Shadow AI runs rampant in many franchise networks, leading to inconsistencies, data silos, and non-compliance. To prevent these issues from snowballing any further, franchisors must balance convenience with governance. In this article, we explain how to clamp down on shadow AI, adopt secure alternatives, and strengthen compliance with robust AI governance frameworks, policies, and training.
22% of franchisors name AI integration as their top technology priority, according to recent Claromentis research.
But, for some, this has come too little too late.
Franchisees are already harnessing AI for daily tasks, all in an effort to streamline operations, reduce busywork, and cut costs. Our data shows that 50% of teams use AI chatbots, 25% use AI search, and 20% use AI auto-summaries.
The trouble is, many of these tools are unapproved and may pose serious compliance and data security risks.
As it stands, 13% of franchise leaders report frequent use of unapproved or “shadow” AI. But, bear in mind, this percentage only reflects the usage they’re aware of. Underneath the surface, shadow AI likely runs much deeper.
Here’s why this is a problem you can’t afford to ignore — and how you can fix it with a robust AI governance framework.
Franchisees often make technology decisions independently, guided by whatever helps them save time, improve customer services, and solve pressing operational problems. To a well-meaning franchisee, using ChatGPT to draft a social media post, rewrite a SOP, or fix a mechanical problem just makes sense.
However, while open AI tools are undeniably convenient, they’re also inherently insecure. Confidential information can be used to train underlying models. Hackers can override conversations and trick AI systems into leaking data. Generated output often references reams of information from across the internet, rather than your approved materials.
The knock-on effects can be damning; incongruous brand messages; improper equipment usage; compliance risks and data breaches; and plummeting sales.
But that’s not all.
The ease and accessibility of shadow AI means new tools can enter your network very quickly. Without a central AI acceptable use policy and governance framework to hold franchisees back, each unit may experiment with its own model, prompts, and training data.
This doesn’t just increase the risks mentioned above. It can fragment your data further, making it difficult to ascertain compliance, measure performance, and ensure operational consistency.
While it might seem like a quick fix, outright bans are never the way to go. Franchisees will continue to use the tools that make their lives easier, they’ll just stop being open with you about it. Instead of preventing shadow AI usage, you’ll only push it further underground.
As well as increasing risks, this can breed resentment and damage your network relationships. Once trust is severed and communications break down, you’ll find yourself in a stickier situation than you were in before.
The solution isn’t to implement sweeping bans. The solution is to provide HQ-approved AI tools that are faster, easier, and safer than open AI alternatives.
Approved AI tools must circumvent the risks of consumer AI while still providing the benefits your franchisees have come to expect.
To illustrate what we mean, let’s examine what a good AI chat assistant should accomplish.
A secure, effective, and governable assistant should:
All this being said, technology is only ever as good as the foundations you build it upon.
To completely mitigate any AI risks, you must uphold your approved tools with a watertight AI governance framework.
What tasks do franchisees currently use shadow AI to streamline? If they don’t use AI, identify the recurring pain points each unit faces. Perhaps it takes them too long to find the information they need to resolve customer queries. Maybe they struggle to understand complex policy updates or standards.
Make a note of these use cases and the tools being used, if applicable. These will form the basis of your first AI pilots.
From here, identify use cases that carry the greatest risk. Are franchisees inputting sensitive customer data into AI systems? Are they using AI to make important decisions or judgements? These are the areas that will help your security teams rein-in problematic usage and write more effective policies.
At this point, you can begin to investigate AI tools. As we stated earlier, it’s often more convenient and cost-effective to choose tools that exist in your current tech stack.
If you decide against this — either to develop your own model or adopt an external tool — make sure you rigorously assess the risks involved. Bring your legal, security, data, and executive teams into the conversation to ensure you cover all bases, and assign ownership to strengthen compliance and accountability.
Once you’ve compiled a list of acceptable use cases and approved tools, draft clear AI policies for your franchisees.
Your guidance should explain:
Before rolling out your AI tools, build a solid governance foundation.
Set the appropriate permissions settings in your software and test its functionality across every role. Does the AI cite its overviews? Does it “hide” sensitive content for users with fewer authorization rights? Can security and compliance teams access an up-to-date audit log?
Then, distribute your approved AI acceptable use policy across your franchise network and enforce every user to read and accept the contents. When everyone understands their obligations, they’re more likely to comply with them.
Getting to grips with new tools can take time and effort — no matter how convenient the tools are.
Investing in training can put teams at ease, increase adoption rates, and improve compliance. Blend bitesize e-learning courses with more hands-on virtual workshops and walkthrough sessions. During these sessions, you can demonstrate how your approved AI is more useful and secure than consumer alternatives.
Periodically review your AI tools and audit logs to identify usage patterns and potential risks. To get more qualitative feedback, create dedicated discussion forums and distribute anonymous surveys across your network.
AI is constantly evolving, which makes shadow AI a continual risk. Gathering this feedback can help you pinpoint non-compliance before it spirals out of control.
For franchises looking for secure, effective, and governable AI, Claromentis comes out on top.
Our franchise management software (FMS) contains a suite of AI tools, including:
While useful in its own right, the true power of our AI lies in the breadth of our solution.
Our FMS acts as a central operating system for your franchise. It centralizes all your policies, SOPs, training, documents, processes, performance data, staff directories, communications, and more. The AI indexes all of this knowledge, making it an instant expert in your franchise model.
We’ve also baked security and governance into these capabilities, so you never have to worry about fabricated overviews, unauthorized content access, or data breaches.
As standard, the AI:
In addition to this, you can harness Claromentis’s intranet, internal communications channels, policy management application, and learning management system to build an effective AI governance framework. Communicate tool changes, share trackable e-learning courses, and distribute and enforce AI acceptable use policies — alongside your AI tools, and all within the same platform.
AI is now part of the franchising tapestry; it’s woven into every corner of your network, whether you see it or not.
This presents a real opportunity to speed-up daily operations, boost franchisee engagement, and improve compliance. But only if you take out the risk.
Effective AI requires structure and oversight. That means clamping down on shadow AI usage, adopting secure (and effective) alternatives, and building robust governance frameworks.
To find out more about how Claromentis can help your franchise network implement AI securely and at scale, book a tailored discussion call with one of our experts.