As a franchisee, there are two main documents that tell you what you can and can’t do: the franchise agreement and the operations manual. You signed the franchise agreement when you purchased your franchise, so you know it’s binding. But, what about the operations manual? National franchisee attorney Jeffrey M. Goldstein explains.
Yes, the Operations Manual is Legally Binding
In short, yes, the operations manual is legally binding. You must comply with the terms of the operations manual; and, if you don’t, you will almost certainly hear from your franchisor. In most cases, your franchisor will likely give you an opportunity to come into compliance. But, if you significantly depart from your obligations, or if you get labeled as a repeat offender, then violating the terms of the operations manual could put your franchise in jeopardy.
How is the operations manual legally binding? The operations manual is legally binding because you agreed to comply with it when you signed your franchise agreement. In legal terms, this “integrated” the operations manual into the franchise agreement, so it is as if the terms of the operations manual are contained within the franchise agreement itself.
This is true even if you were not given an opportunity (or you declined the opportunity) to review the operations manual before you purchased your franchise.
Not only are you bound to comply with the operations manual in its original form, but also as your franchisor updates it “from time to time.” So, if your franchisor makes changes to the franchise system by updating the operations manual, you must adopt the changes—and you must do so at your own expense. If you have excess inventory that you can no longer sell, or if you need to implement a new point-of-sale (POS) system that you cannot afford, this is your problem, not the franchisor’s.
What if You Can’t (or Don’t Want) to Comply with the Operations Manual?
So, what are your options if you cannot feasibly comply with the operations manual? Or, what if you don’t think complying with the operations manual is the best way to grow (or even sustain) your business?
In most cases, you must find a way to comply if you want to keep your franchise. Whether this means taking out a loan, cutting staff or watching your sales drop, you need to do whatever it takes. While seeking a variance or concession might be an option, uniformity is a hallmark of the franchise system, and most franchisors will enforce compliance across the board simply because it would be an administrative burden not to do so.
With this in mind, if you are struggling to comply with your operations manual, you should consult with a franchisee attorney. From organizing with other franchisees to asserting unfair franchise practices, you may have a number of options available. An experienced franchisee attorney will be able to help you evaluate your options and choose the best path forward.
Request a Free Consultation with Franchisee Attorney Jeffrey M. Goldstein
Jeffrey M. Goldstein is a national franchisee attorney who has more than 30 years of experience advising active and prospective franchisees. If you need help making informed decisions, you can call 202-293-3947 or contact us online to arrange a free initial consultation.