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franchise.co.nz – PUTTING PEOPLE IN BUSINESS
enerative Artificial Intelligence (Generative AI) refers to AI systems
that generate content based on patterns learned from data.
Generative AI is a tool that can be used to drive efficiency in many sectors.
Global and established franchisors have been quick to adopt AI for
document review, financial projections, growth strategy and marketing.
While it offers great benefits and efficiencies in the franchising space,
Generative AI is not without risk and it cannot replace legal advice,
human judgement and business acumen, particularly given that it lacks
contextual understanding, which can lead to critical oversights. These
risks must be understood and managed.
Legal considerations
Currently, Australia and New Zealand lack specific regulations to manage
the use of Generative AI. However, at a general level, franchisors are still
required to comply with existing laws such as the Fair Trading Act 1986
and Contract and Commercial Law Act 2017 in New Zealand, and the
Competition and Consumer Act 2010 in Australia. Misuse of Generative
AI output can inadvertently breach these laws and regulations (i.e. by
providing false or misleading representations), resulting in significant
legal and financial repercussions.
Enhancing efficiency while minimising risk
Some essential dos and don’ts for franchisors when using Generative AI:
Dos:
• Understand its capabilities and limitations: AI can streamline
document reviews and financial projections, and inform expansion
forecast decisions, but it cannot replace legal or business judgement.
Use it as a tool, not a substitute for expert advice.
• Combine with human expertise: Lawyers assess franchise agreements
and operational decisions beyond AI-generated insights. Generative AI
may oversimplify the data it is provided.
• Use insights for further analysis: AI can highlight important terms
and operational trends, but human interpretation remains crucial to
understanding their implications.
Don’ts:
• Upload confidential information to public AI tools: Under no
circumstances should confidential information about franchisees or
commercially sensitive information be uploaded to public AI tools.
Once uploaded, all information becomes publicly available for other
users and may breach confidentiality obligations.
• Assume AI-generated content complies with regulations: AI is only
as good as the data that has been inputted. For example, AI generated
processes, systems or template documents may not reflect FANZ
obligations or the Australian Franchising Code of Conduct. Expert
legal advice is required to ensure legal compliance and
enforceable contracts.
• Rely solely on AI for decision-making: Franchise operations
involve nuanced discussions that require human judgement and
strategic negotiation. Generative AI does not have knowledge of
the franchisor’s growth objectives, brand strategy or risk profile and
cannot be relied on to make decisions.
Engaging legal and business
professionals alongside
AI ensures franchise
systems and operations
are compliant with law
and aligned with business
objectives and franchisors
are protected.
By Wynn Williams Partner
Katrina Hammon and
Associate Miriam Doak.
Wynn Williams
www.wynnwilliams.co.nz
Contact
Katrina Hammon
09 300 2647
021 221 8847
katrina.hammon@
wynnwilliams.co.nz
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BALANCING EFFICIENCY
AND RISK
Franchise Management
GENERATIVE AI
& FRANCHISING: