Software Discord: As part of franchise brand standards, franchisors stipulate system-wide software and franchisees take issue: ‘The software fees are too high; if I use the software, the franchisor has access to my consumer information; there are better alternatives.’ But what happens when a franchisee refuses to adopt the franchise brand software?
That was the issue confronted in the arbitration case of Wild and H&R Block Tax Services. Wild, a 30 year franchisee of H&R Block, refused to adopt the software required by H&R Block saying, ‘The software fees were too high and the software compromised customer privacy by allowing franchisor access to consumer data.’
The panel of arbitrators rejected Wild’s arguments saying, ‘The franchisor had a legitimate interest in establishing a uniform procedure ……... Indeed, the franchisor arguably had a duty to insist on uniformity and the right to insist on monitoring every franchisee’s compliance with the uniform procedures it established.’ The arbitration panel unequivocally declared that franchisee’s failure to adopt the brand required software was a material breach of the franchise agreement, which justified termination of a more than 30 year old franchise.
Lessons from the Court Room: In the world of franchising, ‘It’s mine and you can’t see it’ or ‘You charge too much’ rarely wins over ‘uniformity’ including when it come to software.