Creating Franchise Friendly Documents

The requirement when franchising your business is to have a set of documents that layout in a particular format your obligations and responsibilities to a franchisee. The reason behind having franchise documents is so that there is transparency of your franchising company and well-defined expectations. In order to meet regulatory requirements when creating such franchise documents, the information you are required to disclose has to be presented in a pre-defined format (to learn more about franchise documents read “What are the Elements of a Franchise Disclosure Document?”). You may be surprised to learn that many franchise documents are complicated to read. While these documents may cover the minimum requirements, you wonder if they are written to impress OR written to be understood. Then you ask yourself, “Can I still adhere to the required format and create franchise friendly documents when franchising my business?” The answer is YES, of course you can! It depends on the philosophy of the author who you work with to get them done and of course the franchise attorney leading the charge. It is pretty clear there are two philosophies when it comes to creating franchise friendly documents. Let’s touch on these now.

Shorter is Better

One philosophy when it comes to franchise documents is the shorter the better. This does not always equate to being franchise friendly but more so a perceived benefit to the prospective franchisee because there is not a lot of material to read. People who subscribe to this philosophy believe that a shorter franchise document is advantageous because it is a tool when it comes to awarding franchises (read about how we help steer you in the right direction when you are ready to award franchises). Fact (and affirmed by franchise examiners): the franchise document is not a sales tool. Shortening the types of disclosures that are being made to a prospective franchisee such as: the obligations of the franchisor, obligations of the franchisee and other elements that ultimately define the relationship all may lead to lack of understanding and lack of clarity.

Another perceived benefit of having a shorter franchise document is you can keep things ambiguous. In other words minimizing obligations and leaving things open for interpretation. While this may sound good (especially at the onset when it comes to providing prospective franchisees with your franchise documents) it won’t be so good for your pocketbook later. The more ambiguous the document, the less likely it is understood and when it is not understood then the prospective franchisee is compelled to seek the advice of an attorney to get it reviewed. This sparks an arsenal of clarification questions that ultimately costs you time and money (all before the prospective franchisee commits to purchasing a franchise from you, if they do at all). The BIGGEST proponents for the shorter is better philosophy tend to be franchise brokers and some franchise attorneys. Why some franchise attorneys? Because they can later bank on charging you additional fees for responding to questions from your applicants and their attorneys… questions that are generated from these documents (it is a way for these attorneys to keep you handcuffed and dependent on them).

More Detail is Better

Another philosophy when it comes to franchise documents is the longer the better in other words more detailed. This does not necessarily mean that your franchise documents are a result of cutting down a tree but they are a bit more robust, not ambiguous leaving little room for interpretation. As a result of being a bit more robust, the franchise documents provide greater protections for you and have a tendency to hold up in court better if a claim were ever to be filed against you. Think about it… a more detailed franchise document that takes the time to outline: obligations, trade secrets, indemnification, termination responsibilities, etc. leaves little for interpretation. The trick is to have these types of things written in an easy-to-read franchise friendly format. Not to mention easier approval in franchise registration states, when that time comes (see “Franchise Registration: Some States are Tougher”).

Another benefit to a more detailed franchise document is that while the prospective franchisee has a bit more to read in a more detailed document chances are greater that it is better understood. If your franchise documents are able to adhere to regulatory requirements and also convey details without going overboard in an easy-to-read format it is a win-win. A win for prospective franchisees because they understand it. A win for you because the greater the likelihood that your franchise applicant (in conjunction with how you execute and your interactions with them) will not be inclined to seek further assistance from an attorney for clarification. All of which saves you time, money and results in the prospective franchisee coming on board with you quicker.

We believe one of the keys to successful franchising are your franchise documents; how well they are written and how easily they are understood (learn more about our strategy when structuring your franchise document). The franchise document you present to someone is a reflection of the type of relationship that the prospective franchisee can expect to have with you. Think about this from the prospective franchisee’s perspective… if you are about to embark on a long-term relationship and you are given a document that is complicated, ambiguous and not very clear to understand; how comfortable are you going to be to want to enter into that relationship? We do not subscribe to the philosophy that shorter is better but ore of a hybrid approach. One of the hallmarks of our franchise development program is that the documents we prepare are written from a franchise friendly perspective so they are not very long, clear and are easy to read and understand. To learn more about our franchise development program (see a quick outline of how we franchise your business), including how we work with you to put together your franchise documents, please do not hesitate to call us directly at 1-877-615-5177 or simply send us your contact information. We will be happy to answer ALL of your questions.