IT solution.

Have a legal adviser review the allocation of responsibilities before you commit. In particular, make sure that your obligations to remain open and use the franchise network’s systems are compatible with the terms governing technical outages.

Practical conclusion: Do not buy a franchise with compulsory IT systems until you know what they cost, who deals with faults and how you can run the business when the technology fails.