Read about using AI in franchising. Franchisors must urgently address the risks AI poses to their intellectual property (IP). Unregulated AI use by franchisees, staff, or suppliers can unintentionally expose proprietary systems, branding, and customer data. To mitigate these threats, franchisors should implement clear AI usage policies in their Franchise Manuals.

Regular audits, training, and innovation channels can help balance risk management with system-wide improvements. Franchisee AI experimentation should be seen not just as a risk, but as a source of insight and competitive advantage.

Your franchise system could be more exposed than you realise. 

Franchisors have long invested heavily in developing operational expertise, proprietary manuals, customer systems, performance metrics, training content, and competitive strategies. These assets form the backbone of a franchise system’s value. Yet few franchisors fully appreciate how easily that intellectual property can now be compromised with using AI in franchising.

Increasingly, we are seeing examples of well-intentioned AI use that put brand, compliance, and system consistency at risk. That includes franchisor teams, franchisees, their staff, and suppliers, all of whom may be using AI tools with little understanding of how franchise IP, brand assets or customer data may be exposed. 

You should consider understanding using AI in franchising scenarios that we have already seen: 

• A franchisee employee uploads an operations manual excerpt into a free online AI tool to generate a simplified version. That content may now sit in public AI training data. 
• A franchisor team member uses a free AI image generator to create marketing visuals, unwittingly breaching copyright or pushing proprietary branding into the public domain. 
• A supplier drafts promotional content using generative AI, feeding franchise-specific positioning and tone-of-voice into a model that learns from every input. 

Do not overlook the risks introduced by suppliers 

Franchisors often focus on internal teams and franchisees when considering policy development. But suppliers, especially those involved in marketing, technology, training, or analytics, can be an equal source of vulnerability. 

For example, if a digital agency uses AI to analyse performance data or draft franchisee communications without specific instructions and restrictions, your IP and customer data could be compromised. Supplier agreements need to reflect this, and expectations must be clearly defined. Your AI policy should extend across the full franchise ecosystem. 

The Franchise Manual is your first line of defence 

While franchise agreements are not easily amended, the Franchise Manual is a living document, and it must now evolve to include protections against AI misuse. This is the most appropriate place to codify practical and enforceable guidance, including: 

• Using AI in franchising: Approved and Prohibited uses of AI.
• Franchisee obligations to seek approval before implementing AI tools.
• Procedures for proposing new tools or automations.
• Supplier standards relating to brand, data, and operational content.

These policies should also be reflected across franchisee handbooks, training programmes, and staff inductions. A one-time memo is not sufficient. Ongoing education and structured training are essential to ensure consistent understanding and compliance for using AI in franchising.

Using AI in franchising: Build mechanisms for oversight and innovation

Policies are only effective if they are followed. Franchisors should be reviewing AI use across the network, actively seeking out both inappropriate use and promising ideas.

We recommend: 

• Regular audit checks 
• Clear innovation channels for franchisees and teams to propose new uses of AI 
• Defined processes to assess and safely implement worthwhile initiatives 

Franchisees are close to the action. Many are already experimenting with AI. The challenge is to manage this exploration constructively and consistently, without risking system fragmentation. 

Franchisees should require pre-approval for sensitive AI use, but franchisors must also understand the ‘why’ behind it. 

To protect your brand and IP, franchisees should be required to seek written approval before using AI tools that: 

• Interact with manuals or operational materials 
• Process customer or commercial data 
• Generate marketing or branding content 
• Create training or performance-related content 

This step is not about blocking progress. It is about ensuring risk is assessed before exposure occurs. But just as importantly, the pre-approval process can help franchisors better understand why franchisees are turning to AI in the first place. 

• Are franchisees using AI to save time on customer service responses? 
• Are franchisees using AI to help create local marketing content more efficiently? 
• Are franchisees using AI to generate training materials for new staff members? 
• Are franchisees using AI to help analyse their business performance? 

These insights can be invaluable. When franchisors take the time to explore the needs and drivers behind AI adoption at the coalface, they gain a clearer picture of where the system might benefit from structured innovation. What starts as ad hoc experimentation can point to areas where head office can develop approved tools, centralised support, or scalable solutions that benefit the entire network. 

Franchisors should treat franchisee-led AI interest as an early indicator of operational friction or opportunity. With the right approach, it becomes not just a risk to manage, but a source of competitive advantage to cultivate on your own terms. 

How Franchize Consultants can help review AI best practices

Franchize Consultants has worked with many of New Zealand’s leading franchise systems to develop structured, high-quality operational documentation. We know what good looks like, and we also know what happens when shortcuts are taken. 

Our team of franchise consultants can help your franchise system by: 

• Developing tailored and enforceable AI and IP policies 
• Embedding protections into your Franchise Manual and related documents 
• Providing training and change management support across the network 
• Setting up processes to capture and evaluate innovative ideas safely 

Franchise systems are built on shared knowledge, repeatable processes, and brand consistency. AI can support all of these, but only with the right framework in place. 

Now is the time to futureproof your system, protect your assets, and ensure the tools of tomorrow strengthen rather than weaken your brand. 

Interested in how your current policies stack up?  Let’s talk.

Email Franchize Consultants to discuss an AI readiness review or we can start work on an updated Franchise Manual.

Dr Callum Floyd – CFE

Managing Director
Phone 09 523 3858
Email callum@franchize.co.nz
Address 27 Gillies Avenue, Newmarket, Auckland.

Contact Franchize Consultants if you would like to discuss our franchisor services. We’d be very happy to sit down with you to understand your business and objectives. You can also follow us via LinkedIn, Facebook, Instagram and Google.