Beware the Franchise Operation Manual!

Jan 13, 2017 | Commercial Contracts, Start Up

What is a Franchise Operations Manual?

A Franchise Operations Manual is just that, it is a manual or book that sets out how the franchise is to operate. Generally it will include items like:

  1. Customer engagement – how to deal with customers, how they should be spoken to, how quickly they should be spoken to when they come into your store, obligations to upsell additional services or goods to them ‘for $2 we can upsize your coke’ etc.
  2. Franchise presentation – how often should the franchised store, shop or restaurant (etc) be cleaned, what should be placed on the tables, what are the rules in relation to signage for promotions and a whole lot of other stuff.
  3. Trouble Customers – how to deal with customers that make a complaint, who the complaint should be sent to, how should the complaint be dealt with, what are some possible solutions to the complaint etc etc.

So as you may appreciate, based on the above examples, the Operations Manual sets out how to run the business, what is expected of franchisees etc etc.

But what we wanted to talk about is why you should beware of the Operations Manual!

Why you ask? Given the sorts of information it contains what could be an issue?

The Problem with Operations Manuals

Well the issue is this:

  1. Franchise Agreements generally say that the franchisee must act in accordance with the Operations Manual;
  2. Many franchise operations manuals impose substantial obligations on franchisees;
  3. Many Franchise Agreements allow the franchisor to amend the Operations Manual whenever they feel like it; so
  4. The net effect of this is that the franchisor can basically impose any additional obligations that it likes on franchisees by simply updating the Operations Manual, which it is contractual able to do! Sneaky hey!?

So beware the Operations Manual, as it could be used to impose substantial additional obligations on you as a franchisee!

Now we note given the introduction of the Unfair Contracts Legislation (November 2016) the ACCC has said that where a franchisor gives itself unfettered discretion to alter substantive obligations of franchisees (i.e. by amending the Operations Manual like in the example above), there is a significant risk that such a provision in the Franchise Agreement allowing this to occur may be found to be unfair and unenforceable.

However you don’t want to have to go to court later to have such an unfair clause deleted or stricken from your Franchise Agreement based on it being unfair. It would be best to get amended or deleted before you even sign the agreement.

So as we like to say, ‘Do it once and do it right’!

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