Questions about franchising and the law
In this section, experts answer the questions most commonly asked about the legal requirements and stumbling blocks for franchisors and franchisees.
What subjects are regulated by franchise manuals?
The system manual describes in detail how the franchise concept is to be realised. It includes instructions to facilitate the franchisee’s work as a manager. Clarity is enhanced by forms, graphics and planning data relative to different aspects of the management of the business. The franchisee may refer to the manual at any time to check and see if his business performance complies with the terms of reference and standards of the franchise system. Whilst it is true that by the nature of things, the various franchise systems in specific lines of business have little in common with each other, there are a number of basic requirements which should be laid down: thus the manual should include, among other things, statements concerning business philosophy, corporate identity, decision concerning location, personnel policy, business organisation, marketing initiatives, both introductory and further training of managers, quality management, planning and financial controlling.
- Description of the business in general
- General organization of the business
- Personnel matters
- Finance, administration, IT
- Technical guidelines
- Tips on potential problems or sources of error
- A ‘who’s who’ list of those in the franchise system.
If for whatever reason the franchisor has not brought out a system manual, it is likely that the know-how specific to the system has not yet been laid out in a comprehensible and practical form.
The franchise agreement generally gives the franchisor the right to change the systems manual at any time. Care should be taken here to ensure that specific features of the franchise system that have been guaranteed by the franchisor in the franchise agreement cannot be changed against the wishes of the franchisee unless this has been expressly agreed on.
The search for franchisees should never begin before the framework of the franchise system has been established. Qualified candidates will be frightened off by inadequate manuals or a lack of manuals or by confused descriptions of the training courses. Franchise contracts can be legally disputed if the franchisor is unable to fulfil his tasks defined in the contract and by law. Franchisees will not receive public funds if the system’s contract and performance data do not fulfil the requirements.