Feb 14, 2020 - Blog, Franchise Articles by |

A recent article on 1851franchise.com discusses three ways that artificial intelligence (A.I.) has already made its way into the franchise industry, with a particularly-high adoption rate in the restaurant sector. Start-ups and well-established franchised brands are utilizing A.I. in a variety of ways—and they are forcing their franchisees to utilize A.I. as well.

As a current (or prospective) franchisee, what do you need to know about the franchise industry’s acceptance of A.I. as a business development tool, risk mitigation tool and go-to-market strategy? Here are answers to some commonly-asked questions from national franchise attorney Jeffrey M. Goldstein:

Q: How are Franchisors Requiring Franchisees to Make Use of A.I.?

While artificial intelligence as something other than a sci-fi fantasy is still difficult for many people to grasp, the truth is that many companies are already using A.I. in many different ways. Within franchising, companies are utilizing A.I. for everything from tracking (and responding to) consumer sentiment to taking orders in-person and online.

Q: Who Bears the Cost of Adopting New A.I. Technologies?

Predictably, franchisors are forcing franchisees to bear the cost of adopting new A.I. technologies. Franchisors almost universally reserve the right to require franchisees to adopt system “updates” at their own expense, and most franchise agreements do not place any limits on the nature, frequency or cost of updates franchisors can require.

Q: Can Franchisors Force Franchisees to Abandon Old Technologies in Favor of A.I.?

In most cases, yes. Uniformity and “standards” are hallmarks of the franchise system, and franchisors can generally force franchisees to adopt new A.I. technologies against their will. Even if you just opened or just finished paying off a loan for a previous update or overhaul, if your franchisor wants to move to A.I., as a franchisee, you are most likely going to have to comply.

Q: What Happens if A.I. Makes a Mistake?

This is an interesting question, and it is one that is far from being resolved. As a franchisee, it doesn’t seem fair for you to bear the cost of a mistake made by an A.I. platform that you didn’t want to adopt in the first place. But, franchisors are going to try to push this liability down to their franchisees, and franchisees might be forced to seek indemnification from A.I. service providers (which are likely to have their own contractual protections in place as well).

Q: What if I Don’t Believe in an A.I. “Solution” My Franchisor is Implementing?

Unfortunately, this probably doesn’t matter. Again, franchisors reserve broad rights to tell their franchisees what to do; and, if your franchisor decides it wants to implement an A.I. “solution” on a system-wide scale, this is a decision you will probably be forced to accept.

Discuss Your Options with Franchise Attorney Jeffrey M. Goldstein

Do you have questions about your obligation to adopt an artificial intelligence “solution” for your franchise? Are you concerned about your ability to pay for the “update” or what it might mean for your franchise’s profitability? To request a free consultation with franchise attorney Jeffrey M. Goldstein, call 202-293-3947 or inquire online today.

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