Advice for Future Franchisors – Part 3

Next on the list of to-dos is all the prep work, a.k.a. paperwork. During the 18 months of evaluation on your trademarks, you need to spend time with a qualified Franchise Attorney. This work may also take months, but will vary widely from client to client. The prep work consists of all the documentation that is needed in a franchise system. The first thing you will need to do is establish and write a legally sound Franchise Operations Manual. You want to require enough control that the franchisee will create a duplicate of your successful business, however not too much control that their accidents or incidents could create legal liability for you or your company. Recent court decisions have held franchisors liable for rather large amounts for such accidents. One such court decision dealt with a franchisee that had placed a sign at the top of the stairs leading up to their restaurant. A customer climbed the stairs, and upon reaching the top of the stairway, stepped onto a platform then turned around to read the sign. After reading the sign the customer took another step toward the stairway, we assume they forgot they were there, and fell down the stairs. A judge held the franchisor liable for the injuries to the franchisee’s customer. Why? Because the Franchise Operations Manual stated that the franchisor would approve the location of signage. The amount of the liability accrued to hundreds of thousands of dollars. We can not express enough how important ensuring that the Franchise Operations Manuals are legally sound. There are many human resource type companies that can write the Franchise Operation Manuals for you, and even though they have a lot of experience, nothing can replace an evaluation by a qualified Franchise Attorney, which may potentially save you thousands of dollars in the long run.  If you would like to speak to a company that may help you draft your Franchise Operations Manual, we can provide a list of qualified companies. After the Franchise Operations Manual is done, or possibly concurrently with it, the Franchisor should next create all the business forms that the franchisees will be using. These include accounting and reporting forms, logs for advertising expenses, material order forms, whatever applies to your business. Stay tuned later this week for Part 4 of our Advice for Future Franchisors series, and always remember that we welcome comments and if you would like to contact our offices to discuss franchising or to get a list of qualified companies to help you draft your Operations Manual, we can be reached in our Tampa, Florida office at 813-625-9590 or our Austin, Texas office at 512-535-0090.