Many people still remember the rhyme from the Sesame Street song: “Who, what where, when, why, how – what do you wanna know now?” In order to obtain useful results from AI systems, you have to ask the right questions (use the right prompts). The same applies to the review of existing distribution agreements, such as authorized dealer agreements, but especially franchise agreements. These raise new questions, new regulatory requirements, and new responsibilities with regard to the use of AI. There should be agreement between the parties, or this should be established through the revision of contractual provisions, with regard to
WHO is responsible and accountable for the selection of AI systems, their integration into the distribution network, training in the use of AI, and their monitoring;
WHAT to do if errors occur due to the use of AI;
WHERE to establish that only certain AI systems (and which ones) may be used in the performance of activities under the contract;
WHEN compliance with data protection regulations and the protection of trade secrets become relevant and require additional regulations and increased attention;
WHY continuous monitoring of AI compliance and ongoing adjustment of agreements will be necessary, so that reservations regarding changes are justified; and
HOW the use of AI can be ensured in accordance with legal requirements on the one hand and the creation of significant synergies, increased efficiency, the preservation of corporate culture, the fulfillment of brand promises, and the exploitation of savings potential on the other.
The challenges are immense, especially for franchisors, as they must consider not only their own organization but the entire network:
- Clear responsibilities must be defined both within the franchisor’s own organization and in the contractual relationship with the franchise partners, and these must be explicitly assigned in the contract.
- Training must be provided for employees and franchise partners alike and understood as an ongoing and permanent obligation.
- The franchisor’s typically existing right to review the franchisees’ compliance with the system should be extended with regard to their AI compliance in order to avert damage to the system and the brand through regular audits.
