UK: Getting The Most From Customer Data – A Key Asset For Franchising Growth

Last Updated: 23 December 2013
Article by Gordon Drakes, Victoria Hordern, David Naylor and Chris Wormald


Increasingly in the future, when an international franchising business is asked to identify its most valuable asset, it may well point to its customer data. Inexhaustible developments in technology and the rise of technology for the masses mean that businesses now have access to information about how their customers tick as never before. Whereas a business might previously have run a marketing campaign based on focus group feedback, now it can target its marketing based on how individuals visit its website and use its app (on tablets as well as smartphones), as well as how they rate and recommend it on social media. Moreover, a business can perform this analysis of customer interactions on staggering amounts of data.


The world markets have opened up and franchisors have looked to internationalise by exploring new territories, frequently in the Far East. The opening up of certain 'goldmine' territories (eg, China) to franchisors offers the promise of substantial growth. In many of these territories, major franchisors' brands are already widely known and an engaged customer base already exists. In other territories and for many brands, it will take more time to build up a loyal customer base, and franchisors may look to social media and their online presence to generate interest and gauge reaction.

In the offline world, franchisors will increasingly want to provide the same in-store experience to a loyal customer, whether that customer is in a franchisee store in Manchester or Moscow. Franchisors that deliver a seamless service in which customers feel special and customer needs are anticipated based on astute data marketing and analysis can reap a massive loyalty reward. Effective use of customer data can exploit the personalised offline experience in an online setting. It can enable franchisors to respond more quickly to customer trends and develop an integrated approach to marketing and brandbuilding campaigns. Franchisors that embrace this approach should ensure that teams are structured around the customer and not just the channel, thus guaranteeing more integrated collaboration between the corporateowned business and franchise-owned business.

Data protection rules on a global stage

Any handling of customer data is likely to trigger the application of data protection and privacy rules. Issues of intrusiveness and data security concerns have increasingly led to more countries legislating for data protection. For instance, in recent months Singapore and South Africa both passed data protection laws. However, the standard that remains the strictest is that set out in the EU Data Protection Directive (95/46/EC). As those who have dealt with the Data Protection Directive before will know, there are restrictions on the transfer of personal data outside the European Union. This restriction can be perplexing for international businesses that are keen to push into new geographies such as the European Union. Nonetheless, there are ways of meeting the data transfer compliance requirements, such as through the comparatively new innovation of binding corporate rules, which a number of truly global companies have now adopted (including, for obvious reasons, a major international hotel group). What makes the binding corporate rules solution so unique is that it establishes a framework for global data protection compliance inside a multinational organisation that is consistent, even though it crosses borders, and thus builds trust – it is not concerned solely with the technical requirement to transfer personal data legitimately. Being 'joined up' and consistent is also becoming more necessary than ever before, particularly given the risk of brand damage and new legal liabilities emerging under new legislation. Customers could take fright and opt out in droves, depriving franchisors of the ability to mine and exploit these new communications channels. Getting this right will soon be seen as absolutely essential for consumer-facing brands in most sectors, and not just the obvious ones.

Gaining customers, building Trust

Compliance with data protection rules – which may have been seen in the past as an obstructive, legalistic requirement – can actually be central to building trust and loyalty with individual customers. An individual who understands how his or her personal data is being used, and who has an element of choice about how it is used, is much more likely to share that data with an organisation. On the other hand, because of greater consumer awareness and concern about the potential abuse of customer data, an organisation that is cagey about its collection and use of personal data or that gives individuals little choice may well lose customers. In a technology-driven age where more people are aware of their privacy rights, a brand that demonstrates that it 'gets' privacy will have an advantage over its competitors.

Who must comply with data protection rules?

In the European Union, the law places compliance obligations on data controllers – those organisations that make decisions about personal data collection and use. A data controller may engage service providers (known as 'data processors') to carry out some of the data processing on its behalf, but the data controller is ultimately responsible. Data controllers have quasi-ownership rights over the personal data collected, so it is crucial in any franchise relationship to establish who the data controller is and whether there is more than one. For instance, the franchisor will nearly always be the data controller of customer data, but a franchisee may be either a data controller or a data processor, depending on the arrangement between the parties. The franchisor and franchisee are usually independent data controllers – that is, they both have rights to access and use the personal data, but for their own separate purposes. A franchisee may be a data controller of customer personal data even if the franchisor lays claim to IP rights in the data. The important thing is to ensure that the parties agree on their roles and that, to the greatest extent possible, this is documented in the contract.

What does data protection compliance look like?

EU law will apply to organisations that are established (ie, operate a business, branch or subsidiary, including a franchise) in an EU member state and collect customer data. An organisation caught by EU law will need to put in place processes that meet the requirements of local law, including:

  • registering with the local data protection authority;
  • providing notices to individuals;
  • obtaining marketing consents;
  • granting access to data; and
  • ensuring appropriate data retention and data security.

Certain EU jurisdictions have slightly more prescriptive rules in some areas – for instance, Spanish law sets out very specific requirements on data security. In particular, franchisees and franchisors will want to understand the rules around marketing and how they can best use technology to connect with their audiences.

Managing franchisees

A franchisor will also need to consider its strategy for managing franchisees and, in particular, what rights it has over customer data held by the franchisee. If a franchisor wants the right to control e-marketing campaigns for all customers, its franchisees are likely to be required to share access to customer databases with it as a matter of course. If this is the case, the parties will need to think carefully about what customer consents are required. Alternatively, a franchisee may want a certain amount of discretion to run local marketing campaigns suited to the specific territory (eg, a promotion for Chinese New Year).

While perhaps not an issue to dwell on at the beginning of a franchising relationship, the franchisor will also need to consider what happens to customer data where:

  • one party breaches the franchising agreement so that it terminates;
  • the franchising agreement expires; or
  • the franchisor or franchisee is acquired by a third party.

A franchisor will usually want to ensure that a former franchisee cannot compete in the market with the new franchisee, and should thus include a mechanism in the franchise agreement to regulate the ongoing rights to use – and the obligation not to use – customer data. Competition laws should be taken into account in ensuring the effectiveness of such restrictions.

Loyalty schemes

The success of various loyalty schemes has highlighted the fact that people are prepared to give away access to much of their data if they receive a benefit in return. Loyalty schemes are not in themselves a new phenomenon, but new technology has given companies much greater access to information about customer behaviour and preferences. Franchisors and franchisees can take advantage of the new insights obtained through 'mining' the data captured by loyalty schemes to get to know their customers and provide them with benefits which keep them loyal. It is significant that the company behind one of the most successful UK loyalty schemes – Aimia, which runs the Nectar card programme – developed a set of data values (known as the Transparency, Added Value, Control and Trust (TACT) Rules) that places consumers at the heart of its data management activities. Good privacy practices can enhance trust and brand recognition for franchisors – and the deeper the relationship that the franchisor builds with its customers, the greater the rewards.

Multi-channel approach

Now more than even before, a franchisor can engage with customers across a variety of channels. Franchisors will be keen to ensure that, as they expand, their online presence remains consistent and on message. However, websites that target particular geographies (eg, by providing web pages in the local language or local currency) should increasingly think about compliance with local data protection requirements. For instance, the privacy notice on the website may need to be amended to comply with local law. Likewise, franchisors should consider what happens to the customer data collected through that website. Will the franchisor share it with the local franchisee so that it can target the customer? If so, does the franchisor need to obtain customer consent to do so? Of course, a franchisor can choose to give its franchisees the freedom to modify the relevant web pages to reflect the local market. There is emerging evidence that this is a particularly successful model, although franchisors will still ultimately want a significant degree of control over how the country franchisee runs the content and engages with customers. Privacy and data protection rules are still adjusting to the rapid growth of apps, but this will continue to become an extremely popular way for individuals to purchase goods in the future – take the huge success of the Domino's Pizza app, for example. Tech-savvy consumers (especially the youth market) will expect to be able to interact with their favourite brands from their smartphone or tablet. Franchisors that can spot the best ways to engage with customers through technology have the potential to gain the most.

Customer data in the cloud

It is no surprise that a number of drivers have led companies to use cloud services to store their customer data. The drive to reduce costs and the need for greater data security resilience (typically found in highly sophisticated tech companies offering cloud services) are just two factors that have encouraged businesses to move to cloud services. All franchisors (whether operating global businesses or tech-savvy domestic businesses) that involve the collection and analysis of customer data are thus likely to consider storing data in the cloud. Where the customer data is subject to EU data protection rules, franchisors should consider how to meet their obligations and reduce the risk of non-compliance. Many, if not most, of the big cloud players are based in the United States and have 'safe harbour' status, allowing EU data to be transferred to their companies in the United States, although a number also now have clouds limited to the European Union only. Franchisors engaging cloud providers should ensure that the contract provides sufficient reassurances about data security and access to the data, particularly if franchisees will be given some level of data access.

A helping hand to increase customer trust and interaction

Although there will be some sceptics due to the bad press that data protection has received in the past, good data protection compliance – when used together with other emerging technologies and customer engagement techniques such as social media and messaging technologies – can be a significant enabler for businesses by increasing customer trust and encouraging interaction. This can help franchisors and franchisees to know more about their customers and thus open up new and enhanced marketing strategies. The spread of privacy and data protection rules globally and the likely adoption of a new data protection regulation in the European Union will again emphasise the need for businesses to comply. However, compliance should be seen not as a drawback, but rather as a means of exploiting customer data in the most effective way possible. A failure to take data protection compliance seriously can result in serious fallout for companies, whether that entail a loss of reputation, compensation claims or regulator fines. A number of major companies have learned this to their cost when their noncompliance with the rules became public. It is likely to be only a question of time before a franchisor and its brand is similarly caught out.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Gordon Drakes
Victoria Hordern
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.