THE FRANCHISE DOCUMENTATION PHASE  

If the company has made doing a good job at the planning stage the number one priority, franchise documentation goals will be apparent. Proprietary and intellectual property assets (like operating techniques, customer information, recipes, formulas and methods) need to be identified and protected. A trade secret protection program is developed and implemented. The name, logo and tag lines should have been previously registered as trademarks or service marks.   

Franchise operations manuals - Franchise operations manuals and training programs are developed, often from scratch, to impart business operating skills to the franchise owner as well as ensure uniformity of products and services. The franchise operations manual and training program curriculum must be drafted with a particular focus. Certain topics, chapters and policies found in manuals for a company-owned chain, for example, are entirely inappropriate in a franchise environment, creating significant liability (lawsuit) issues for the franchise division.  

I routinely find franchise operations manuals drafted by franchise consultants or do-it-yourself manual kits containing inappropriate chapters or topics. Not knowing where the bullets come from in franchise litigation, they proceed blindly ahead using "boilerplate" manuals where most (but not all) instances of "hamburgers" are changed to "tax returns."

The support aspect of the franchise relationship needs to be carefully considered, structured and reflected in the franchise operations manuals. Deciding who writes the franchise operations manual is a relatively simple question to answer, yet many new franchise companies also fall into a trap here.

Bewildered by the new business of franchising, with its legal requirements, franchise operations manuals, training programs, etc., they decide to “delegate responsibility,” usually to a high-priced franchise consultant who produces the operations manual and sometimes even the legal documents. Putting aside the practicing law without a license issue on the legal documents, does using someone to write your franchise operations manual who knows literally nothing about your business, ever make any sense?  

The best practice approach, developed over almost three decades of my writing, editing and reviewing hundreds of franchise operations manuals is based on common sense. Let the true “expert” in your business write the operations manual. And who is that expert? It’s usually the founder of the business or a handful of your management personnel who know the business inside and out.

It’s true, an outside franchise expert should be involved in the process, but this should be limited strictly to a planning and editing capacity – helping develop the overall Table of Contents, giving samples of writing styles and techniques, then reviewing each chapter after it’s drafted by you or your management team. This approach produces a professional, easy to use and update franchise operations manual. It also ensures the most efficient use of resources and talent.   

Franchise disclosure documents - Finally, and only after all of the above are underway, a Franchise Disclosure Document, similar to a securities (stock offering) prospectus, is prepared by competent franchise counsel and registered with various regulatory agencies to comply with applicable federal and state laws. This document can contain thousands of discrete disclosures within its twenty-three chapters and attached exhibits, and obviously needs to be prepared by a franchise attorney.

Doing it properly and with a balanced and fair perspective can help keep the company out of the courtroom later. In addition, a franchise registration process is required before any franchises can be advertised or sold in those 14 or so states having a franchise registration requirement. Having one firm author, edit and review all documents is not only cost-effective - it also avoids inconsistencies that can plague the franchise company as franchise legal pitfalls in the future (see discussion below).   

Next - Recommendations

<<Back - Next>>