Can We Make System-Wide Changes through an Update to the Operations Manual?

Can We Make System-Wide Changes through an Update to the Operations Manual

One fundamental challenge that franchisors of all sizes face is how to implement system-wide changes and require franchisees’ compliance with such changes. There are several ways to make system-wide changes and one of the easiest ways to implement such change is to update the operations manual.

  • First, you must ensure at the outset that your franchise agreement requires compliance with all changes to the operations manual.
  • Second, it is important to garner franchisee support behind any system-wide changes to make the process go much more smoothly.
  • Third, it is important to have a well thought out development plan for any system-wide change prior to its introduction and implementation.
  • Lastly, there are certain changes that are appropriate to implement through the operations manual and other changes that require large-scale overhauls (i.e. new franchise agreements or addenda to existing franchise agreements), as further outlined below.

So the big question is, what types of changes are appropriate to make through an operations manual update? You should focus on those changes that are “reasonably foreseeable”, for example, changes to suppliers, lines of products, logos, certain build-out specifications and things of that nature.

You want to ensure that you do not use the operations manual as a back-door to implement large-scale system-wide changes that are material to the franchise relationship.

For example, you should not implement

(a) new territorial policies that lessen a franchisee’s territorial rights, or

(b) new fees that substantially modify the relationship the franchisee purchased.

It is natural to assume that a franchise system will develop and change over time but changes go beyond the scope of the original franchise relationship if you are altering material portions of the franchise agreement. If that is the case, it is best to examine other avenues for implementation of such changes.