Franchising an Existing Business: Setting Rules for Opening Hours and Closures

When turning an existing business into a franchise, opening hours and closure arrangements are easy to overlook. If company-owned outlets rely on the founder working long hours, imposing the same schedule on franchisees can put staffing and profitability under strain. Building a sustainable franchise network requires rules that balance customer convenience with franchisees’ independence as business operators.

1. Test whether company-owned outlets’ opening hours are necessary

Start by asking why the current opening hours are needed. ‘We have always kept these hours’ or ‘Our competitors are open then’ is not enough to justify an ongoing burden on franchisees. Identify the purpose of each trading period, such as serving commuters, fulfilling booked services or complying with the conditions imposed by the premises operator.

At pilot outlets, record the following by time slot, rather than simply tracking total daily sales:

• Sales, customer visits, order numbers and the associated gross profit
• Required staffing levels, labour costs and additional utility costs
• Time needed for opening preparations, closing tasks and handovers
• Cover arrangements for staff shortages and the owner’s own working hours
• Links with bookings, deliveries and the use of nearby facilities

In particular, recalculate any work that the founder or family members do without pay as labour that a franchisee would also need to provide. Longer opening hours may increase sales without generating enough additional income to cover the extra labour and other costs.

Conversely, judging a short time slot as loss-making in isolation can overlook customers shifting their visits to adjacent periods or taking their business elsewhere. When testing shorter hours, keep conditions as comparable as possible with normal trading, and distinguish the effects of weekdays, seasons and promotions. Check not only sales, but also complaints, booking cancellations and staff working patterns.

2. Understand Japan’s legal framework before introducing uniform rules

Japan does not regulate franchising through a single comprehensive statute. Relevant legislation includes the Small and Medium-sized Retail Business Promotion Act, the Antimonopoly Act and the Civil Code. Uniform opening hours are not automatically justified simply because they appear in the contract.

Article 11 of the Small and Medium-sized Retail Business Promotion Act requires franchisors operating a ‘specified chain business’ under the Act to provide prospective franchisees with written disclosure and an explanation before the contract is signed. Whether a business falls within this category depends on statutory criteria, including product supply and management guidance, rather than its name alone. Not every business connected with retail or food service automatically qualifies.

The Japan Fair Trade Commission’s guidelines on franchising under the Antimonopoly Act explain that restrictions, including those on opening hours, do not in themselves raise concerns if they remain within the bounds needed to operate the franchise properly, for example to maintain a consistent brand image. However, restrictions that go beyond those bounds and unfairly disadvantage or constrain franchisees may constitute an abuse of a superior bargaining position, trading on restrictive terms or another infringement.

These guidelines explain the interpretation and enforcement of the Antimonopoly Act; they do not establish a separate registration or licensing system. The Act also applies to businesses outside the scope of the disclosure obligation described above. The starting point is that the franchisor and franchisee are independent businesses.

When recruiting franchisees, clearly specify standard opening hours, arrangements for regular days off, the conditions for requesting exceptions and the staffing required. Avoid describing opening hours as ‘flexible’ if, in practice, requests to reduce them will not be accepted. Seek specialist advice before adopting particularly restrictive arrangements.

3. Put principles in the contract and procedures in the manual

Rather than requiring every outlet to follow an identical schedule, establish reasonable categories based on location and services offered. An outlet in an office district may need different trading hours and days from one in a residential area. Use pilot findings to define these categories, while avoiding so much variation that customer communications or delivery arrangements become unmanageable.

The contract or an agreed schedule should clearly set out at least the following:

• Standard opening and closing times, and whether there are regular days off
• Outlet-specific conditions, such as the opening hours of the host facility
• How to apply for an ongoing reduction in hours or a change to regular days off
• Circumstances permitting temporary closure, distinguishing between prior consultation and reporting afterwards
• Responsibility for customer notices, booking arrangements and other changes, including who bears the costs

A clause stating only that the outlet must ‘open during the hours the franchisor considers necessary’ leaves franchisees unable to anticipate their future commitments. For any extension of opening hours, consider staffing needs, profitability and preparation time, and agree in advance how consultation will take place.

The operating manual should specify where applications go, what supporting information is required, who makes the decision, the expected response time and how customers should be informed. Avoid using manual revisions alone to expand contractual obligations in practice.

Closure communications should cover not just notices at the premises, but also booking channels, business listings on mapping services and telephone messages. A checklist separating franchisor-managed channels from franchisee-managed channels makes the process easier to use and helps prevent missed updates.

4. Handle requests for shorter hours separately from emergency closures

Ongoing changes to opening hours should not follow the same approval process as emergency closures caused by disasters or equipment failures. Where people’s safety is at risk, it is inappropriate to require an outlet to keep trading while awaiting a response from the franchisor.

For emergencies, define the circumstances in which an outlet may stop trading to prioritise safety, and how it should contact the franchisor. The next steps are to contact customers with bookings, protect stock and decide when to reopen. Provide an alternative contact if the usual franchisor contact cannot be reached.

For requests to reduce hours on an ongoing basis, examine the franchisee’s circumstances in detail. If staffing is the issue, review recruitment efforts and actual working patterns; if profitability is the concern, share income and cost figures by time slot. Rather than simply replying that ‘the same rules apply to every outlet’, consider alternatives such as staff cover, reducing tasks or adjusting opening hours.

Where the decision is uncertain, both parties can agree a trial period and evaluation criteria. For example, after bringing closing time forward, review whether sales shift to other hours, what enquiries customers make and how staff workloads change. Before the trial begins, clarify who will assess the results and how a decision will be made to continue or revise the arrangement.

Record the reasons for approving or refusing requests, along with the deliberations behind each decision. If outlets in similar circumstances receive different decisions, be ready to explain why. Do not penalise franchisees simply for raising a request; develop a process that encourages information from outlets to reach the franchisor.

Practical takeaway: Before recruiting franchisees, prepare a one-page summary covering three areas: standard opening hours, routine requests for changes and emergency closures. Test the procedures in company-owned outlets and confirm that they work without relying on the owner working excessive hours. Only then should they become part of the terms offered to franchisees.