Even though training is the first channel through which the DNA of a franchise concept can be replicated, it is not easy to set up and properly monitor training programs within a multilevel organization (such as a franchise network).
Proper training for each person's role is just as necessary for a network's managers and employees, as for its franchisees, their executives, their managers and most, if not all, of their employees.
One risk, specific to multilevel organizations, is that of "playing broken telephone", whereby the quality of the message is diluted from one person to the next until it becomes completely distorted and no longer achieves its purpose.
It is therefore not surprising that a franchisor could find itself with performance deficiencies and problems after having dedicated significant resources to the design and development of appropriate relevant training programs.
For most franchise networks, deficiencies and weaknesses with respect to point-of-sale performance will quickly have a significant impact on the profitability of the franchisee … and of the franchisor.
It is thus important for your franchise agreement, as well as your operating manual, to include clear and complete training provisions, not only for each franchisee, but also for the managers and employees of each franchised business.
Here are some important provisions that you should find in a well-drafted franchise agreement.
Core training commitments
Your franchise agreement should first clearly stipulate the franchisor's core training requirements, both for the franchisee and for its executives, its managers and all of its employees.
These provisions should cover both initial training (at the start of the franchise, at the time of each executive's or employee's hire, at the time of any sale or transfer, and at the time of any other change within the franchisee) and continued training.
These core training covenants should more specifically include the following: (a) participate in the training programs, (b) complete the training, and (c) pass the training. The provisions addressing these commitments should also provide deadlines for compliance, as well as consequences for non-compliance.
Naturally, as a counterpart to these franchisee's commitments, there should be one or several provisions describing, in general terms, the main training programs (initial and continued) offered by the franchisor or by persons designated by the franchisor.
Specific training covenants in the event of performance deficiencies
Your franchise agreement should also provide for the right of the franchisor to prescribe specific training programs (for the franchisee itself as well as for one or more of its managers or employees) in the event that the franchisor deems such a training appropriate to remedy to any performance deficiencies or difficulties within the franchised business.
Training expenses and costs
Although training is more of an investment (which is often very profitable in the medium and long-term) than an expense, the fact remains that it entails direct costs (participation costs, trainer compensation, space rental, training materials costs, travel and lodging, etc.) and indirect costs (wages of those being trained).
The franchise agreement should therefore include specific provisions with regard to responsibility for both direct and indirect costs, whether they be for initial training, continued training, or a particular training.
Technology tools and platforms
More and more franchisors are using technology tools and platforms (for example, online training, webinars, training portals, pre-recorded training modules, CDs, etc.) to provide training to their franchisees, and even more often to the employees of franchised establishments.
It is thus important for the franchise agreement to include some specific provisions concerning those technology tools and platforms, in particular to (a) protect the intellectual property rights of these tools and platforms, (b) maintain their confidentiality, (c) limit their access to the persons who have to be trained, (d) provide for their installation, use, and continuous update by the franchisee, (e) establish certain means of verification that the training was actually successfully completed by the persons being trained, and (f) provide for the costs of using these tools, if applicable.
In certain cases these provisions could also address equipment and software specifications required of the franchisee, security and access methods to training tools and a dedicated training facility in the franchisee's place of business.
Consequences of failing a training
Another topic which should be included in the franchise agreement, and which is all too often forgotten, is that of the consequences for failing a training.
These consequences will differ depending on whether this is an initial training, a particular training, a continuing training, or a training required at the time of a change within the franchisee (for example, when the franchised business is sold or following the death of the franchisee).
The consequences will also vary depending on the person who has failed the training (whether this is the franchisee herself/himself, a manager, an employee, or a potential buyer).
Among the possible consequences are (a) termination of the franchise agreement (particularly in the event of the franchisee's failing the initial training), (b) refusal to consent to the transfer or sale of the franchised business, (c) refusal to consent to the choice of or replacement for the main operator or manager, (d) an obligation to retake the training, (e) the franchisor designating a person to temporarily manage the franchised business, or (f) the obligation to terminate the employment of a person who has failed the training (in this last case, it is necessary to pay careful attention to how the provision is drafted to avoid the franchisor becoming, from a legal point of view, the employer of the franchisee's employees by reason of its right to demand their dismissal for having failed a required training).
The topic of training is too often approached only superficially at the time a new franchise agreement is drafted.
However, it is a key element in transmitting the franchisor's know-how to the franchisee and the first channel through which the DNA of a franchise concept can be replicated.
This is a topic which must therefore be seriously considered and which merits dedicated provisions which are clear, complete and well adapted to each franchisor's reality (as well as to its resources).
Fasken has all the necessary expertise and resources to help you draft agreements that are complete, appropriate and adequately protect your rights.
