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The Franchisee and the Operation of the Franchise

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If you have ever read through a franchise agreement, and you were wondering where all the nitty gritty details were, like how long you should be cooking the fries for or how particular technical systems function – stop. You shouldn’t be looking in the franchise agreement, but rather the operations manual. Most franchisees are not aware that an operations manual exists as the franchisor does not provide them with one at the outset of entering into a franchise. Requesting a copy before you sign a franchise agreement is a significant step to understanding your possible obligations. We set out below how the manual guides the operation of the franchise.  

It May Form Part of the Franchise Agreement

Although the operations manual is not a legal document in itself, in many franchise agreements, it is commonly cited in the substantive provisions. This means that although you do not need to read or sign the operations manual, you could actually still be bound by the terms and conditions within it! As this could be the core basis at which you operate the franchise system, it would be prudent to request a copy preferably before you sign the franchise agreement.

What Should I Be Expecting in the Operations Manual?

The operations manual basically provides you with day-to-day instructions on how to operate your business. It can cover numerous areas, including:

  • How to price your goods/services;
  • Customer service strategies;
  • Marketing strategies;
  • Cleaning standards;
  • Reporting requirements; and
  • Performance guidelines.
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What Should I Ask the Franchisor About the Operations Manual?

Franchisors are typically protective of their operations manual as they contain important trade secrets, intellectual property and details about a franchisor’s business system. It is important to cite the document and understand in detail how the franchise actually operates. There are some questions you could keep in mind while reviewing any operations manual:

  • Are there any minimum performance requirements?
  • Will you be provided with guidelines on how to use the intellectual property?
  • How will you know which laws you need to comply with as a franchisee?
  • Will you be provided with guidance on how to deal with customers?
  • Are there price recommendations or obligations?

Key Takeaways

Once you have a clearer picture of your obligations as a potential franchisee, you can be more confident that you are signing the agreement with a full understanding of how you should operate. Don’t rush into purchasing the franchise and always request a copy of the operations manual, so you understand the extent of your obligations.

Questions about your franchise’s operations manual? Ask our franchise lawyers on 1300 544 755.

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Kristine Biason

Kristine Biason

Practice Leader

Kristine is a Practice Leader in LegalVision’s Commercial Contracts team. She drafts and negotiates commercial contracts, in particular, supply, distribution and manufacturing agreements used internationally. She also assists clients with their information technology agreements, often aiding clients on their business journey by determining the relevant agreements needed for their business, whether that be a SaaS agreement, reseller agreement or a managed services agreement. She has previously worked in the Franchising team and has provided clients with advice on setting up franchises and purchasing franchises.

Qualifications: Bachelor of Laws, Graduate Diploma of Legal Practice, Bachelor of Media, Macquarie University.

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About LegalVision

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