One of the strategies that franchises often employ to maintain the integrity of the franchise system and insure control and consistency throughout the franchise company is to use a standardized confidential operations manual. Yet, we all know that the only thing that is constant use change. This is why the confidential operations manual in any franchisor company must be constantly updated. But, how do you know if all the franchisees have been diligent in updating their manual, so that everyone is doing everything the same way?

Many franchisors today put the manuals online in a company intranet system and the company itself makes the changes. This is a good strategy, however opens the door to downloadable theft of proprietary information. In our company we decided to use paper manuals, in binders, which were extremely hard to copy. To insure that our franchisees updated their manual, we decided to add a clause into our franchise agreements and make them agree prior to the commencement of their franchise to above all else keep the confidential operations manual up-to-date;

3.12 Confidential Operations Manual

3.12.1 Updating Manual And System

Franchisee acknowledges that the Service Marks, Confidential Operations Manual, and System, including any future amendments or modifications to them, have substantial value, and that the conditions, restrictions, covenants not to compete, and other limitations imposed by this Agreement are necessary, equitable, and reasonable for the general benefit of Franchisee, Franchisor, and others enjoying any lawful economic interest in the Service Marks, Confidential Operations Manual, and System.

Franchisor may change or modify any part of the Service Marks, Confidential Operations Manual, or System from time to time at its sole discretion. Franchisee will accept, use, and protect, for the purposes of this Franchise Agreement, all changes and modifications as if they were a part of the Service Marks, Confidential Operations Manual, and System at the time this Franchise Agreement is executed. Franchisee will bear all costs and expenses which may be reasonably necessary as a result of such changes or modifications. Under no circumstances will Franchisor be liable to Franchisee for any damages, costs, losses, or detriments related to of these changes or modifications.

Complete and detailed uniformity of the Service Marks, Confidential Operations Manual, and System under the varying conditions to be experienced by our Franchisees may not be possible or practicable. Therefore Franchisor reserves the right, at its discretion, to accommodate Franchisees special needs, or those of any other of our franchisees. These needs may result from the peculiarities of a particular site or location, density of population, business potential, populations of trade area, existing business practices, requirements of local law or local customers, zoning requirements, daytime population, landlord requirements or any other condition which Franchisor deems to be important to the successful operation of the franchisee's business. From time to time, Franchisor may allow certain franchisees to depart from normal system standards and routines to experiment with or test new products, equipment, designs, and procedures. In no event will any variance or testing be deemed a waiver of any of the Franchisor’s rights, or an excuse for Franchisee to not perform any of their duties under this Franchise Agreement. Franchisor may require Franchisee at any time to commence full compliance with the Confidential Operations Manual and the System. Franchisor will not be required to grant any variance to Franchisee under any circumstances.

In order to protect the reputation and the goodwill associated with the Franchisor’s trademarks and to maintain the Franchisor’s uniform standards of quality and operations, Franchisee must conduct their Franchised Business in strict accordance with the Confidential Operations Manual, as amended. Franchisee will update their manual via the Franchisee Forum intranet system, electronic mail, diskettes, CD-ROM’s, zip disks or other medium for their computer immediately upon receipt or insert new pages in their loaned copy of the Confidential Operations Manual. Any subsequently revised pages or old diskettes must be returned to Franchisor or completely shredded, burned up or destroyed immediately to insure confidentiality. Franchisor will advise Franchisee of what to do after each revision.

Franchisor may, at its sole discretion, revise any or all contents of the Confidential Operations Manual to convey to Franchisee any advancements and new developments in sales, marketing, operational techniques and other items and procedures relevant to the operation of the Franchised Business. There will be no additional costs associated with updating Franchisee’s loaned copy of the Confidential Operations Manual. This remains a service funded by Franchisee’s on-going royalty fees.

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Each franchisor will need to determine the best strategy, which will work best for their company. It is well advised to talk to franchise attorney about the legal ways to go about this. There is more than one strategy and each franchise company will need to determine what makes the best sense for them. Consider this in 2006.

Lance Winslow

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