Franchise Transactions Due Diligence
According to Gartner, “more than 80% of legal and compliance leaders tell us that third party risks were identified after initial onboarding and due diligence, suggesting traditional due diligence methods in risk management policy fail to capture new and evolving risks.”
Traditionally, due diligence for franchise transactions focuses on the franchisee’s financial history, personal background, and business experience. However, the critical areas of cybersecurity and data regulatory compliance are often given minimal attention, if any, despite potential significant risks.
Franchisees can be an attractive target for cyber criminals because they provide potential access to a large network of customers and businesses. A cyber attack that compromises customer information affects not only the targeted franchisee but also the franchisor and other franchisees within the network who may suffer reputational damage due to their association.
Some notable instances where cybersecurity issues significantly impacted franchises, including:
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Target's data breach in 2013, which cost the company $290M and may reach $1B in total.
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Wendy's settlement of $50M for a 2015 data breach that affected 1,025 of its franchise locations.
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Marriott International, which was fined £18.4M two years after acquiring Starwood Hotels for an undiscovered data security incident preceding the acquisition.
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Franchisors should provide training and resources to help franchisees establish and maintain cybersecurity and data privacy policies and practices.
Our Process
We customize our approach to address cybersecurity and data privacy regulations based on factors like location, industry, business type, and data type. We conduct a thorough analysis to develop a risk profile and evaluate third-party and supply chain vendor management, technical infrastructure, asset inventory, applicable cybersecurity and data privacy regulations, and organizational policies and procedures. Our goal is to provide franchisors with a complete understanding of potential risks and help them gain a comprehensive view of franchisee security and compliance risks.
Our Value Proposition
Our Franchise Due Diligence services help franchisors and franchisees evaluate, quantify, and reduce cybersecurity and data privacy risks. Our approach combines the expertise of our compliance and technical teams to provide a comprehensive view of the risks within tight timelines and compressed schedules. We leverage the skills of our experienced engineers, cutting-edge software, and real-time intelligence on emerging threats for a thorough approach. Cybersecurity and data compliance is just a part of doing business in today’s world; it’s no longer a nice-to-have but a must-do for franchises looking to be successful.