As reported in a recent article on franchise news site BlueMauMau.org, pizza franchise Little Caesars is launching a pilot program that it plans to roll out to franchised locations nationwide in 2018. The program includes a new app ordering process and in-store “Pizza Portals.” Once a customer places an order through the app, “[t]he app will notify the customer when the order is ready . . . they skip the line and go directly to the Pizza Portal and punch in a 3-digit pin or scan a QR code. Then the door on the customer’s secured compartment opens and they take their hot, fresh order.”
According to the franchisor’s president and CEO, “We changed the pizza game when we introduced HOT-N-READY. We think RESERVE-N-READY featuring our breakthrough Pizza Portal has the potential to do it again.”
When Are Franchisees Required to Adopt New Technologies?
While Little Caesars franchisees are likely already contributing to the cost to update the Little Caesars app through their royalties (and potentially other fees as well), when it comes to installing the Pizza Portals in their stores, franchisees are likely to bear the full financial burden. Franchise agreements commonly include provisions requiring franchisees to adopt system-wide changes at their own expense, and this includes adopting new technologies. Although some franchisees will find success negotiating limited requirements to update, uniformity is a hallmark of the franchise model, and franchisors typically prefer to reserve broad rights to impose their will on their franchisees.
What are the Risks of Non-Compliance?
For franchisees who do not believe in their franchisors’ innovations, or for those who simply cannot afford to make costly upgrades, facing a substantial capital investment can present a major concern. Since franchisors need uniformity, franchise agreements almost universally include failure to adopt mandatory system changes as “cause” for franchise termination. In large franchise systems and when major technological developments are already in the works, individual franchisees can often find it difficult to find a voice that garners the franchisor’s attention. Oftentimes, franchisors would simply rather sign a new franchisee who believes in the brand’s direction and who has the financial resources to meet their new requirements.
What if the Pizza Portal Doesn’t Change the Pizza Game?
What if the Pizza Portal is a flop? What if customers don’t like having to fumble for their phones to find a PIN or try and scan a QR code? If Little Caesars disables the new feature on its app and decides to pull the cord on its franchisees’ Pizza Portals, franchisees may be left with no choice but to count their losses. Little Caesars may be offering something unique to its franchisees, we don’t know. But, in a typical scenario, if a franchisor has the right to require use of a particular technology at its franchisees’ expense, it will have the right to say that franchisees must stop using the technology they paid for as well.
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If you have questions about your obligations as a franchisee, we encourage you to contact us for a free consultation. With offices in Washington, D.C., the Goldstein Law Firm represents franchisees in negotiations and disputes nationwide. To speak with franchise lawyer Jeffrey M. Goldstein in confidence, please call (202) 293-3947 or send us your contact information online today.
