When you enter into a franchise you will be required to comply not only with the terms of the franchise agreement which can be an extremely lengthy and detailed commercial contract, but you will also be required to comply with the operations manual and the franchisor’s instructions. It is central to franchising that franchisees do what they are supposed to do and don’t do what could damage their business. This is not because a franchisor wants to pressurise franchisees but franchisors want to have successful franchisees and can only have successful franchisees if franchisees are fully compliant with all requirements in the agreement, manual and the franchisor’s instructions.
In most commercial relationships the obligations on each party are clearly set out. This is only partly true in franchising where the franchisor can vary the manual at any time as well as issuing instructions to franchisees with which franchisees must comply even if they believe those instructions to be unreasonable.
Franchisors will regularly monitor franchisees compliance with obligations by requiring management and financial information. Also members of the franchisor’s head office team will visit franchisees on a regular basis not only to provide assistance and deal with issues that might arise but also to ensure that franchisees are complying fully with all of the requirements of the franchisor. If a franchisee is not compliant then that franchisee can expect a formal notice from the franchisor to improve. This is not “big brother” at work but is a sensible way to operate a franchise network.
Written by: John Pratt
Partner, Hamilton Pratt