Franchising in Taiwan: Setting Clear POS Fees, Data Access and Downtime Arrangements

When opening an existing business to franchising, the franchisor often simply requires franchisees to use the same point-of-sale (POS) system as company-owned outlets, overlooking the fact that the two parties are now independent operators. Using a shared system raises questions about who pays, who can view trading data and how transactions can continue during an outage. To build trust across a franchise network, turn these arrangements into verifiable, enforceable rules before recruitment begins, rather than relying on a single clause stating that franchisees ‘must use the system designated by head office’.

1. Specify mandatory functions and the full cost

Start by distinguishing functions that genuinely need to be standardised, such as product codes, sales records and inventory synchronisation, from optional features such as loyalty marketing, self-service ordering or advanced reporting. Explain the purpose of each function, rather than treating established practice at company-owned outlets as a cost every franchisee must bear.

Prepare a system fee schedule covering at least:

• Activation, account setup, data migration and initial training fees.
• Subscription fees per outlet, device or account.
• Charges for repairs, technical support, backups and additional reports.
• Fees for add-on modules, additional outlets and service termination.

Also identify the payee, the basis of charging, whether tax is included, any free period and the assumptions used to calculate estimates. Buying the equipment does not give a franchisee perpetual use of the software; paying a system fee to head office does not mean the supplier will not charge separately. Check both sets of contracts to avoid duplicate charges.

If the supplier has the right to change prices, explain how notice will be given, when changes take effect and how head office will handle them. A reference to ‘the supplier’s latest published prices’ is no substitute for helping franchisees understand their long-term financial commitments.

2. Include system terms in Taiwan’s franchise disclosures

Taiwan is not without franchise-specific rules. The Fair Trade Commission has issued the Fair Trade Commission Disposal Directions (Guidelines) on the Business Practices of Franchisors, which guide its handling of relevant cases under the Fair Trade Act. These are not a standalone franchise statute.

Under the guidelines, franchisors should provide material franchise information ten days before entering into a franchise or preliminary franchise relationship, or within a period considered reasonable in the circumstances or agreed by both parties. Where a designated system involves start-up or operating payments to the franchisor or a party it designates, the amounts or estimated amounts should be disclosed. Mandatory-use restrictions and related assistance should also be clearly explained according to their nature.

Failure to provide the required information without proper justification may breach Article 25 of the Fair Trade Act if it is sufficient to affect trading order. A franchisor should not assume it has no disclosure responsibility simply because payments go directly to the software supplier. Contractual rights and obligations also fall within the scope of Taiwan’s Civil Code. If the system handles loyalty programme members’ or employees’ personal data, the Personal Data Protection Act must also be observed.

In practice, cross-check the fee schedule, franchise agreement and software service terms, and mark each with its version and date. If recruitment staff say verbally that ‘everything is included’ but the documents list separate support fees, resolve the discrepancy before signing.

3. Set data access permissions according to purpose

Avoid a blanket provision stating that ‘all data belongs to head office’. Trading reports, loyalty members’ telephone numbers, employee accounts and payment records serve different purposes. A single ownership clause cannot settle all questions about access and use.

Create a permissions matrix specifying each data category, its purpose, the roles allowed to view it, whether it can be downloaded and how it will be retained. For example, head office may need to see total sales to assess trading performance, but that does not mean every support employee needs access to members’ contact details. Where personal data is involved, separately establish the lawful basis for its collection, processing and use, along with the applicable notification obligations. A franchisee’s consent cannot be treated as customer consent.

System settings must match the documentation: use individual accounts, restrict administrator privileges, retain activity logs and revoke unnecessary permissions when staff leave or an outlet changes hands. Suppliers carrying out remote maintenance should also have their access restricted to what they need.

Before signing, demonstrate the system using test accounts. Can franchisees download their own detailed sales records? Can head office amend historical records? Is there an audit trail of any changes? These practical checks are easier to verify than abstract promises.

4. Rehearse outages and the data handover at the end of the relationship

First, test internet outages, equipment failures and cloud service interruptions at a company-owned pilot outlet. Establish which transactions can still be completed and which must be suspended. Do not promise offline capabilities that have not been verified, or independently record sensitive payment details simply to keep taking payments.

The outage procedure should specify the fault-reporting contact, support hours, response targets and escalation process. It should distinguish between acknowledging a report and restoring service. If temporary transaction records are used, assign responsibility for entering and reconciling them later to prevent duplicate entries when connectivity returns. Any fee reductions or arrangements for handling losses should align with the supplier’s actual commitments.

Before the franchise relationship ends, agree the deadline for requesting a data export, the format, fees and delivery channel. Clarify which data may lawfully be retained and which must be deleted or made inaccessible. Head office cannot guarantee an export service the supplier does not support, and should not wait until accounts have been deactivated before asking franchisees to make their own backups.

Practical takeaway: Before offering franchises, complete the fee schedule, data permissions matrix, outage procedure and exit handover process, then run through them using test accounts. The system is only suitable for long-term franchisee use when what the documents promise can actually be delivered.