IT systems before franchising: secure the right to share your tools

When you expand your existing business through a franchise network, booking systems, tills and other digital tools need to work across several independent businesses. A subscription that works for your own employees may have very different terms for franchisees. Before promising access to these systems, check both the right to use them and how they will be administered in practice.

1. Map out the systems your concept actually requires

Start by listing the digital tools needed to run an outlet under your franchise concept. Include point-of-sale, booking, order management, stock control, training platforms and any other tools essential to day-to-day operations. Distinguish these from tools you use out of habit but which do not need to be shared across the network.

For each system, document:

• which company holds the agreement,
• which users and businesses the agreement covers,
• whether the system is mandatory or optional for franchisees,
• which other systems it connects to,
• who administers accounts and liaises with the supplier.

The key distinction is between more users and more businesses. Being able to add user accounts does not, in itself, mean you can give another business access. Even a subscription covering several locations may be restricted to a single legal entity.

Also map out your own templates, add-ons and integrations. If a consultant has built a solution for your company, review the agreement before making it available to the whole franchise network. Do not assume that paying for development gave you all the rights you need.

2. Get written confirmation of the supplier’s terms

Explain your planned structure to each critical system supplier: franchisees run their own businesses, operate under a shared concept and may need access to the same technical environment. Ask for written confirmation of what the supplier’s agreement permits and what changes are needed.

There are several possible models. Each franchisee could enter into their own agreement, the franchisor could purchase a solution that expressly covers participating businesses, or the parties could use a framework agreement with separate orders. No single model is automatically right for every franchise concept.

Pay particular attention to the following questions:

• Can franchisees use the system under your agreement, or do they need their own?
• Who is responsible for payment and breaches of contract?
• Who can order additional users or features?
• Who can request support, export data and close an account?
• What happens to outlets’ access if your main agreement ends?

A common risk is that the franchisor promises more than the supplier commits to providing. If the supplier only offers support during office hours, do not promise technical help throughout an outlet’s opening hours unless you have your own arrangements in place. Also distinguish between help with the system itself and guidance on using it to implement the franchise concept.

3. Make system requirements clear before signing

Sweden has specific legislation, the Act (2006:484) on Franchisors’ Duty to Disclose Information, but no comprehensive law governing every aspect of the franchise relationship. The Swedish Contracts Act, copyright rules and the Swedish Competition Act may also affect your system arrangements. Personal data processing must also comply with data protection rules; a software licence does not resolve that issue.

The disclosure legislation requires franchisors to provide clear, understandable written information about the implications of the agreement and other relevant circumstances well before the franchise agreement is signed. This must include financial terms and any goods or services the franchisee is required to buy or hire.

Mandatory systems therefore need to be described in a way that enables prospective franchisees to understand the commitment. Specify what is included in the franchise fee, what is billed separately and which agreements franchisees must enter into themselves. Also disclose known start-up costs, such as installation, essential equipment and data migration.

Explain how costs are calculated if they depend on user numbers, transactions or selected features. Avoid simply stating ‘system costs extra’ without further explanation. Prospective franchisees need to assess both the practical commitment and the financial burden.

Have a lawyer review the arrangements if you require franchisees to use a particular supplier or resell the system service yourself. The fact that a shared tool makes operations easier is no substitute for reviewing the terms.

4. Test access and responsibilities before anyone becomes dependent

Once the rights are clear, carry out a limited technical test using a separate company environment. The aim is not to test the entire business concept, but to check that the system solution genuinely works across independent businesses.

Try creating an outlet, assigning permissions, ordering a feature and ensuring invoices go to the correct recipient. Check that users cannot view or change other outlets’ data without the intended authorisation. Also test how data can be exported and how access is withdrawn when a user leaves.

Then draw up a brief allocation of responsibilities for system administration. Assign responsibility for accounts, supplier liaison and service outages. Decide how franchisees will be notified of planned downtime and whom they should contact when a critical tool stops working.

Practical takeaway: Do not promise shared digital tools until supplier terms, costs and access arrangements are clear. Start with the system whose failure would stop sales, and secure the necessary arrangements before signing the next franchise agreement.