Item 15: Obligation to Participate in the Actual Operation of the Franchise

Content: This describes how much direct involvement the franchisee is required to have in the actual operation of the business.

Purpose: By stating the terms explicitly, the franchisor may be preventing a future conflict with a franchisee over an issue of performance. If a franchise unit was found to be underperforming, one of the first things to be examined would be the question of the franchisee’s effort.

Tips & Advice: It may sound unusual to specify how much day-to-day participation is required to be successful, but because people may have various business interests, they need to know if the franchise company allows passive ownership. This declaration serves the dual purpose of giving the franchisee a realistic expectation while at the same time protecting the franchisor against a claim by a franchisee who was not fully engaged.