While it is becoming increasingly common to use ChatGPT, Gemini, Perplexity, and other artificial intelligence (AI) platforms to conduct research rather than searching online, this approach poses several risks. This is especially true for prospective franchisees. As a prospective franchisee, it is critical to do your due diligence, and there are multiple issues with AI that make it unfit for this purpose. Keep reading to learn more from franchisee lawyer Jeffrey M. Goldstein.
7 Reasons to Be Cautious About Using AI to Research Franchise Opportunities
Why shouldn’t you rely on AI when doing your due diligence as a prospective franchisee? Here are seven reasons to be cautious about using AI to research franchise opportunities:
1. AI Platforms Often Regurgitate Outdated Information
Artificial intelligence platforms rely on information they find on the Internet. This is how they are “trained,” and the information they provide can only be as good as the information they find. Since much of the information on the Internet is outdated, AI platforms often regurgitate it as well.
When you do your own due diligence, you can examine your sources to see if they are current. But if you prompt an AI-generated summary, you won’t necessarily know where the original information came from or when it was published. From outdated legal principles to outdated information about specific franchise offerings, relying on any outdated information can lead to making an uninformed buying decision.
2. AI Platforms Are Notoriously Bad At Summarizing Legal Issues
Another reason not to rely on artificial intelligence when considering a franchise is that AI platforms are notoriously poor at summarizing legal issues. While there have been some high-profile cases of lawyers presenting erroneous AI-generated briefs in court, AI platforms give everyday people bad legal advice every day.
While relying on outdated legal information is an issue, this is not the only concern. In attempting to synthesize information from multiple sources, AI platforms often simply get it wrong. Jurisdictional differences and other complexities frequently lead to AI platforms providing bad legal advice as well.
3. AI Platforms Frequently Rely on Unreliable Sources
Artificial intelligence platforms also frequently provide inaccurate information and advice due to reliance on unreliable sources. Simply put, AI platforms have no way of knowing which sources are accurate and which ones are not. AI platforms can look for a general consensus, but if the general consensus is wrong—or if there are not many sources of information available—they cannot tell bad information or advice from good.
Bias is a major concern as well. For example, if you are researching a franchise opportunity and most of the available information has been published by the franchisor, you are not going to get the full story. Likewise, if law firms that represent franchisors tend to write about a particular legal issue more often than law firms that represent franchisees, this could also lead to AI giving you a biased point of view.
4. AI Platforms Often Misconstrue and Misrepresent Data
For the same reasons that AI platforms often provide bad information and advice, they also regularly misconstrue and misrepresent data. As a prospective franchisee, you cannot afford to rely on bad numbers. If you do not have realistic expectations regarding the costs of opening for business, your revenue potential, or your likelihood of success as a franchisee, you could unexpectedly find yourself in a very tenuous situation.
5. AI Platforms Do Not Have Access to All of the Information You Need
Yet another concern with relying on AI when conducting your due diligence is that AI platforms do not have access to all of the information you need. AI platforms can only use the information incorporated into their “learning” databases—and this is not the full universe of available information. If a particular AI platform’s database excludes any critical information, the only way you will discover this is if you perform additional research on your own.
6. AI Platforms Tend to Generalize (and Don’t Know Your Individual Circumstances)
Since AI platforms attempt to cater to a wide audience, they often provide extremely generalized information. Additionally, even if you provide a detailed prompt, your chosen AI platform still will not have a comprehensive understanding of your individual situation. As a result, even if the information or advice you receive from an AI platform is generally accurate, it still might not be accurate for you.
For example, in response to the prompt, “Should I buy a franchise?”, Google’s Gemini wrote:
“Opening a franchise is a good idea if you have sufficient capital ($100k+), prefer a proven business model over, or in addition to, high innovation, and are willing to follow strict operational guidelines to leverage an established brand. It offers higher success rates and faster scaling than starting from scratch, but requires royalty payments, long-term commitments (10-20 years), and limited creative freedom.”
While there are numerous issues with this two-sentence paragraph, one of the most glaring issues is the suggestion that buying a franchise is a “good idea” if you meet three highly generalized criteria. Whether it makes sense for you to buy a franchise depends on numerous factors unique to your background, financial situation, and other personal circumstances.
7. Buying a Franchise Carries Legal and Financial Risk
Buying a franchise carries legal and financial risk. This is why conducting your due diligence is so important—and this is why you should rely on the insights of professional advisors who understand your individual circumstances. Ultimately, if you rely on AI to help you make your buying decision, you could end up unknowingly making an uninformed (or misinformed) decision that has serious legal and financial ramifications for years to come.
Considering a Franchise Opportunity? Schedule a Free Initial Consultation with Franchisee Lawyer Jeffrey M. Goldstein
Are you considering a franchise opportunity? If so, franchisee lawyer Jeffrey M. Goldstein can help you make an informed decision about buying. To get started with a free initial consultation, please call 202-293-3947 or tell us how we can help online today.
