WHAT IS A TECHNOLOGY AGREEMENT?

Businesses today cannot work without recourse to tech.

Businesses today cannot work without recourse to technology, so it is vital clear rules of engagement are laid out

before you sign up to run your own.

Technology is transforming the franchise world with customer loyalty programs, point-of-sale (POS) terminals that sync with stock-ordering systems and online training modules to improve efficiency and drive greater brand engagement.

However, franchisees should understand the risks associated with technology. The “WannaCry” malware cyber attack is just one example of how vulnerabilities in computer systems can severely cripple businesses.

A “technology agreement” is a catch-all phrase referring to the supply of a particular type of technology to a business, for instance: • software licence agreements;

• POS licence agreements; or

• website development agreements.

These types of agreements often involve the transfer of customer data to a third-party supplier or software provider. Common issues that can arise include:

• privacy

• intellectual property

• warranties and support services • indemnities.

These types of agreements can often be found in a franchise context. I unpack each of these terms below and suggest practical steps franchisees can take to ensure ongoing compliance with the law...

1. PRIVACY

Franchisees are collecting an increasing amount of customer data, particularly through loyalty programs. Customers can usually redeem points earned through these programs on products in store or by accessing special offers. When collecting, storing, using or disclosing personal information, franchisees must comply with the Privacy Act 1988. Personal information is data that can be used to identify an individual, such as email addresses collected when customers join a loyalty program or enter a competition.

If your franchise has an annual turnover of $3 million or more, you will also have additional obligations under the Australian Privacy Principles. Franchisees should promote a culture of transparency and accountability with their customer base by maintaining an up-todate privacy policy. The policy should set out: • how the franchisee uses a customer’s

personal information

• whether the franchisee will share the

information with any third party

• how a customer can complain about a data breach.

Your legal advisor can review technology agreements to ensure you do not breach your privacy obligations.

2. INTELLECTUAL PROPERTY

The franchisor will generally own and control the IP of the franchise business, including social-media accounts, confidential information and customer data. The franchise agreement will typically contain a clause prohibiting the franchisee from acting in a way that damages the goodwill or reputation of the franchise.

It is important to understand what franchisees can and cannot do on social media. For example, the operations manual may not permit setting up a separate Facebook page.

3. SUPPLIER WARRANTIES AND SUPPORT

When POS systems break down or don’t work properly, sales can be crippled. Franchisees should contact existing franchisees (listed in the disclosure document) and confirm that the technology used by the network does not cause any issues, and that they are happy with the level of support the suppliers provide.

F ranchisees s hould a lso e nsure t he P OS provider offers adequate response times and that any incurred costs are incorporated into the system's “subscription cost”.

Franchisees should know that Australian Consumer Law protections, such as statutory warranties, apply to POS systems and similar technologies. These warranties include fitness for purpose, and protection against defects. If any product does not perform as expected, contact the franchisor or supplier and raise these issues promptly.

4. INDEMNITIES

Indemnities for loss or damage arising from defects in products the franchisor supplied or approved are often non-existent. This means it is important franchisees understand that the primary claim for any defect in supply will be against the supplier.

Franchisees should also note it is standard to have a clause in the franchise agreement that indemnifies the franchisor for loss or damage arising from a breach of the operations manual or franchise agreement. For instance, if a franchisee experiences a data breach that leaks their customers' personal information, that then causes damage to the network. Franchisees should take extra care to ensure the security of their data, and update their systems to limit the effect of malware.

SAFEGUARDING INFORMATION

Franchisees should actively create a culture of privacy awareness and compliance in their business.

To safeguard information, you can:

• Speak with the IT provider to better understand how the backup system works and how data is protected

• Review the confidentiality clause in your franchise agreement and understand what it entails

• Speak with the franchisor about receiving

adequate training in the franchise systems • Ask the franchisor about the support team and whether it is available to answer questions

• Ensure you can answer questions from customers and direct them to the appropriate person should they wish to lodge a complaint about the handling of their data

• Familiarise yourself with how the franchise uses and stores your customer’s personal information.

I gnorance i s n o e xcuse f or i nadvertently sharing confidential information or customer data.

It is critical to speak with a franchise lawyer who can take you step by step through these requirements to ensure you are complying with the technology agreement.